Solana Outage and SLP Slump
On last Monday’s newletter, I didn’t have the space to talk about Solana’s meteoric rise these past weeks. On August 15th, it was at just $41 before increasing 5x to a high of $216 on Sept 9th. These types of pumps are typical of Ethereum rivals, and are generally accompanied by narratives about how these blockchains are faster and/or cheaper than Buterin-chain. However, these claims of being faster or cheaper are true primarily because these other blockchains don’t have as much user traffic. If you imagine blockchains as highways, Ethereum is EDSA, and all of these other chains are SCTEX, NLEX, or CAVITEX. EDSA is jampacked because it’s at the center of business and innovation, while these other expressways have fewer venues for people to visit. But every blockchain wants to become Ethereum, and every Solana fan dreams of a $3,000+ $SOL price. But we have observed similar hype from XTZ, NEO, BSC, DOT, NEAR, etc. since 2017 onwards, and that’s nothing new either.
We got a good reminder of why blockchains are hard last night when the Solana network went down for several hours due to “resource exhaustion.” I bookmarked the news article after dinner and when I woke up this morning, it was unbelievably still down 12 hours later. The $SOL price has taken a bit of a beating as a result, losing about 15% in the last 24 hours. Now, perhaps you are thinking that half a day of downtime is acceptable given that blockchains are still very experimental. That’s not unfair, but I should mention Bitcoin’s last outage was 8 years ago, and it’s been up 100% since then. That said, Ethereum’s last outage was just this last November, so maybe these younger chains are just more fragile because of all their bells and whistles? In any case, it looks like the Solana validator community is small enough that they can still all get on a Discord server and coordinate a system-wide restart.
The crypto community is obsessed with animal iconography: bulls, bears, dogs, cats, apes. You know what’s missing from that list though? Woolly mammoths! This news is not really market-related, but it was weird enough that I thought I’d include in today’s letter. Apparently, the Winklevoss twins (Bitcoin billionaires from way back) are funding a “de-extinction” startup called Colossal, that aims to Jurassic-Park the woolly mammoth through gene-editing technology. My first thought: this will undoubtedly end well! My second thought: I guess “philosiraptor” memes are coming back too then.
As I predicted back in August, the SLP price continues to slide, and is hovering at 4 pesos this morning. The growth of the Axie population is slowing down slightly, but we’re still above 1.6M daily active users (DAU).
What happens next? Well, there’s no significant change in the game itself at the moment, so it is reasonable to assume that the SLP price will continue to drop. The DAU will stop going up and possibly start to decrease as players decide to do something else with their time. In my mind, 3 pesos is the threshold at which the DAU will begin to decrease. Why? Because at 3 pesos per $SLP, the average player can only make 300-450 pesos a day from Axie Infinity, meaning that it’ll be below minimum wage for the first time since May. This will likely eliminate the more profit-centric guilds and players from the community.
What happens then? Well, with fewer players, the SLP selling pressure will be alleviated, allowing the price to rise back up. (Remember that the most basic reason for the low price is that there are so many players all selling their SLP and the breeders are the only ones buying.) So what should you do, as a Filipino Axie player? Well, you have a number of options open to you, and both of them will require some thought and consideration: (a) you could continue playing, just accept that you will be earning less for the next month or two, and plan your spending accordingly, or (b) you could stop playing, find a temporary job, and then come back to the game later on when the economy has found a new equilibrium. I suspect that for most people, (b) is not going to be an option, since employment is at an all-time low right now. The one thing that I don’t recommend is that you hold on to your SLP and wait for the price to come back up. If you’re relying on this game for your food and other household expenses, it is a really bad idea for you to be gambling with your money that way. (If you’re an investor, go ahead, but be prepared to hold for months.)
That’s all for today, cryptofam! On Friday morning, I’ll be showcasing the work of the Cryptopop Art Guild members and talking about our strategy as an organization. Yes, we are definitely taking option (a).