As the bitcoin market fell over the weekend, Solana once again suffered high levels of network Liquidation.
DeFi users were unable to add more collateral to their loans because of the bottleneck. This resulted in an uptick in liquidations.
Even in the midst of a big market downturn, Solana has had to deal with network difficulties.
This weekend’s crypto catastrophe, hit Solana DeFi members badly.
Overcrowding at SOL
The value of crypto assets including Bitcoin, Ethereum, and Solana plummeted on Friday and Saturday. This caused congestion on the Solana network.
It impacted consumers who borrowed assets from DeFi platforms like Solend. However, Solana had previously suffered similar challenges, including an 18-hour network outage in September.
To get leverage, you usually need to put up some kind of collateral like SOL or ETH. This is to guarantee that you can pay back the loan. SOL has fallen from $143 on Thursday to $90 on Saturday as the market has deteriorated. Those who had taken out loans had to enhance their collateral to avoid liquidation.
To avoid losing their money, a borrower must keep at least a specific amount of collateral to cover their loan. As a result, customers forcibly hurry to replenish their collateral during market downturns. Liquidators can then close the position in order to get a reward.
Many Solana users had difficulty topping up their collateral over the weekend because of a crowded network. There is no mempool in Solana, so transactions are extremely cheap—especially when compared to Ethereum. This compels bots, DeFi borrowers, and other users to overburden the network.
In the past, bots have attempted to get a foothold in IDO sales by attacking the network.
In contrast, liquidators and debtors rushed to close deals as SOL faded, with liquidators having a greater success rate. The issue of “bots sending repeated TXs” was reported on Saturday by Solana Labs’ Anatoly Yakovenko.
Looking for a Solution
Early on Sunday, Solana’s largest lending protocol, Solend, reported a liquidity issue. The project’s creators tweeted that they were “painfully aware” of the problem and were working on a solution. User Klean responded by saying that they had lost 500 SOL as a result of the incident. Every transaction failed, and liquidation occurred, losing a total of 500 SOL, they claimed.
Solana is working to find a solution to the network problems.
Solana Foundation reported network congestion. Engineers are fighting the “double transaction attack.” According to a post, user demand and complex network interactions show that these systems need to be improved. As proof of the team’s work, Solana linked its recent mainnet beta release, 1.8.14.
Yakovenko encouraged node synchronization in a follow-up post. With version 1.9 live on testnet, the foundation promises additional updates in the coming weeks.
DeFi on Solana’s on-chain price feed oracle, Pyth, ran into difficulties on Saturday because to the market decline. Forced liquidation of the consumers’ accounts occurred due to erroneous pricing feeds. Solana would adopt Chainlink, DeFi’s most popular oracle, soon.
This weekend’s catastrophe had a significant impact on the entire DeFi ecosystem, even though Solana didn’t fare particularly well. On Saturday, several popular stablecoins went below their pegs as a result of the erratic market conditions. While the USDT temporarily hit a low of $0.95, UST and DAI fell to $0.97.
With the recent decline in Solana, Bitcoin, Ethereum, and other crypto, the global market cap is currently $1.7 trillion. It has fallen more than 40% from its peak in November 2021.
