Solana (SOL) Is ‘Truly In Limbo’ If This Happens, Warns Crypto Analyst
04 September 2024 - 4:00AM
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A recent statement made by Austin Federa, a strategist at the
Solana Foundation, has sparked a widespread debate within the
crypto community. On Monday, Federa proposed a novel
conceptualization for several enhancements on the Solana blockchain
via a post on X, suggesting that “most of the L2-ish things on
Solana are better thought of as Network Extensions.” “While the
underlying tech stack might resemble Bitcoin or Ethereum L2’s, the
function and role is so radically different I think founders would
best be served by Network Extensions. Network Extensions extend the
Solana network to new places, or bring new execution environments,
specialized processing, etc to the Solana network. State
Compression, cNFTs, Neon’s EVM layer, maybe even Phoenix all fit
this mental framing imo,” Federa wrote. Why This Could Put Solana
‘In Limbo’ Responding to this post, Ignas, a popular crypto analyst
and co-founder of Pinky Brains, voiced his analysis and concerns to
his 105,000 followers on X. Ignas highlights the critical nature of
the ongoing debate about Solana’s developmental strategy. He raises
a fundamental question about whether the crypto community will
embrace the new “Network extension” terminology or continue to
favor the Layer 2 framing. Related Reading: Solana’s Surge: Here’s
Why This Analyst Is Predicting A Rise To $360 Ignas elaborates on
the potential risks associated with Solana’s rebranding of its
scalability solutions as Network Extensions. He cautions that if
Solana’s transition leads to negative outcomes similar to those
experienced by Ethereum—such as liquidity fragmentation and a
degraded user experience due to the complexities of bridging
between layers—then the future of SOL could be jeopardized, leaving
it in a state of limbo. “ETH was stuck between BTC and SOL during
this bull run. BTC was ‘better money’ for less conservative and
institutional investors, and SOL as a faster, simpler, and cheaper
smart contract platform with higher upside than ETH. If Solana
narrative shifts from a monolithic model to scaling with L2s (like
Ethereum), SOL could become the new ETH. [..] then SOL is truly in
limbo,” Ignas warns. The impact on the Solana price could be
significant. According to Ignas, Ethereum would remain the “safer
option” for long-term investors because of its higher
decentralization and no downtimes. “Plus, if degens start chasing
‘network extension’ tokens for SOL beta instead of buying SOL, it
could stagnate SOL’s price growth,” the analyst added. Related
Reading: Analysts Unanimous: Solana (SOL) To Soar 100% – Details
Meanwhile, Ignas did not dismiss the potential advantages of
Solana’s strategy entirely. He acknowledged that integrating
Network Extensions from the outset, with aggregation layer
solutions already in place—a step Ethereum had not taken during its
initial Layer 2 rollouts—could mitigate some of the common
challenges associated with Layer 2 solutions. This proactive
integration could preserve a unified user experience and prevent
the fragmentation of liquidity. “As a result, Solana could maintain
the ‘monolithic narrative’ while benefiting from modular approach
solutions. The ‘network extension’ narrative could then prevail,”
Ignas concludes. However, if the Solana narrative shifts to L2s,
there could be an empty void for a new monolithic champion. The
crypto analyst concluded: ”Solana’s shift to a modular scaling
approach creates an opportunity for a new monolithic scaling
champion in the eyes of crypto community. Could this be the perfect
moment for Monad to launch? Or will another Layer 1 blockchain
seize the monolithic chain crown from Solana? Exciting!” At press
time, SOL traded at $134. Featured image from Solana.com, chart
from TradingView.com
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