How Sam Bankman-Fried’s FTX Impacted the Solana Blockchain

• Sam Bankman-Fried was a vocal proponent of the Solana blockchain and its native token.
• Since FTX imploded, there is more developer activity on Solana’s network, but the token’s price has plummeted.
• A leader of the Solana Foundation told Insider how the ecosystem is moving forward after FTX’s fallout.

Sam Bankman-Fried was one of Solana’s most high-profile backers before his one-time $32 billion crypto empire imploded, leaving industry watchers to scrutinize the ties between the blockchain and the disgraced founder.

Now, executives at the Solana Foundation, the nonprofit that supports the solana network, say they are trying to move on, put the failure behind them, refocus on new projects, and lose ties to Bankman-Fried and his firms.

Solana, the tier-1 blockchain that bills itself as a cheaper and faster alternative to ethereum’s network, was seen to have close ties to Bankman-Fried and his now-bankrupt crypto exchange FTX.

He was a vocal advocate for Solana, telling reporters that the blockchain could become critical infrastructure for the future of crypto, according to Fortune.

“They were clearly the most serious [layer 1] we spoke with about continuing to scale their blockchain and expand their capabilities,” Bankman-Fried said in an email to the publication.

Many people first learned about Solana through Bankman-Fried, according to Austin Federa, chief strategy officer at the Solana Foundation.

“He was one of the early people who ran a credible, smart engineering organization that saw the potential of solana,” Federa told Insider in an interview. “[But] it wasn’t like we worked very closely with them.”

It was probably helpful that one of the richest people in crypto was praising the network, but Bankman-Fried’s association would soon raise eyebrows from onlookers as his digital asset empire began to unravel.

After FTX filed for bankruptcy last November, fear gripped the markets and sent the price of Solana’s token plummeting. The altcoin has crashed 43% since FTX began having liquidity concerns in early November, according to Messari, adding to already heavy losses the token suffered in line with the rest of the market as it navigated crypto winter.

“It was probably two to three solid weeks [where] Many wondered if this is existential [threat] for the Solana network?” Federa said. “The fundamentals of the network are no different pre-FTX and post-FTX. What’s different is the fear, right?”

Solana executives have distanced themselves and the network from Bankman-Fried and his toppled empire. The technology underlying Solana is as ground-breaking and innovative as it was before, says Federa. Since 2018, the number of total developers on Solana has grown by 10 times, more than any other blockchain ecosystem, according to Electric Capital.

“Look, this has always been a technology story and a technology game,” Federa said of Solana’s network. – There has never been anything other than that.

Connection to SBF

Bankman-Fried launched Serum, a decentralized exchange (DEX) built on Solana, with the help of the Solana Foundation and Alameda Research’s trading desk in 2020. Serum was a key provider of liquidity for Solana’s decentralized financial ecosystem, with an order book critical to the largest DeFi projects on the network.

“As the organization got bigger, the motives changed,” Federa said of Bankman-Fried’s affiliated firms. “You saw the focus of both Sam and FTX shift from ‘How do we put DeFi front and center?’ to ‘How do we work under market structures that might be able to protect our interests in the long term?’

Solana DeFi projects tried to cut ties with Serum for security reasons after FTX’s bankruptcy filing, although Federa says there was no evidence that Serum had even been compromised.

The Solana community has now switched to Serum’s successor called OpenBook, shedding all ties to Bankman-Fried’s warring entities.

“One of the things that’s been really cool to see is the community coming together even more and kind of galvanizing around replacing the parts of the ecosystem that FTX had a role in,” Federa said.

The transactions between Solana Foundation, blockchain developer Solana Labs, along with Bankman-Fried’s Alameda Research and FTX included 58 million solana tokens worth about $1.2 billion based on the token’s current price of $21.69.

The Solana Foundation had about $1 million — less than 1% — of its cash or cash equivalents on FTX when the trading platform stopped client withdrawals in early November. No solana tokens were kept on the exchange, according to a blog post.

Federa says he believes Solana has come out even stronger than it was before FTX’s woes became public, adding that there are more validators and active users on the network now. The number of total developers at Solana grew by 83% in December 2022 from the previous year, according to the Electric Capital report.

“It’s really cool to see that the community has really come out stronger through this and it’s still building… We had no doubts,” Federa said. “We just didn’t think it would necessarily come back that quickly.”