The now-infamous collapse of FTX sent shockwaves through the broader cryptocurrency space in 2022, but the Solana ecosystem was particularly hard hit in the fallout.
Speaking exclusively to Cointelegraph at the latest edition of the Solana Breakpoint conference hosted in Amsterdam, Solana co-founder and CEO Anatoly Yakovenko recalls his concern for several projects that were building on the layer 1 smart contract blockchain protocol.
“I was more worried about the ecosystem of startups; we didn’t know how exposed teams were,” Yakovenko explains. Solana’s native token SOL saw a significant drop in value in the immediate wake of FTX’s bankruptcy, with its token trading at $36 in early Nov. 2022 before dropping as low as $12 in the days after the exchange’s collapse.
Solana’s brainstrust and several investors contacted hundreds of teams building products, services and decentralized applications to take stock of the collateral damage. According to Yakovenko, about 20% of Solana-based projects had received investments from FTX or Alameda Research and just 5% of ecosystem startups had funds sitting on the defunct exchange.
“That’s what hurt the most. Those teams saw their runway evaporate.”
Yakovenko empathized with founders who had toiled to raise capital and placed their trust in FTX as the custodian of those funds. “You keep it in an exchange that everyone seemed to trust and boom, it’s gone. It was a catastrophic failure for those companies,” he added.
A prime example was Armani Ferrante, who had raised some $20 million to build out Solana-based cryptocurrency infrastructure firm Coral. The engineer has previously estimated that his company lost around $14.5 million it had held on FTX.
“Folks like Armani just really doubled down and rebuilt their companies. They took that failure and channeled it as energy to build.”
While Yakovenko concedes that seeing SOL’s value plummet due to the exposure that some prominent Solana projects had from several Sam Bankman-Fried-led investments was a tough pill to swallow, it paled in comparison to the damage done to ecosystem projects.
“It was gut-wrenching. The token price dropping sucked but that’s crypto, it moves up and down all the time. But people’s runways getting evaporated, that really hurt. I’m just glad the vast majority of teams survived,” the CEO added.
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