This week is not going to make me popular with the crypto community. I would like to share my experience with one of 2021’s blockchain superstars and the supposed slayer of Web 3.0. Say So-long to Solana, at least this is my view after my interactions with the blockchain over the last 10 days.
Web 3.0 (~2021) is the next generation of the World Wide Web which is trying to transition to more decentralised blockchain type data sharing versus the more centralised database type operations controlled by big tech with Web 2.0 (2004 – still main player today). Web 1.0 was the early period of the World Wide Web from 1991 to 2004. Ok with those timelines in place let’s dive in.
From about August 2020 until 30 June 2021 I became pretty obsessed with the blockchain. I wanted to understand better what was all the fuss with crypto. I had started investing again when Bitcoin was around $7,000 and was watching the crypto markets take off.
Time for a humble brag but you will see there is a connection – promise. I bought 10 Bitcoin when they were $100 and wrote a blog post in early 2014 about the trade of the century when I sold them shortly thereafter for $1000. The problem at the time was if you thought it was hard to buy Bitcoin 8 years ago it was far harder to sell your Bitcoin, welcome Solana into the story.
As mentioned above I poured my energy into understanding the blockchain. As somewhat of an extremist I was up all hours of the night (morning) reading and more importantly getting my hands dirty with the code and trying my best to run a blockchain node. I became a little obsessed with running CLI code, for no practical reason other than scratching deep unresolved complexes. However, getting my hands dirty trying to run a relay node on different protocols, which is geek speak for hosting the entire blockchain ledger and then authenticating a block, gave me a decent insight into the various protocols strengths and weaknesses.
So when the 9th of June 2021 came along I was already a fanboy of Cardano, what I believe to be the most sophisticated robust protocol, but a news release caught my attention.
Solana Labs Completes a $314.15M Private Token Sale Led by Andreessen Horowitz and Polychain Capital.
The big thing about Solana is its incredibly fast transactions per second speed advantage as well as its low fixed transaction cost $0.00025. To provide some comparison, Solana can theoretically process 50,000 transactions a second, compared to Bitcoins 7, Ethereum’s current capacity is 15 – 45 (they are hoping to be able to do 100,000 when their protocol upgrade ETH 2.0 is fully implemented) and then there is my favourite Cardano with its current 250 transactions per second with speculation that they can get up to 1 million per second. The current average cost of Cardano is $0.31 compared to Ethereum’s crazy expensive $36.40 and Bitcoin’s averages $2. For the sake of completeness Visa can do around 1,700 a second and Mastercard says they can do 5,000 per second.
When I read the press release about Solana’s tech and saw Andreessen Horowitz had just cut a sizeable cheque I wanted in. For me an early web entrepreneur (I launched South Africa’s first internet grocery business Micksons in 1996) I fell in love with the web browser Mosaic developed by a young Marc Andreessen and could see the potential this new medium might have on society. I provide this backdrop to show that my comments to follow are not written by some newb with no internet experience. Also anyone who has followed Andreessen’s and Ben Horowitz’s career will know that these guys are the smartest guys in the room bar none and if they are bullish then so am I.
If I am not mistaken the private token sale was done at a price of 40 something. With SOL trading at 22 I climbed in, if only I had backed up the truck. Over the course of the next 137 days I saw my investment grow from 22 to 241 that is 1,370% probably the trade of the millennium if I closed out at the top. Will you believe the market cap of Solana at its peak was an incredible $69 billion, its currently trading at a $37 billion market cap it started 2021 at $ 1 billion.
As the year 2021 ended I started getting a little disappointed at the quality of projects coming through the Web 3.0 pipeline. I could see Solana languishing as its community of largely hardcore developers just doesn’t seem to have the breadth of adoption that Bitcoin, Ethereum and Cardano have which is essential for anything meaningful to happen in a mass market space.
I decided I wanted to “cash-in” or at least “token-in” as I was no longer confident about Solana’s future. I figured it had maybe just done too much and it will spend the next few years trying to live up to its 2021 expectations and do very little in terms of price upside from current levels. The decision was made to sell which I did at SOL 168, that was before reading about the DDoS attacks on the network on Dec 10 and then again a few days ago on Jan 4 which has only strengthened my decision to sell.
Cashing in SOL
It turns out cashing in wasn’t as simple as I thought it would be and is the reason for me sarcastically titling this letter Web 3.0 more like Web 0.1.
Any self respecting investor in a token that is using Proof of Stake as its validation method should have their tokens staked. I did my staking through the only official Solana wallet that existed when I bought the tokens – Solflare. Unlike my Cardano stake pool operator who has taken his stakers on a journey, staking with Solana is quite faceless so I simply just left my tokens in my Solflare wallet earning around a 9% p.a.
Keeping your seed phrase passwords and all the security protocols secure and up to date can be overwhelming, for this reason I didn’t check on the wallet too often. I had written on a piece of paper stored in a safe place what needs to be done if I got hit by the proverbial bus. I barely understood what I needed to do, good luck to my next generation trying to read my handwriting and my garbled instructions.
Ok its the 30th Dec 2021 I want out. I login or I should say try to login to my Solflare wallet and there are problems. In the months since my last visit there is a whole new update to the platform and nothing looks familiar and its telling me to create new accounts and import your old wallet, etc.. all of this sounded a little like Greek.
Eventually after quite a bit of kerfuffle I managed to get into the wallet to see that my tokens were there- phew. Do you have the same experience when logging into your online bank portal?
Don’t ask me why but for some reason I had to create a new 24 word seed phrase, these things are scary, lose them and you lose your money – thats it, they are gone forever. Ok so now I see my tokens but I also see that they are staked which means they are tied up. Remember I want to sell and I am just hitting what seems like endless roadblocks.
I see something interesting in the wallet. It says if I switch to mSOL for 0.3% I can access my SOL immediately with no lockups. As a typical gunslinger who likes to shoot first, ask questions later. I did the switcherooo. It was super easy, probably the only thing that was easy. If you are interested in things spicy you can read about Marinade here.
You are excused if you think the rest will be easy after all that heavy lifting. Little did I know my journey was just getting started. I now have a bunch of mSOL and I am keen to get my money out so I try and sell my mSOL which trade at the same price as SOL. I sell at SOL 168 for the Bitcoin equivalent. Very quickly my wallet updates with the BTC and I am feeling relieved and happy having traded and realised an 860% return. Happy days – not so fast.
It is now time to transfer my BTC from my Solflare wallet to my regular BTC wallet, something that I was blocking out of my mind is coming into play. As I am inputing the appropriate addresses I notice something peculiar. If you look at the snapshot below you will see that the BTC I own are called Wrapped Bitcoin (Sollet) (BTC) – WTF are these. It turns out I have been marinaded with some additional
lubricant flavouring. How the hell do I get rid of these wBTC that I have never heard of. There is next to no helpful advice on the net unless you are a hardcore developer close to the space. I try to get hold of support, there is only a Discord channel which is more chaotic than a pharmacy selling Rapid Antigen Tests.
I post my question on a general channel and its as if nobody in the history of Wrapped Bitcoin has every sold. It reminds of the Eagles song Hotel California, “you can check-out any time you like, but you can never leave!” I am not sure exactly how but I am now in private discussion with a support guy from Solflare, or so I think. He says he knows how to help me and proceeds to give me more complex instructions than a professor teaching partial differential equations. I am busy driving during this discourse on my way to pickup takeaways. He says he will stay up for me to get home to my computer to complete the process. I think it a bit strange that he is happy to wait another hour when it is 3am. I wolf down a burger, I made sure it had very little marinade, and start to follow Mr X’s instructions. I cannot get it to do what he expects to happen. Its now 5am his time and his patience is starting to wane. He clearly thinks its time, so he tells me to give him the 24 word seed phrase for my wallet. At this point I know I am in the process of being scammed. Mr X must have seen this rookie’s question on the General channel and figured I will be able to steal his coins. At this point I am wondering if the trade of the millennium is turning out to be fail of the century.
To cut a long story short there was one person on the Discord general channel who threw out an idea that at first I thought was unnecessary but at this point I was happy to try anything. She said open an account with FTX as they trade in wBTC. I will spare the gory details but this proved my way out. I was able to open a new account with FTX and then sell my wBTC for BTC – more fees – the system need more lubrication. Then from there I was able to do what I needed to do.
What this exercise taught me is that the Solana ecosystem despite being worth many billions of dollars is extremely immature. I realised that Web 3.0 has a really long way to go before it becomes mainstream and efficient. In order for the true vision of Web 3.0 to unfold it will need mass adoption, I am talking hundreds of millions of people involved with a project. Not a few 100,000. We are talking real money here and the current ecosystem feels like we are playing Monopoly. There is so much work to be done. The part that worries me the most is security.
I think it is unacceptable that the blockchain system does not have contingencies for the loss of “keys”. If I forget my password to my bank account I haven’t lost my money. I was a big advocate for DEX where I can control my funds and have safe custody of my tokens and not have to worry about being co-mingled at a CEX. No that is not some kinky nightspot. The fear of being responsible for the security and accessibility of the wallet is real and its a living nightmare. I was thinking that perhaps some biometric protocol can be used but the more I think about it the risk then is bad actors will chop peoples fingers and poke their eyes out to access wallets.
I am not an expert in this field by any stretch of the imagination, I just wanted to share my experience and the immediate reaction I had to the Web 3.0 space. So as a final word I remain bullish the blockchain technology and the growing ecosystem. I feel however that in this risk-on speculative environment, the central banks have created, the pricing of these tokens has gotten way ahead of itself. There are more than 7000 tokens I believe and more than 500 exchanges its all happened very fast. I think entrants over the last 6 months are going to seriously loose a ton of money. This space is exciting and will make serious inroads to the Web 2.0 incumbents. It will unlock huge potential through its ability to transact seamlessly around the world with very few middlemen, it will provide huge boosts in productivity and reduction of costs through smart contracts. However, ……..
Rome was not built in a day!