soBTC and soETH, wrapped versions of bitcoin and Ether on the Solana blockchain, have lost pegs to their underlying assets. This event was triggered by the bankruptcy of FTX and led to turmoil in the Solana ecosystem. However, this series of events did not affect the overall confidence of users in DeFi.
Highlight
- soBTC is currently trading at $1,006, while soETH is now trading at $251.
- Meanwhile, the Ethereum DeFi ecosystem is performing steadily and even saw TVL spike on Nov 10th.
The collapse of the significant centralized exchange FTX has caused cryptocurrencies to fluctuate wildly in the past week. Of these, Solana (SOL), which is closely tied to FTX, has been hit harder than other cryptocurrencies. This situation is reflected in the sharp decline in the price of SOL. Furthermore, it triggered users’ concerns about its crumbling DeFi ecosystem.
But the FTX catastrophe didn’t stop users from trusting the DeFi dapps in a truly decentralized ecosystem like Ethereum.
soBTC and soETH depeg on Solana
Since Bitcoin and Ether are not native tokens on the Solana blockchain, users cannot use or trade those tokens Solana directly. This is why wrapped versions of BTC and ETH were created. They allow Solana users to participate in a broader crypto ecosystem.
Bridge protocol on Solana holds Bitcoin or ETH in escrow and issues an equivalent number of their derivative versions on Solana, namely soETH and soBTC. Theoretically, users can redeem soETH and soBTC for BTC and ETH on a 1-to-1 basis.
According to Meow’s tweet, the tokens were issued by FTX. With FTX declaring bankruptcy, the status of the underlying assets used to back soETH and soBTC on the Solana blockchain is unknown. The prices of these two wrapped tokens have been unpegged from ETH and BTC.
soBTC is currently trading at $1,006, less than 10% of the price of Bitcoin. Also, soETH is now trading at $251, making it less than 20% of the ETH price.
DeFi dapps are still widely trusted
Looking at Solana’s competitor Ethereum, the DeFi ecosystem is performing steadily. TLV calculated in ETH rebounded right after Nov. 8, with a spike on the 10th. According to DappRadar DeFi tracking, Oasis.app, LIDO, Uniswap V2, Instadapp, and dozens saw TLV, marketcap, and token price increases.
The FTX catastrophe is another reminder of the importance of decentralization and transparency to the crypto community. Users are again realizing that only DeFi dapps executed through smart contracts and owned by the community are trustworthy because no individuals have private access to their funds. Even when tragedies like FTX cause panic in the market, open and transparent DeFi dapps can often recover in a relatively short time period.
We’ll continue to follow the FTX incident as it unfolds and restore the whole picture for you through various reports and articles. Meanwhile, to get an overview of the DeFi space or the performance of individual dapps, you can utilize DappRadar’s extensive tracking tools.
