- Solana team accused of unlocking 11.36 million tokens without informing the community
- Market makers’ tokens not included in market cap
- Mistake raises questions of competence of Solana team
The Solana project has been accused of withholding 11.36 million tokens from its circulating supply, which would have seen the figure sitting at 19.56 million rather than the 8.2 million the team has stated. The revelation of massively understated circulating supply has caused concerns within the Solana community, with some stating that their allegiance to the project is over.
Market Makers’ Tokens Not Included in Calculation
Solana, which markets itself as a “web-scale blockchain”, launched on Binance just over two weeks ago, a launch which saw questions raised about the circulating supply. This led to Solana making an announcement about the calculation of the circulating supply, including a detail that didn’t go unnoticed:
Well… remember the $SOL listing on #Binance?
“As advised by exchanges […] marketing making tokens are typically not used when calculating circulating supply”
They secretly unlocked 11.3 million additional tokens for themselves, which should have locked for another 10 months https://t.co/yyhYW7FBPv pic.twitter.com/wDGEqe7QBg
— Cryptonator1337 (@cryptonator1337) April 28, 2020
The handing over of millions of tokens to market makers is not an anomaly – almost all crypto projects do this to keep the token liquid – but the fact that the team hid the unlocking from the community and didn’t include it in the circulating supply figures is the concerning part, especially when the stated circulating supply was only 8.2 million to start with.
Add to that the fact that they had been seemingly calculating the circulating supply incorrectly in the first place and that it took “recent feedback” to admit to their error and you have a recipe for a team that clearly doesn’t know what it’s doing.
The Importance of Circulating Supply
The circulating supply has a huge impact on the price of a token. A sudden increase in circulating supply means that the market cap is now diluted between more tokens, decreasing the value of each token in turn. Equally, a sudden decrease in circulating supply, for example a token burn, means there are fewer tokens to go round, theoretically increasing the value of each one.
This would have been bad enough with a circulating supply in the billions, but when the ‘missing’ tokens outweighs the existing supply by 36% then it’s clear that the impact would be huge. It wasn’t just the maths that has bothered investors, but the actions and intentions of the team:
Hopefully for Solana’s sake they can put this behind them and move on, but it seems they have lost a lot of credibility in the eyes of the wider community with their ‘miscalculation’.
Solana to Burn Tokens
Solana responded to the allegations late on Tuesday, stating that they were saddened with the “discord and distraction this oversight has caused to our community.” They announced that the 11.36 million tokens under discussion will be removed from the circulating supply and burned within the next 30 days, with a $100,000 BNB airdrop will be distributed proportionally to those who have traded SOL since its listing on Binance.
The team say that they hope this action will “make things right”, but it seems they have lost a lot of credibility in the eyes of the wider community with their ‘miscalculation’, and the damage may already have been done.
