Solana narrowly avoided a network halt: a provider outage took down nearly 29% of the stake
On August 12, the Solana network came dangerously close to a critical failure. Due to routing issues at the infrastructure operator TeraSwitch, validators controlling 28.83% of all staked SOL simultaneously lost connectivity. This is just 4.5 percentage points below the 33.34% threshold, beyond which the blockchain stops finalizing transactions. This would mean an actual network halt.
The incident affected approximately 90 validators operating through TeraSwitch's autonomous system (AS20326). This node accounted for 118.9 million SOL, or 27.34% of the total stake. At the moment of the failure, 94% of that amount went offline—a massive blow to decentralization.
Fortunately, the critical level was not reached. After 33 minutes, routing was restored, and the validators came back online. However, during that brief period, they lost about 333 SOL in unearned rewards—a vivid illustration of how fragile infrastructure can be even for top-tier networks.
Infrastructure concentration—a hidden threat
What happened is not a coincidence but a symptom of a systemic problem. Even before the incident, as of July 22, TeraSwitch served validators with 27.1% of staked tokens. It was followed by UAB Cherry Servers (12.7%) and Latitude.sh (11%). Such concentration creates the risk of a "single point of failure," contradicting the very idea of a decentralized ledger.
The Marinade Finance team has already announced a review of its restrictions on the distribution of validators across autonomous systems and data centers. This is a correct step, but it only partially solves the problem. Some major players are already acting proactively. For example, Coinbase reported in its first-quarter report that 13 of its validators operate through TeraSwitch, and 10 through Latitude, with a backup server in a different location used for each. This scheme minimizes the impact of a single provider's failure.
History knows similar precedents. In November 2022, Hetzner shut down servers hosting Solana nodes, affecting about 40% of validators with 20% of the stake. The network survived then, but the current case shows the risk has not disappeared. Moreover, the number of active Solana validators has dropped to 800—the lowest since 2021, while at the peak in 2023 there were over 2,500. This decline exacerbates the network's vulnerability.
My view: The TeraSwitch incident is a wake-up call for the entire Solana ecosystem. The market may not have reacted appropriately, but ignoring infrastructure concentration is not an option. If major operators do not diversify their connections, the next failure could be fatal—and then the discussion will shift from lost rewards to trust in the network as a whole.