In a surprising transfer, customers of Solend, a Solana-based borrowing and lending service, on Sunday voted to take over the most important whale account on the community. In response to Solend, the whale held “a particularly massive margin place”. Reportedly, the unprecedented transfer got here as an effort to keep away from liquidation “chaos”. What precisely occurred with the whale account and the way did Solend take over the account?
What Occurred at Solend?
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On Sunday, Solend Labs posted a governance proposal to liquidate the most important whale account on the community. The platform claimed that the whale’s “extraordinarily massive margin place” was “placing Solend protocol and its customers in danger”. Primarily based on the main points they shared, the whale held 5.7M SOL (value about $170 million) at a liquidation value of $22.30.
The person had additionally used their holdings to borrow $108 million in stablecoins. Within the occasion that they may be liquidated, it might drastically deliver down SOL costs.
“If SOL drops to $22.30, the whale’s account turns into liquidatable for as much as 20% of their borrows (~$21M),” the proposal learn. “It’d be tough for the market to soak up such an influence since liquidators usually market promote on DEXes. Within the worst case, Solend might find yourself with unhealthy debt. This might trigger chaos, placing a pressure on the Solana community.”
Moreover, Solend acknowledged that they’ve been making an attempt to get in contact with the whale since June 13. Nonetheless, regardless of their efforts, they have been unable to “get the whale to cut back their threat, and even get in touch with them.”
How Did Solend Take Over the Whale Account?
With no response from the whale, Solend was spurred to take motion to “mitigate threat”. Reportedly, they arrange a DAO simply to carry a vote on the proposal. What’s extra, allegedly, the voters solely had six hours to vote, throughout half of which, the voting website was down. They then requested the token holders to vote sure or no for the next:
Vote Sure: Enact particular margin necessities for big whales that symbolize over 20% of borrows and grant emergency energy to Solend Labs to briefly take over the whale’s account so the liquidation might be executed OTC.
Vote No: Do nothing.
Of the Solend token holders who voted, 97.5% voted sure. In actual fact, the proposal barely handed the 1% threshold, with only one.13% voting within the affirmative. Curiously, a single massive pockets’s vote was chargeable for passing the proposal.
What Does This Imply For Decentralisation?
Solend’s unprecedented transfer to take over a whale account has raised issues about decentralisation in DeFi. In any case, DeFi has been praised for its decentralisation capabilities, whereby monetary providers are supplied with none intermediaries similar to banks and brokerages. It’s this very function that’s now elevating questions.
“A whale’s account is being taken over by different folks after a DAO that was spun up 24 hours in the past, with a 6 hour timeframe to vote (web site was down for 3 hours), voted so,” NFT influencer, Farokh commented.
In the meantime, Loopify tweeted, “decentralization at it’s best.”
“Solend labs has set a harmful precedent of utilizing “emergency powers” to liquidate whale accounts,” Sharat Chandra, vp of Analysis and Technique at EarthID, informed Business Today. “Imposition of controls on wallets on the pretext of mitigating liquidity dangers isn’t any reply to making sure the steadiness of DeFi platforms.”
Clearly, Solend’s motion in opposition to the whale goes in opposition to the very basis of decentralisation. The transfer’s wider repercussions stay to be seen.
The journalist is a writer and digital nomad. Loves thinking, learning, and writing about all things Web3, particularly its impact on major creative industries.