Last night, an anonymous whale account deposited over 5 million SOL (worth $170 million at the time) and represented 88% of USDC borrows.
The developers at Solend Labs were worried that the Solana decentralized exchanges would be overwhelmed with excessive sell pressure and that the network may even be jammed.
In an attempt to mitigate liquidation risk, the DeFi protocol launched a governance proposal titled “SLND1 : Mitigate Risk From Whale” abruptly. Users could decide if Solend Labs should take over the account temporarily so that the liquidation can only be executed OTC, or do nothing. This would be carried out with the help of a smart contract upgrade. Once the whale’s account reaches safe level, they would release control.
The results were in and it appeared that most users voted to have Solend Labs take control of the wallet in question.
Governance proposal SLND1 has passed.
Special margin requirements for accounts that represent over 20% of borrows are now in effect.
There will be a grace period for 3oSE…uRbE to reduce their leverage by themselves. pic.twitter.com/dsZhFRC8ZX
— Solend (we’re hiring!) (@solendprotocol) June 19, 2022
The crypto community on Twitter reacted rather negatively in regards to this messy situation. An attorney believes that this move does not only contradict the “DeFi ethos”, but is also illegal. Another lending service on Ethereum stated that this is “an indictment of DeFi on Solana.”
When a DeFi platform decides to take over an account when they deem it appropriate, it completely goes against the concept of a user owning every right and control to their account. A concept that is so vehemently upheld by the DeFi space.
According to the pseudonymous founder Rooter, the backlash from Twitter and the press has forced Solend to rethink their action and restrategise. Rooter stated that — although the SOL price recovery has allowed a bit more wiggle room for liquidation — they have yet to find a solution for the nonresponsive whale wallet.
In the past 24-hours, SOL is up by 14.37% and currently values at $33.62. It has a market cap of over $11 billion and a circulating supply of 3.42 million SOL coins.
