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A Solana-based lending platform votes to take control over a whale account to mitigate risks

Business Insider India logo Business Insider India 6/20/2022 BI India Bureau
A Solana-based lending platform votes to take control over a whale account to mitigate risks © Canva A Solana-based lending platform votes to take control over a whale account to mitigate risks

  • A Solana-based DeFi platform is exercising the power of decentralization to protect itself and its users.
  • The Solend platform said it tried to contact the whale multiple times but didn’t get a response.
  • The platform can now liquidate 20% of the whale’s assets if required.
In a curious development, users of a Solana-based lending service called Solend, voted to take control of one of the protocol’s largest accounts. The governance vote, a first of its kind for the platform, will allow Solend Labs “emergency powers” over the account, which will allow the protocol to liquidate the whale’s vulnerable assets through over-the-counter trades instead of using decentralised exchanges.

The move is an effort to protect the service from the crypto market’s downturn. The price of Solana has fallen massively amid the crypto market’s recent bear turn, and platforms like Solend have to protect their liquidity to avoid massive disruptions, like the one suffered by the Luna token last month.

“If SOL drops to $22.30, the whale’s account becomes liquidatable for up to 20% of their borrows (~21M). It’d be difficult for the market to absorb such an impact since liquidators generally market sell on DEXes. In the worst case, Solend could end up with bad debt,” the platform said in a blog post.

The post added that the Solend platform has tried to get in touch with the whale through Twitter and its own networks, along with on-chain messages, but has failed to get a response from the whale account. It also said that Solend has “been in contact” with market makers to explore liquidation options.

“Despite our efforts, we’ve been unable to get the whale to reduce their risk, or even get in contact with them. With the way things are trending with the whale’s unresponsiveness, it’s clear action must be taken to mitigate risk,” the post said.

It further explained that the risk posed by the whale could put a strain on the Solana network and could cause the network to go down as well. “Due to concerns about risk, many users have withdrawn, causing USDC and USDT utilization in the Main Pool to spike to 100%. This means depositors can’t withdraw, and positions collateralized by USDC or USDT can’t be liquidated,” they added.

While Solend’s governance vote is an effort to protect its own network and users, the incident is also a show of one of the crucial capabilities of decentralized blockchain-based platforms. A whopping 97.5% of the users that participated voted in favour of forcing the whale to relinquish control. The proposal only just cleared a 1% quorum, with 1.13% of the total token holders being in favour of this move.

SEE ALSO:

Bitcoin sinks under $20,000 to lowest level since late 2020 as crypto selloff continues

More than 70 crypto tokens are down 90% from their peak

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