Solend Takes Over Whale Account; What Does It Mean For Decentralisation?


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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 line with Solend, the whale held “a particularly giant 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?

Solend token holders votes on whale account
Solend token holders voted to liquidate whale account. Credit score: Realms

What Occurred at Solend?

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 giant margin place” was “placing Solend protocol and its customers in danger”. Based mostly 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 convey 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 troublesome 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 web site was down. They then requested the token holders to vote sure or no for the next:

Vote Sure: Enact particular margin necessities for giant 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 truth, the proposal barely handed the 1% threshold, with just one.13% voting within the affirmative. Curiously, a single giant pockets’s vote was liable for passing the proposal. 

Emin Gün Sirer's tweet
Emin Gün Sirer breaks down what occurred.

What Does This Imply For Decentralisation?

Solend’s unprecedented transfer to take over a whale account has raised issues about decentralisation in DeFi. In spite of everything, DeFi has been praised for its decentralisation capabilities, whereby monetary providers are offered with none intermediaries resembling 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. 

NFT influencer Farokh's tweet
Many have raised issues over Solend’s transfer.

In the meantime, Loopify tweeted, “decentralization at it’s most interesting.”

“Solend labs has set a harmful precedent of utilizing “emergency powers” to liquidate whale accounts,” Sharat Chandra, vice chairman of Analysis and Technique at EarthID, instructed 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 towards the whale goes towards the very basis of decentralisation. The transfer’s wider repercussions stay to be seen.

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All funding/monetary opinions expressed by will not be suggestions.

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