Solend, the leading lending protocol on Solana wanted to take seize control of a whale's account.
This caused huge backlash.
Here's a quick breakdown of what happened.
(including imp info for Sol holders) 🧵
This caused huge backlash.
Here's a quick breakdown of what happened.
(including imp info for Sol holders) 🧵
Solend is a lending & borrowing protocol on Solana.
It’s the largest Dapp on Solana with a TVL of $265M.
Now, it’s caught up in the latest crypto controversy.
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It’s the largest Dapp on Solana with a TVL of $265M.
Now, it’s caught up in the latest crypto controversy.
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A whale has the biggest position on Solend.
The whale deposited $170M Sol & borrowed $108M of Stables. This constitutes 95% of sol deposits & 88% of USDC borrows.
The liquidation price for this position is $22.27
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The whale deposited $170M Sol & borrowed $108M of Stables. This constitutes 95% of sol deposits & 88% of USDC borrows.
The liquidation price for this position is $22.27
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Over the last 7 days, sol has been hovering between $26-36.
The price hasn’t hit the whale’s liquidation price yet, but with it moving closer, tensions have began to run high.
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The price hasn’t hit the whale’s liquidation price yet, but with it moving closer, tensions have began to run high.
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Potential consequences of Sol hitting liquidation price:
• Sol dumping on Dexs
• Puts Solend users at risk
• Sol has a history of downtime caused by liquidations, it could mean downtime for Solana
• Solend could end up with bad debt
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• Sol dumping on Dexs
• Puts Solend users at risk
• Sol has a history of downtime caused by liquidations, it could mean downtime for Solana
• Solend could end up with bad debt
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Due to these fears, Solend reached out to the whale to negotiate. However, the whale did not respond.
Then, Solend came up with SLND1, a proposal that would grant them emergency power to take over the whale’s account & execute the liquidation OTC.
realms.today
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Then, Solend came up with SLND1, a proposal that would grant them emergency power to take over the whale’s account & execute the liquidation OTC.
realms.today
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This move met with major outrage as it goes against the ethos of decentralization.
• Seizing someone’s money is bad precedent, goes completely against what DeFi is supposed to be
• If implemented, this likely would come under legal scrutiny & have bad effects long term
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• Seizing someone’s money is bad precedent, goes completely against what DeFi is supposed to be
• If implemented, this likely would come under legal scrutiny & have bad effects long term
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@cobie @el33th4xor @FatManTerra The proposal was passed with 97.5% voting in favor of it.
But the whole process was very sketchy.
• Solend DAO was only formed a day ago.
• 98% of yes votes came from 1 wallet
• Users were given less than 6 hours to vote.
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But the whole process was very sketchy.
• Solend DAO was only formed a day ago.
• 98% of yes votes came from 1 wallet
• Users were given less than 6 hours to vote.
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@cobie @el33th4xor @FatManTerra The glaring problem is that not only were they trying to seize someone’s money, but they were also doing it through a very shady, centralized voting process.
270M of assets controlled by 1 vote. Is this Defi?
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270M of assets controlled by 1 vote. Is this Defi?
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@cobie @el33th4xor @FatManTerra However, since Sol price went up & given the community backlash, the team came up with a new proposal.
The second proposal SLND2 would:
• Invalidate the last proposal
• Increase voting time to 1 day
• Work on a new proposal that would not involve seizing
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The second proposal SLND2 would:
• Invalidate the last proposal
• Increase voting time to 1 day
• Work on a new proposal that would not involve seizing
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@cobie @el33th4xor @FatManTerra Now, a new proposal is being worked on.
Overall, I think a lot of the backlash was justified.
Seizing someone’s account in DeFi is a bad idea.
It completely goes against what DeFi is supposed to be. If allowed, it sets a terrible precedent & will lead to lack of trust.
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Overall, I think a lot of the backlash was justified.
Seizing someone’s account in DeFi is a bad idea.
It completely goes against what DeFi is supposed to be. If allowed, it sets a terrible precedent & will lead to lack of trust.
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@cobie @el33th4xor @FatManTerra Everyone in DeFi wants to step away from TradFi’s system.
“You keys your coins”
“True ownership”
“Guaranteed trust”
None of these promises hold true if devs can just seize accounts when things go south. This would’ve set a bad precedent & have long term impacts.
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“You keys your coins”
“True ownership”
“Guaranteed trust”
None of these promises hold true if devs can just seize accounts when things go south. This would’ve set a bad precedent & have long term impacts.
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@cobie @el33th4xor @FatManTerra It opens the door to legal scrutiny.
Regulation is def coming. But these sort of incidents could make it worse.
If allowed, legislators could use incidents like this to build up a strong case on the basis that DeFi protocols don't uphold their promises.
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Regulation is def coming. But these sort of incidents could make it worse.
If allowed, legislators could use incidents like this to build up a strong case on the basis that DeFi protocols don't uphold their promises.
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@cobie @el33th4xor @FatManTerra Voting process.
The whole voting process was just terrible.
1 wallet was essentially in charge of everything, there was hardly any voting time, the site was down.
It was looking super sketchy.
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The whole voting process was just terrible.
1 wallet was essentially in charge of everything, there was hardly any voting time, the site was down.
It was looking super sketchy.
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@cobie @el33th4xor @FatManTerra However, I’m glad the team listened to the criticisms & acted quickly to invalidate the old proposal.
It's important that DeFi doesn't just become TradFi with extra steps.
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It's important that DeFi doesn't just become TradFi with extra steps.
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@cobie @el33th4xor @FatManTerra Solana Holders
Sol did get some breathing room when the price went up.
However, if you're holding sol, pay extra attention to the Solend situation & the upcoming proposal.
Also, keep an eye on the $22.30 liquidation point
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Sol did get some breathing room when the price went up.
However, if you're holding sol, pay extra attention to the Solend situation & the upcoming proposal.
Also, keep an eye on the $22.30 liquidation point
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@cobie @el33th4xor @FatManTerra And that's it. Thanks for reading this solend situation breakdown.
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