The logo of the cryptocurrency platform Solana.
Jacob Borzeki | NurPhoto via | Getty Images
Decentralized finance platforms are making great efforts to limit the fallout from cryptocurrency sales.
Solend, a lending platform built on the Solana blockchain, has attempted to take control of its largest account, a so-called “whale” investor that it said could significantly influence market movements.
Since then, Solend users have voted to block the move.
What is Solend?
Solend is a DeFi application that allows users to borrow and lend money without having to go through intermediaries.
Solind said a single whale is sitting on a “very large marginal position,” which could put the protocol and its users at risk. At worst, Solend could end up with bad debts, the company said. This may cause chaos and stress to Solana’s network.”
The account in question had deposited 5.7 million . Sol Solend tokens account for over 95% of deposits. In return, she was borrowing $108 million in USDC and ether stablecoins.
If Sol’s price drops below $22.30, then 20% of the account’s collateral — about $21 million — is at risk of liquidation, Solend said. Seoul was trading at $34.49 on Monday.
On Sunday, Solend passed a proposal giving it emergency powers to take over a whale account, an unprecedented move in the DeFi world.
Solend said the measure would allow it to liquidate whale assets through “off-exchange” transactions – as opposed to deals on exchanges – to avoid a potential chain of liquidation.
DeFi apps under stress
The move led to a backlash on Twitter, with some questioning Solend’s decentralization. One of the core principles of DeFi is to get rid of central institutions such as banks.
By Monday, Solend users were asked to vote on a new proposal to overturn the previous vote. The community voted overwhelmingly in favour, with 99.8% voting “yes.”
The disaster is a sign of how DeFi – a kind of “wild west” where users take it upon themselves to conduct peer-to-peer trades and loans – has fallen into cryptocurrency.
MakerDAO, creator of a dollar-pegged stablecoin called DAI, recently disabled a feature that allowed traders to borrow DAI for bet the etherDerivative token causing havoc in the crypto market.
StETH is supposed to be worth the same value as ether, but it is trading at an increasing discount on the second largest cryptocurrency. Getting in and out of stETH is not easy, and this has led to liquidity issues for major cryptocurrency lenders and hedge funds like Celsius and Three Arrows Capital.
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