Solend invalidates Solana whale takeover plan with second governance vote

Solend's invalidation for the second governance vote for the Solana whale account takeover may result in SOL ecosystem collapse

  • Published:
  • 22/06/2022 04:18 PM

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Solend, decentralised finance (Defi) lending protocol based on Solana (SOL), has brought in another governance vote concerning the invalidation of the recently-approved proposal that granted Solend Labs the authority to access a whale account to avoid liquidation. 

Earlier in the week, Solend passed a governance vote, “SLND1: Mitigate Risk From Whale.” The whale liquidation signalled a risk for the market, and the governance proposal would allow Solend to dilute the risk. The strategy behind this proposal was to take control of the whale wallet and liquidate it over the counter.

Solend is apprehensive about SOL price dropping and the whale getting liquidated. In such a scenario, Solend may end up with bad debts, which will severely strain the SOL network. 

The whale wallet is the largest user of the lending platform and holds 95 percent of Solend’s deposits with $108 million worth of USDT and USDC. If the SOL price declined to $22.30, the whale wallet might run the risk of liquidating up to 20 percent of its borrowing, or a staggering $21 million.

The proposal was almost unanimously approved, earning Solend a heavy backlash from the crypto community. This move has been termed illegal and contrary to Defi proceedings by the crypto asset holders. It is the opposite of decentralisation.

Ultimately, Solend launched another governance vote to invalidate the precedent vote. The former vote got repudiated with 1,480,264 votes. Governance voting time increased from 6 hours to 1 day, said a tweet from Solend’s official handle.

The second governance vote urged Solend to design a new plan that shouldn’t allow Solend to use emergency power to take over the whale wallet.

@Samogoodfamo tweeted, "Invalidating taking over an account proposal is for the good. No matter what the market conditions might be, the whole idea of crypto is about core economic freedom and trust. Lose it, and crypto shall go to 0."

Solend’s temporary take-over plan of the whale account has shaken the whole crypto community. Had Solend gained the power to watch the whale wallet, it might have skimped back from the breakdown of Defi, but not without repercussions. On the other hand, SOL prices may drop to 0 altogether if Solend doesn’t come up with a new plan sooner.

Shashank is the founder of yMedia. He ventured into crypto in 2013 and is an ETH maximalist. Twitter: @bhardwajshash