After voting for a “forced takeover” for a whale account, Solend users have revisited the ballots to decide that Sunday’s “Emergency Powers” plan must be invalidated.
Extreme Measures - “Whale” Account Takeover
The crypto market downturn is causing ripples throughout the industry, causing many DeFi protocols to take drastic measures to protect liquidity. The Solana blockchain-based lending appl, Solend, underwent a similar situation over the weekend when token holders voted for a “forced takeover” of the protocol’s largest account. As described by Solend users, this large “whale” account had gotten dangerously close to a catastrophic on-chain liquidation. As a result of the emergency takeover due to the unprecedented governance vote, Solend Labs would have been able to liquidate around $20 million of the whale’s vulnerable assets via over-the-counter (OTC) trades.
“Whale” Liquidation Woes
This step was taken to avoid the chaos in Solana’s DeFi markets that could erupt from the on-chain liquidation of these many assets. Going the OTC service route could avoid this outcome. However, it also violates the smart contract-coded protocol that Solend follows for borrower liquidation. Therefore it has caused the platform to revisit the ballots for another vote on the matter. The proponents of the takeover believe that the “whale” is not a typical user as the account had parked 5.7 million SOL onto Solend, which accounts for over 95% of the pool’s deposit. Against that, it had borrowed $108 million in stablecoins – far more than anyone else. If SOL hits its liquidation price of $22.30, the whale would be liable for around $20 million. SOL is currently trading at $32.27.
The proposal for the emergency takeover read,
"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."
“Emergency Takeover” Reversed
However, on Monday morning, the community decided to revisit the decision with a flash vote. It asked its governance token holders to vote “yea” if they wanted to invalidate the first vote, extend voting periods to 24 hours, and start developing less extreme solutions to the whale wallet crisis.
The co-founder of Solend, who goes by the pseudonym, Rooter, said,
“We recognize that a voting time of 1 day is still short, but we need to act swiftly to address the systemic risk and fact that normal users can’t withdraw USDC. We ask our community to be active in governance in the next few days. Voting time will be revisited in a future proposal.”
99% of the token holders voted to reverse the previous decision.
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