Solend votes to liquidate whale account; Is this end of decentralisation in DeFi?
The majority of users of Solend, Solana-based lending and borrowing service platform, has voted to control the largest whale account to mitigate liquidation risks and this has started raising serious questions about decentralisation in DeFi.
Sharat Chandra, vice president of Research and Strategy at EarthID breaks it down for Business Today readers. He said,“ Solend labs has set a dangerous precedent of using “emergency powers” to liquidate whale accounts.”
Chandra explained, “Imposition of controls on wallets on the pretext of mitigating liquidity risks is no answer to ensuring the stability of DeFi platforms. “
Highlighting how this has become a general trend with DeFi, he said, “The illusion of decentralization in DeFi is becoming more evident than ever. Decentralized finance protocols have deviated from the first principles of decentralization and are increasingly veering toward centralization and censorship.”
What happened at Solend Labs?
Solana-based lending and borrowing service platform Solend’s majority voters voted to control the largest whale account to mitigate liquidation risks.
The DeFi protocol is justifying this by saying that the whale account and its extremely large margin position had become a threat to on-chain liquidation.
They claimed that the large holding of the whale was causing the Solend protocol and the users to be in a risky position financially.
After the governance vote, Solend will have ’emergency powers’ to liquidate the vulnerable assets of the whale to mitigate the risk of all its other users.
Roughly $20 million in SOL token will be liquidated through over-the-counter trades. Over-the-counter trades will be preferred because on-chain liquidation might cause turbulence in the DeFi markets of the cryptocurrency.
How much are the whales holdings?
A whale is a cryptocurrency community term that refers to individuals or entities that hold large amounts of cryptocurrency that have the potential to manipulate currency valuations.
The whale in this case had 5.7 million SOL deposited and had also borrowed over $108 million in stablecoins.
As per data from CoinMarketCap, SOL is currently trading at $32.80, and is up 8.23 per cent in the last 24 hours.
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