Solend Whale Moves $25M to Another Platform Despite Canceled Plans to Seize Their Wallet

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Solend – a DeFi lend­ing pro­to­col built upon the Solana blockchain – attempt­ed to take over a whale account that sup­pos­ed­ly could put the pro­to­col in trou­ble due to its colos­sal size of col­lat­er­al at risk of being liq­ui­dat­ed. After the cryp­to com­mu­ni­ty fired at the DAO behind Solend approv­ing such a pro­pos­al, the orga­ni­za­tion soon launched a sec­ond pro­pos­al that aimed to over­write the first one and got it approved with 99% sup­port from the voters.

Hours lat­er, the whale moved some of their funds to mit­i­gate the risks.

A Threat of Massive Liquidation

In a Twit­ter thread on Sun­day, Solend request­ed autho­riza­tion from the DAO to “tem­porar­i­ly take over the whale’s account so the liq­ui­da­tion can be exe­cut­ed OTC and avoid push­ing Solana to its lim­its.” Mean­while, it promised that once the whale’s posi­tion of SOL is not at imme­di­ate risk of being liq­ui­dat­ed, the emer­gency pow­er would be revoked accordingly.

The announce­ment came on the plat­form, notic­ing the whale who had deposit­ed 5.7 mil­lion SOL – mak­ing up more than 95% of Solend’s liq­uid­i­ty – to take out a loan worth $108 mil­lion USDC and USDT. Under this cir­cum­stance, if SOL drops from the cur­rent price to $22.3, up to 20% of its posi­tion could be liq­ui­dat­ed. As a result, it may cause a liq­uid­i­ty cri­sis in the pro­to­col, fur­ther deep­en­ing the asset’s plunge as fear reigns in the Solana community.

Solend attrib­uted its unusu­al mea­sure to the issue’s urgency and inabil­i­ty to con­tact the whale direct­ly. When the pro­pos­al was passed in a speedy man­ner (with­in six hours), Solend imme­di­ate­ly received back­lash from the cryp­to com­mu­ni­ty, and, upon pres­sure, it pro­posed to inval­i­date it, with an extend­ed amount of vot­ing time to 24 hours.

“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.”

The pro­pos­al – even­tu­al­ly passed with 99% of vot­ers say­ing “yes” – not­ed that a new pro­pos­al not involved with “emer­gency pow­ers to take over an account” will be avail­able soon.

Community Reactions and Moving Funds

When the first pro­pos­al was passed, autho­riz­ing the pro­to­col to seize the whale’s col­lat­er­al and sell it OTC, Solend was under fire for steal­ing users’ assets and work­ing against the prin­ci­ple of immutabil­i­ty and per­mis­sion­less­ness in DeFi.

Cryp­to com­mu­ni­ty vet­er­an Jor­dan Fish – Cobie – made fun of the inci­dent on Twit­ter, tweet­ing:

Lat­er, bit­coin bull Lyn Alden added fuel to the con­ver­sa­tion through a re-tweet, imply­ing that the project is sim­ply one of many scams fol­low­ing Satoshi’s inven­tion of Bitcoin.

A day lat­er, Solend updat­ed that the whale had moved $25 mil­lion in USDC to Man­go mar­kets to spread their lend­ing posi­tion across oth­er such platforms.

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