Solend Took Over a Whale's Account to Save Itself
Solend took over a whale's account so the platform could sell its liquidated assets OTC instead of on DEXs.
Solend (SLND) is a decentralized lending and borrowing platform on Solana with $265M TVL.
Unfortunately, Solend's has $170M of SOL in one whale's margin position that's at risk of liquidation. Solend proposed and passed a new measure that will "grant emergency power to Solend Labs to temporarily take over the whale’s account so the liquidation can be executed OTC."
Solend tried to reach out to the whale over the last 12 days, but no one has replied.
The whale wallet:
- 5.7M SOL deposited ($170M)
- 108M USDC and USDT borrowed
According to Solend, if SOL dips to $22.30, the platform will liquidate $21M in assets to account for 20% of the whale's borrow. Solend believes that Solana's DeFi ecosystem cannot handle this volume on its DEXs, leaving Solend with bad debt. Additionally, liquidation bot spamming could once again crash the Solana network.
So if the Solana DeFi ecosystem can't handle just $21M in liquidations, it certainly can't handle $170M of liquidations in rapid succession. With so little liquidity, it's possible that the prices of the assets fall too fast while selling, and there won't be enough to repay the loans.
Solend wants to prevent this situation from happening again by setting special requirements for whale positions and giving itself the power to take over those wallets and liquidate them through OTC trading rather than on DEXs.
FatMan on Twitter believes that "while this is a crazy, radical solution, and while it flies in the face of the DeFi ethos, it is probably one of the better options in terms of market impact and protocol health," and I kind of agree with him. But that's easy for me to say, because I'm not a whale, and no one is voting to steal and sell my tokens.
Update:
The vote to take over the whale wallet passed. According to ChainLinkGod , the process by which Solend won the vote was not fair. Apparently, 98% of the yes votes came from one whale wallet. Solend set the voting period to just 6 hours, and the voting site is said to have been down for 3 hours.