Solend, an “interest rate machine” for lending on Solana, has recently encountered an issue with its protocol during a difficult time with the entire crypto sector. Solend has had to revamp its protocol due to an “extremely large margin position.” Apparently, an unnamed Whale was the nexus of the issue. To quote a blog post from this past weekend:
“The largest user on Solend has an extremely large margin position that is putting Solend protocol and its users at risk. Here are details about the user at the time of writing:
- 5.7M SOL deposited ($170M)
- 108M USDC and USDT borrowed
- 25% of TVL
- 95% of SOL deposits (Main Pool)
- 88% of USDC borrows (Main Pool)
- A liquidation price of $22.30
- The last on-chain activity from the whale was 12 days ago”
If SOL dropped to $22.30 it was predicted that the market would be unable to absorb the margin call and “Solend could end up with bad debt.”
Unable to contact the Whale at that time, Solend took a vote to “do nothing” or enact new margin requirements for holders with large positions and:
“Grant emergency power to Solend Labs to temporarily take over the whale’s account so the liquidation can be executed OTC and avoid pushing Solana to its limits. This would be done via a smart contract upgrade. Emergency powers will be revoked once the whale’s account reaches a safe level.”
Solend has since issued a new proposal (SLND2) that does not involve account takeover.
Apparently in the ensuing hours the referenced Whale emerged and voiced their support of the second proposal:
The anonymous whale who voted in SLND1 and again in SLND2 has this to say publicly in the Solend Discord. pic.twitter.com/k2JMnWLwLO
— Solend 2️⃣ (@solendprotocol) June 20, 2022
Of course, this led to the inevitable criticism of DeFi operations that can act as centralized platforms in times of need.
Absolute comedy. @solendprotocol, a supposed “decentralized” lending protocol built on Solana has “voted” to take over a whales account with emergency powers to eliminate the chance of forced liquidation.
“Decentralized” in name only. pic.twitter.com/Vrua3dFoES
— Dylan LeClair 🟠 (@DylanLeClair_) June 19, 2022
SLND2 is said to be live, immediate crisis averted and the debate between DeFi and CeFi remains.