Solana-based borrowing and lending service company named Solend has voted to take over the largest whale account on the network on Sunday. This comes as shocking news to everyone. Solend claims that the whale holds a huge amount of margin position. But reports have viewed this as a move to try their best to avoid the chaos of liquidation.
So What Happened?
Sunday, a governance proposal was being posted from Solend Labs proposing to liquidate the largest whale account in the network. Solend claims that the account has an extremely large margin position and was putting its users at very high risk. They said that the whale held 5.7M SOL which equates to $108 million in stablecoins at the liquidation price of $22.30.
The users also through holdings borrowed $108 million in stablecoins. If they actually were to be liquidated then it could bring SOL prices down very drastically.
Let’s just say that if indeed SOL drops to $22.30, means that the whale account will be liquidated up to 20% of the borrowed equating to around $21 Million. The proposal also says that if it were to be liquidated, it would be difficult for the market to take in such a huge impact because it is normally sold on Dexes. Solend could in the worst possible outcome be in very bad debt that could result in chaos on the Solana network.
Solend also tried to contact the Whale account since 13th June but was unable to reach the whale to reduce their risk.
How Was The Whale Account Taken Over?
Having no response from the whale account, Solend is to take action to reduce the risk and they had also set up a DAO just to hold votes to the proposal. Furthermore the vote only had six hours to cast their lots as half of the voting sites were down at that time. They had to ask the token holders to vote yes, to have special margin requirements to take action to grant power to Solend labs to mitigate the risk or no and do nothing about it. It was reported that 97.5% voted yes. They actually almost barely lost the proposal but it passed just barely and the vote was successful only because of one very large whale wallet’s vote.
What Happens To Decentralisation Then?
This unprecedented event that took place taking over the whale account has people concerned about what might happen to the main praised points in DeFi. But yet now an account was being taken over. This brings concerns to the people. Wherein the financial services liken to banks and brokerages have no intermediary but this makes them question even more. Likened to Farokh, an influencer of NFT commented on the event of the account being taken over.
Sharat Chandra the Vice President from Research and Strategy at EarthID, told Business Today that Solend Labs had done something very dangerous by using these ‘ ‘emergency powers’ ‘ to take over the account and that using mitigation of risk is not an answer to making sure DeFi platform’s stability.
But yet what is clear to everyone is that this action from Solend against the whale account is going against the foundation principle of decentralisation and the repercussion remains to be seen.
Find out the latest NFT news update in Malaysia and around the world on NFTeller.