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With the current delicate nature of the digital currency ecosystem, Solend is doing all it can to pacify all of its stakeholders while dealing with a liquidation threat from a whale account.
The Solend team argues that if the whale account is left to be liquidated on its platform, it can trigger an unprecedented meltdown that will largely affect the entire Solana ecosystem and drive SOL price to almost zero. In a bid to prevent this, the Solend team activated the platform’s first-ever governance votes in which it proposes to take over the whale account in a bid to liquidate Over-the-Counter (OTC), which can mitigate the DeFi liquidation risk.
“Despite our efforts, we’ve been unable to get the whale to reduce their risk, or even get in contact with them,” the proposal said. “With the way things are trending with the whale’s unresponsiveness, it’s clear action must be taken to mitigate risk.”
The Solend team is asking its users to Vote either in favor to “Enact special margin requirements for large whales that represent over 20% of borrows and grant emergency power to Solend Labs to temporarily take over the whale’s account so the liquidation can be executed OTC,” or to “Do nothing.”
From the statistics gathered, the vote to take over the account passed, and the proposal tagged “SLND1: Mitigate Risk From Whale” surpassed the 1% quorum with the help of a single whale account with over a million tokens.
The Backlash and Solend Protocol’s Second Governance Vote
Solend notably faced backlash with the first governance votes as critics postulated that the move to override a user’s account is against the tenets of decentralization. A particular Twitter user, Cryptokk.eth said that the way the whale’s account is being forcefully taken over can arguably happen to any other user, thus, calling for a total boycott of the platform.
No matter what the team does, there is no way to change the fact that assets deposited into the platform can be confiscated by the team at any time. Escape from the platform is the best way out. At any time the team can tweet an announcement to forfeit your assets.
— cryptokk.eth 🦇🔊(L,3) (@Black_K168) June 20, 2022
Solend has promptly posted a new governance voting to override the first as it explores other attempts to taper the current risk. In a bid to earn goodwill from its users and aggrieved community members, Solend has also increased the voting time to 24 hours, giving more flexibility to anyone who may want to participate in the voting.
From the encompassing slump in the broader crypto industry experienced over the weekend, Solana is currently changing hands at $35.71, up 11.91% in the past 24 hours according to data from CoinMarketCap. The Solend team is notably taking the needed precautions at this time, despite the fact that the liquidation price is still at $22.30.
With the way markets fall unannounced, the Solend team prefers to find a model by which the apparent risks will no longer pose a worry irrespective of market directions.