Solend, a Solana network lending protocol with more than $1 billion in deposits, took a drastic step over the weekend to try to stop its ecosystem from collapsing over a single whale — a term that refers to a investor who holds large amounts of cryptocurrencies. A governance proposal presented on Sunday (19) by the Solend team — approved with 97% of the votes and later revoked — advocated that the project assume control over the account of a single investor, whose balance of 5.7 million SOL ( $170 million) represents 95% of currency deposits in the protocol’s main pool. The core issue here is that the whale’s SOL position is being used as collateral for loans of 108 million USDC and USDT stablecoins. If the price of SOL were to drop to US$22.30, up to 20% of the whale’s funds (about US$21 million) could be liquidated, an event that the Solend team describes as catastrophic, capable of making the rest of the Protocol investors lose money. “It would be difficult for the market to absorb this impact as liquidators often sell in DEXs. At worst, Solend could end up with bad debts.” Solend’s team tried to contact the anonymous investor behind the address 3oSE9…RbE to ask him to decrease his exposure, but got no response from the user who has been inactive for more than 12 days. The only solution found by Solend to prevent the worst scenario from materializing would be to take control of the whale’s account so that the settlement could be carried out via the over-the-counter market (OTC) and not on decentralized exchanges (DEX), as would happen without the intervention. That strategy, which involved modifying the project’s smart contract, could prevent further downward pressure on Solana’s price, prevent the network from crashing, and protect other investors in the protocol, according to Solend.
On Sunday, the proposal was launched and was open for voting for just six hours. In this short period of time, community participants were able to vote “yes” or “no” to hand over control of the whale account to Solend Labs. The proposal was approved by a majority, with 1,155,431 votes in favor (97.5%) and 30,101 votes against (2.5%). Here it is worth mentioning that the “yes” vote of a single investor was decisive, as he alone was responsible for one million votes. But even though the proposal passed with overwhelming approval, it did not go into effect. The Solend team backtracked after a barrage of criticism it received from the crypto community, which views taking control over an investor’s account as an attack on the fundamentals of decentralized finance. “Sqlana’s Solend leverage platform just generated a fake vote as a cover to control a whale’s account so it wouldn’t get liquidated and crash Solana’s server again. Solend is an official portfolio company of Solana. Internal offers. Central servers. This is the definition of CeFi [finanças centralizadas]”, he wrote developer Evan Van Ness.
The proposal presented at the weekend by Solend – which was even the first proposal of the entire protocol – was controversial not only for what it tried to apply, but also for the way in which it was made. Although the project team created the proposal, they claim they did not participate in the vote. The consultation itself barely reached the necessary quorum and was decided by a single investor vote. The fact that the community participating in the project has only six hours to understand the proposal and decide which side to take, was also pointed out as a very short time for a measure of such impact. On Sunday night, Solend Labs went back and created another proposal (already approved) that introduced three measures: 1) Invalidate the previous proposal; 2) Increase governance voting time to one day; and 3) Work on a new proposal that does not involve emergency powers to take over an investor’s account. The project claims that the risk of liquidation of the whale still exists, but the recovery in the price of Solana, which this Monday (20th) is quoted at US$ 34, alleviated the situation.