Solend, a decentralized finance (DeFi) lending platform based on the Solana network, has initiated a new governance vote to nullify the recently-approved proposition that grants Solend Labs emergency access to a whale’s wallet to prevent liquidation. This is being done in order to prevent the platform from going towards a complete meltdown.
The cryptocurrency lending solution recently launched a governance vote titled “SLND1: Mitigate Risk From Whale.” This enables Solend to decrease the market risk posed by the whale’s liquidation by granting Solend accessibility to the whale’s wallet and allowing the liquidations to occur over-the-counter (OTC).
According to Solend, if the price of Solana (SOL) decreases and the whale is liquidated, the lending network could end up with terrible debt and place a strain on the Solana ecosystem. The proposal was passed, prompting opposition from community members.
A Severe Liquidation Emergency
The anonymous wallet at the center of the incident held 95% of Solend’s whole SOL pool as well as 88% of USDC borrowings. With SOL’s plummeting price, Solend’s largest user moved perilously near to a hefty margin call. If SOL reached $22.30, the program would liquidate up to 20% of the whale’s collateral immediately.
Protocol engineers warned that a multimillion-dollar collapse would swamp decentralized Solana platforms with excessive selling momentum and perhaps clog the network. They rushed through a proposal to seize the whale’s wallet and conduct its liquidation via OTC more efficiently.
When the first proposal passed, crypto Twitter exploded. Some referred to it as illegal, while others ridiculed the low turnout report. In a recent interview, Solend’s pseudonymous creator Rooter said that the insane outcry on Twitter and in the media compelled the company to go back to the drawing board. The SOL price rebound has afforded a degree of liquidation flexibility, according to Rooter, but the question of what to do with the unresponsive whale wallet persists.
New Proposal Was Imminent
The Solend team initiated a new governance proposition vote to nullify the previously-approved proposition when the community opposed the action, deeming it the exact reverse of what DeFi should be and unlawful. There were 1,480,264 votes cast in support of ignoring the SLND1 proposal.
The new proposal renders the previous vote invalid, and it requires Solend to devise a solution that does not include forcefully seizing an account as a means of resolving the issue. In addition to that, the voting time for the government was extended by one day.
The incident has placed the cryptocurrency lending platform in a dire predicament. If Solend is successful in acquiring the whale’s wallet and gaining emergency powers, it could be able to prevent a DeFi explosion and save SOL. Nevertheless, this will demonstrate that anyone’s assets can be seized on the network, which could result in a revolt. The Cryptokk.eth Twitter account tweeted:
On the other side, if the Solend team is unable to reduce the hazards that are associated with the whale’s account, then some people fear that it could cause a Solana breakdown, which would result in a significant decrease in the price of SOL.