Crypto lender Solend community votes to reverse ‘whale account’ takeover decision

Crypto lender Solend community votes to reverse ‘whale account’ takeover decision

By Charles Thuo - min read

Solend, a Solana-based borrowing and lending protocol, has overturned the controversial DAO decision that was reached yesterday allowing Solana to take control of the platform’s largest user account.

It all started yesterday, June 19, when the Solend team staged a governance vote on whether to take over the account of a whale account belonging to one of its users to prevent the occurrence of an on-chain liquidation event since the unknown user held a $108 million stablacoins loan that was collateralized by 5.7 million Solana tokens ($170 million).

Solend risk mitigation proposal

According to the proposal that was voted on, there was a need to mitigate the risks from the whale that held 95% of the SOL in the Solend main pool. With the ongoing market meltdown, this could be a great threat to Solend since the whale account will have to be liquidated if the price of SOL drops to $22.30.

The team claimed that the liquidation of this size can pose a great threat to their lending protocol due to thin liquidity. In addition, the team noted that in case an on-chain liquidation happens, then Solend will be on the verge of acquiring bad debts as the SOL value continues to cascade.

However, the team suggested that the loan should be winded up through an over-the-counter (OTC) contract rather than protocol liquidation. With this kind of suggestion, the team got full support and power from the Solend governance system that quickly passed a vote for them to confiscate the user’s position, 88% of voting power coming from a single address.

Social media criticism

Following the governance system decision, there was a lot of criticism on social media claiming that the team has undermined the decentralization ethos. However, the team responded today, June 20, saying that they have taken note of their criticism and they are putting up a second proposal to invalidate the previous decision.

Today, the DAO voted in the favor of invalidating the previous proposal with 99% votes. The team wrote:

“We’ve been listening to your criticisms about SLND1 and the way in which it was conducted. The price of SOL has been steadily increasing, buying us some time to gather more feedback and consider alternatives.”