The Solend whale moves funds on Solana

A whale wakes up – Solend is a lending protocol deployed on the Solana blockchain. He found himself in the spotlight after a whale endangered his solvency. After questionable management of the case, it could have a good outcome for Solend.

The beginnings of the Solend affair

For several days, the protocol Solend is at the heart of the news. Let’s go back together to the beginnings of this case.

On June 15, Rooter, the developer of the DeFi platform Solend, launched a call on Twitter. Thus, he was trying to get in touch with the owner of the Solana address “3oSE…uRbE”.

In practice, the owner of this address was originally a important loan on protocol Solana. Thus, he had borrowed 100 million USDC by collateralizing 5 million SOL.

However, following a significant drop in the SOL, its position was in the process of being liquidated. Unfortunately, Solana’s decentralized exchanges probably wouldn’t have had enough liquidity to absorb the volume of this liquidation.

The consequences could have been catastrophic. Indeed, the lack of liquidity could have led to a significant drop in the price of the SOL on the DEXs, so other cascading liquidations.

Failure to contact 3oSE…uRbE, Solend developers proposed decentralized governance of take control of your funds for liquidate the OTC position. A proposal that really did not please the community, because of its character extremely centralizeda far cry from the decentralization ideals of DeFi.

First SLND1 proposal.

Faced with the ensuing outcry, the developers finally canceled this first proposalin a second vote via the governance module.

>> Does DeFi seem complicated to you? Choose simplicity, register on Binance (affiliate link)<<

A third more reasonable proposition

On June 21, the day after the 2nd Governance Vote was overturned, Solend developers came back to the community with a more decentralized plan of attack.

Thus, the SLND3 proposal presented via the governance module aims to implement 4 modifications to the protocol:

  • introduce a $50 million borrowing limit per account. Any debt above this limit may be liquidated, regardless of the value of the guarantee.
  • This measure will be phased in starting with a borrowing limit per account of US$120 million and gradually reducing it until US$50 million is reached. A reduction of $500K per hour will be targeted.
  • Temporarily reduce the maximum liquidation factor from 20% to 1%. This caps the amount that can be liquidated in a single trade.
  • Temporary reduction of liquidation penalty for SOL from 5% to 2%. This should help reduce spam from liquidators while providing enough of a bonus for liquidators to recoup their costs in the event of a slip-up.

All of these changes have several effects. Firstly, they make it possible to prevent such a situation from repeating itself. Secondly, it ensures the liquidation of the position at risk, minimizing as much as possible the side effects it could have on the network.

Unsurprisingly, this proposal was accepted by the community.

SLND3 voting result.
SLND3 voting result.

The awakening of the whale

In parallel with the vote of SLND3, a new twist occurred in this affair. Thus, the multiple attempts to make contact with the whale finally succeeded.

On June 21, the teams of Solend announced that they had finally managed to make contact with the whale.

Solend comes into contact with the whale.
Solend comes into contact with the whale.

After discussions, the latter managed to reach an agreement with the whale. In practice, the user has agreed to split his position between several lending platforms, both decentralized and centralized.

Therefore, the user moved 25 million USDC debt to the Mangomarkets lending platform. This represents 25% of its initial position. A first action which makes it possible to defuse the situation.

This does not completely solve the problem, however, since the Great Liquidation Wall still exists. We are in contact with the Mango team and 3oSE…uRbE to find a long term plan. »

Subsequently, the whale once again cleaned up its position by repaying part of its debt, to the tune of 1.5 million USDC.

The case is not yet closed. However, Solend was able to backtrack on its somewhat questionable decisions, in favor of a more decentralized resolution.

This case is therefore reminiscent of the one that took place on the Juno protocol last May. In effect, a whale had had the equivalent of $35 million confiscated by the governance of the protocol.

Seduced by the song of the whales? Avoid leaving large sums on a DeFi protocol, however. The advice also applies to CEXs. To invest in cryptos with peace of mind,register on Binance (affiliate link).

Leave a Comment