Decentralized financial platforms are going to great lengths to minimize the effects of recent sell-offs in cryptocurrencies.
Blockchain-based lending platform Solend attempted to gain control of its largest whale account. It claimed that this “whale” could have a significant impact on the markets.
What is Solend?
Solend allows users to borrow and lend money without the need for intermediaries.
In a DeFi ecosystem, lending and borrowing are essential. In contrast to this, current products are both slow and costly. Solend aims to be the most user-friendly and secure solution in the Solana ecosystem.
Solend claims that a single whale has a “extremely large margin position,” which could put the protocol and its users at risk. “In the worst case, Solend could end up with bad debt,” the firm said. “This could cause chaos, putting a strain on the Solana network.”
Over 95% of the funds were deposited from a single account that was linked to 5.7 million Solend tokens. A $108 million loan in USDC and ether stablecoins was used as collateral.
About $21 million in collateral would be at risk if the price of SOL fell below $22.30, according to Solend. On Monday, the price of Sol was $34.49.
In an unprecedented move, Solend on Sunday passed a proposal giving it the authority to take over the whale account.
Some on Twitter questioned the decentralization of Solend in response to the move. Centralized institutions such as banks are meant to be abolished by DeFi.
A new proposal to overturn the previous vote was put forth by Solend’s users on Monday. With 99.8 percent of the vote, the community overwhelmingly approved.
What happened is an indication of how DeFi, a “Wild West”- style peer-to-peer trading platform, has been caught up in the crypto meltdown.
Stablecoin MakerDAO, which created the dollar-pegged currency known as DAI, has recently disabled a feature that allowed traders to borrow DAI in exchange for staked Ether.
StETH is supposed to be equal to ether in value but has been trading at an ever-widening discount compared to ether.
Large crypto lenders and hedge funds like Celsius and Three Arrows Capital are experiencing liquidity issues because it is difficult to move money in and out of stETH.