Solana on brink of collapse: Solend community votes to take over whale's account
The decentralised finance (DeFi) sector continues to heat up as the overall market declines, assets are being remortgaged, and a high share of margin transactions is leading to projects' collapse. In three months, the volume of funds staked in DeFi decreased by 64% to $57 billion, and new methods of saving individual platforms risk a complete loss of investor confidence in this sector.
This time, it was the Solana-based Solend platform that stood out. In April, its assets exceeded $800 million. Despite the platform's stated decentralisation and autonomy, it put a governance proposal up for a vote: whether to change the smart contract and expel the largest whale by forcing the closure of their positions outside the network.
According to management, the whale had staked 5.7 million SOL primarily in stablecoins to obtain guaranteed annual returns. Because SOL is declining, the volume of marginal support for whale positions is falling. When SOL reaches $22.30, the platform must liquidate the coins deposited by the whale in a stop-out.
The problem is that the developers don't want to deal with the sale of such a large volume of SOL (about $21 million at the time of liquidation) through their own platform. For Solend, this presents additional risks due to the lack of liquidity and fears over the collapse of SOL, the platform's base coin. That's why, on 19 June, without prior announcement, Solend's management invited the community to vote to change the smart contract to allow Solend to take control of the whale account without permission and make its deposit over-the-counter (OTC).
Due to haste in voting, it was barely possible to meet the quorum of 1%, and 86% of the votes belong to one address.
Changing a smart contract to deal with an emergency situation is not an isolated case. Vitalik Buterin once initiated a hard fork of Ethereum due to a hacker attack on The DAO fund. However, many users regard such steps as an attack on decentralisation and the main tenet of the cryptocurrency world: "code is law'.
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