Solana Community Takes Over Whale’s Assets

Solana’s (SOL) crypto borrowing and lending protocol, Solend, has voted to take full control of a whale’s assets on the platform to avoid immense liquidation risks.

Solana’s Largest User Forced to Give up Control to the Community

According to the proposal, the whale, or the “largest user” on Solend has taken an “extremely large margin position” on the platform. An over-leveraged position can put the whole protocol and its users at risk, the proposal adds. 

The proposal revealed some details about the whale, such as the user’s deposit of 5.7 million SOL tokens, a loan amounting to 108 million worth of USD Coin (USDC) and Tether (USDT), and a liquidation price of $22.30. As of this writing, SOL is changing hands at $34.72.

The proposal also indicated that the whale’s last on-chain activity recorded was still 12 days ago. It also has not been responding despite numerous attempts, including on-chain messages further amplified on Twitter.

 “With the way things are trending with the whale’s unresponsiveness, clear action must be taken to mitigate risk,” the proposal shows.

Related Article: Solana Outage Now Solved After ‘Durable Nonce’ Bug Hits Blockchain | Here’s What Happened

(Photo : JUSTIN TALLIS/AFP via Getty Images)
An illustration picture taken in London on May 8, 2022, shows a gold plated souvenir cryptocurrency Tether (USDT) coin arranged beside a screen displaying a trading chart. 

Risk Aversion Spreads Through Markets, Solana Scathed as Well

Risk has considerably increased in the crypto market over the past few days. We have seen Bitcoin (BTC) tumble onto new lows, and there is no telling as to when we can expect the bottom of the crash.

The same goes for other cryptocurrencies, including SOL. When the price drops below the liquidation price, the proposal stresses that “it’d be difficult for the market to absorb” its impact. This prompted the community to vote on whether they should “force liquidate” the whale before everything is too late.

97.5% of the votes were in favor of Solend’s radical measure. It sought to establish special margin standards for whales who hold more than 20% of loans and grant emergency power to Solend labs to manually liquidate the account via over-the-counter (OTC) and many other exchanges.

What Could Happen if Liquidation at a New Low Happens?

When mass liquidation happens then, and the underlying assets are forcibly sold on decentralized exchanges (DEXes), “Solend could end up with bad debt.” There are many factors that can lead to the grim outcome anticipated when the whale’s liquidation occurs, but the proposal highlights its capacity to “cause chaos” and put a “strain on the Solana network.”

The proposal argues that if Solana network’s liquidate function becomes spammed in the event of a liquidation, it can cause a spiraling downward movement for Solana, which can further trigger more liquidations as a result.

Attempts to get in touch with the whale have been tried since June 13 but to no avail. The Solana network has also contacted market makers to ensure protocols are in place for the facilitation of a smooth liquidation process. However, despite these steps, the ongoing crypto meltdown seems to create deeper risks than the previous days.

Risk aversion has spread throughout multiple markets. And in order to prevent the cascading effect of a massive liquidation event, the community took the decision to a vote on whether or not an “emergency power” must be vested to Solend Labs so they can take over the whale’s assets temporarily.

Read Also: Justin Kan Fractal NFT Gaming Market Arrives on Solana Blockchain a Few Days After Massive Crypto Scam!

This article is owned by Tech Times

Written by Errol Villorente 

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