Lending platform Solend on the afternoon of June 19 posted a proposal to take control of a “whale” wallet to prevent the risk of massive liquidation.
Since the cryptocurrency market has been continuously going down lately, the prices of major coins are taking a heavy hit. As a result, a lot of crypto-mortgage orders are on major lending platforms.
Solana’s Solend lending platform is having a “headache” with a “huge” loan order of up to $108 million USDC/USDT and collateral with 5.7 million SOL, worth about $176.6 million at the time of execution articles (cost SOL $31.65).
Wallet address 3oSE9CtGMQeAdtkm2U3ENhEpkFMfvrckJMA8QwVsuRbE is Solend’s largest borrower, accounting for 25% of the project’s TVL, 95% of SOL deposited into the platform and 88% of USDC borrowed – showing the importance of this whale and the risk risks posed in the event of liquidation.
The problem is that this wallet has been down since 12 days ago and all attempts to contact Solend to ask this person to pay down debt or increase collateral to minimize the risk of liquidation are futile. Even Solend’s founder, 0xrooter, has taken to Twitter to urge the community to spread the news with the hope of reaching “whale” without any results from June 15 to now.
This wallet is also paying interest of about $140,000 per day.
According to Solend’s estimate, if the SOL price falls to $22.30, the loan order will be liquidated by 20% of the loan value – equivalent to about $21 million. The project is concerned that Solana’s DEX exchanges will not have enough liquidity to handle the amount of SOL released by the platform, so the project may encounter “bad debt” and have to bear the loss on its own.
Therefore, on the afternoon of June 19, Solend posted a proposal to ask for public opinion on the next move. This is the first governance proposal in Solend’s history since going live in mid-2021.
The reason given by Solend is that for the benefit of platform users in particular and the Solana community in general, the project cannot ignore and let the above whale wallet be liquidated because it may lead to chain risks for the company. DEX exchanges such as Solana’s Serum and Orca.
The best solution would still be to liquidate the assets of the above wallet, but through OTC units to both ensure no impact on the market price and keep Solend from having bad debts.
The founder 0xrooter asserted that in the worst case, the platform could be in bad debt up to $100 million and make the project’s $20 million reserve fund “evaporate”.
Voting has now begun and will end around 02:36 PM UTC on June 19.
While Solend has good intentions with the proposal, unilaterally taking control of someone else’s account goes against all DeFi principles of decentralization, setting a dangerous precedent for the future.
Some people think that this is a “market failure” and should be kept as a lesson.
Voting results will be updated by CoinCu in the next article.
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Harold
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