Solana Truly Decentralized? Solend’s Actions Sparks Debate
Is Solana Truly Decentralized? Solend’s Actions Sparks Debate
by Best Owie
10 mins ago
The Solana network has been growing in popularity among decentralized finance
(DeFi) enthusiasts. The success of many projects on the platform has drawn
developers to it and with the developers have come to the investors. With the
market crash, many networks in the market have suffered due to declining
prices, having to put in various measures to ensure longevity. The most recent
happened on Solend, a Solana DeFi protocol, whose actions have drawn the ire
of DeFi investors.
Threatening The Safety Of Decentralization
Last week, the price of SOL had trended to the mid $20s, eventually bottoming
out at $26 before recovering. This has put a Solana DeFi protocol, Solend, in
a perilous position due to the OTC trade of a single whale wallet. The whale
had borrowed 108 million in USDT and USDT using 5.7 million SOL. Since it was
a leverage position, it meant that 20% of the trade stood to be liquidated if
the price of SOL were to fall to $22.3 at any time.
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The amount of the position made it so that liquidation of such proportions
would put the entire protocol at risk. This is because decentralized exchanges
are often operating with limited liquidity and Solend could not adequately
provide the liquidity required to execute such a trade.
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SOL prices falls close to liquidation point | Source: Arcane Research
Given that the digital asset had declined dangerously close to the liquidation
price, Solend had begun to explore various options to mitigate against this.
On Sunday, the protocol released a governance proposal vote which had received
97.5% of votes in favor of passing it. This proposal was to manually liquidate
the whale position by initiating a token sale through an OTC desk. This was to
bypass the event of the liquidation happening on-chain and heavily impacting
Solana Users Raise Hell
The Solend proposal had quickly gone viral on social media and had drawn the
attention of a large amount of Solana users who strongly opposed the decision.
To them, this went against everything DeFi stood for and raised questions
about how truly “decentralized” the protocol is.
Due to the outrage, Solend had had to reverse its decision and abandon the
proposal to temporarily seize the assets of the whale, whose account made up
88% of all borrowed funds and 95% of all deposited SOL on the protocol. In its
place, a new proposal was introduced which received 99.8% of affirmative votes
to invalidate the first proposal.
SOL price recovers above $36 | Source: SOLUSD on TradingView.com
SOL has since recovered back above $35 since then, pushing back the fears of
liquidation in regards to this account. However, the whole debacle has left a
mark on the market as users are now questioning if decentralized truly means
decentralized in the crypto space. As such, DeFi users are advised to keep
such events in mind when participating and interacting with various protocols
which they believe to be decentralized.
Related Reading | Why A Grayscale Bitcoin• Экономика » Финансы » Платежные средства » Платежные системы интернета » Криптовалюта » Bitcoin ETF Approval Could Have Bearish
SOL is up 2.87% in the last 24 hours to be trading at $36.28 at the time of
this writing. It is the 9th largest cryptocurrency• Экономика » Финансы » Платежные средства » Платежные системы интернета » Криптовалюта in the space with a market
cap of $12.43 billion.
Featured image from Blockbuild.africa, charts from Arcane Research and
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