Solend pays users to vote on proposal to liquidate whale wallet OTC and avoid “bad debt”
Solend, a Solana-based lending platform with over $ 1 billion in deposits, Whale account Allows you to withdraw funds rather than being automatically cleared in the open market. To be worried.The user has been Incentive Vote for “50K SLND proportionally distributed to voters via airdrop”.
Try to contact the owner
The proposal began on June 19, 2022 at 8:33 am and was passed by 3:45 pm. This allowed whales to view, read, and vote on suggestions in only seven hours. However, Solend has tried many times over the past few days to communicate with the wallet owner. The DeFi platform not only sends messages to Twitter, Memo proverb:
“Maintaining your funding is Solend’s top priority. Reduce your position so that your clearing base is less than $ 18.50 in the next 24 hours, or you will have to consider other options. There is an inquiry [email protected]”
Potential fallout of the market
wallet Configure 95% of the SOL deposit pool and 88% of USDC borrowing are by far the most important accounts. Due to market volatility, Solend is concerned that “when SOL drops to $ 22.30, whale accounts will be liquidated with up to 20% of borrowing (about $ 21 million).” Solend fears that selling this position in the DEX market will cause further confusion.
“It can cause confusion and strain the Solana network. Clearers are particularly active and spam the clearing function. This is known to be a factor that has brought down Solana in the past.”
However, it’s not unreasonable to think that a $ 21 million market should be absorbed without “chaos” in a blockchain with a market capitalization of $ 11 billion and 24-hour trading volume of over $ 2.1 billion.
Reducing Solend’s bad debts
In fact, the Solend team publication Perhaps the reason for hijacking a user’s account on a decentralized platform is that “in the worst case, Solend can end up in bad debt.” If you vote in favor, Solend can “mitigate the risk” by “temporarily taking over the whale’s account.” The exact representation of the proposal is shown below.
“We will establish special margin requirements for large whales that make up more than 20% of our debt and give Solend Labs emergency authority to temporarily take over their whale accounts so that they can be cleared by OTC.”
In addition, Solend claims, “The goal is to ensure that the OTC can handle the clearing properly. For example, a DEX with a 46% slip will have a 3% slip.” However, no information is known about how much OTC transactions will be published. The concern is that after 20% of the positions are cleared in market orders, Solana’s price could fall further, destroying other circuit breakers and rewinding the entire $ 191 million Solana position. ..
In addition, Solend is a net loss on USDC loans due to insufficient liquidity to absorb Solana DEX market orders. Currently, exchanging $ SOL for $ USDC for $ 21 million will have a 61% impact on the price. Trading over $ 2 million in SOL seems to have a price impact of over 10%. But this problem is undoubtedly related to the bad management of the Solend team, who didn’t expect this when they first took the whale’s position.
suggestion
Since the proposal has now been passed, DAO has allowed a smart contract upgrade that will allow Solend to take over the whale’s account. The option was to enact “special margin requirements” or “do nothing”. There were no words to suggest further options or strategies that could be implemented. Control or do nothing. Users were also given an incentive with AirDrop to vote on suggestions with just one well-thought-out course of action. Solend did not require the user to vote “yes” to claim airdrop, but the ethics of the approach are definitely questionable.
In addition to the dilemma, the governance platform was unable to accept incoming requests during voting.Solend had to go to Twitter again Directly Users access the mirror of the site while the governance platform is down. Regarding the mirror site, Solend tweeted,
“In general, be careful when visiting sites other than http: //solend.fi, with the exception of this.”
I ask the user to visit a site I don’t know, but he says, “This time it’s okay.” It sets a dangerous precedent. If a Twitter account is compromised, an attacker could use the same language to scam community members.
summary
The tragic nature of this story is ridiculous in that it cannot follow proper security, governance, and financial management. Here is a summary of the situation and Solend’s actions.
- We provided a loan that would leave “bad debt” if liquidated.
- Taken over a user’s account using the first DAO Governance Proposal
- Made a suggestion in just 8 hours to vote on Sunday morning
- Paid users of native tokens to vote on suggestions
- Governance platform offline during proposal
- Link users to unknown URLs via Twitter, connect wallets and vote
- Clear your wallet by moving funds to off-chain OTC block trading
- This sets a precedent that you can take over your account if the DeFi platform deems it appropriate.
DeFi is an abbreviation for decentralized finance, and it is hard to say that taking over a user’s account is in line with the spirit of decentralization. Solend currently uses one rule for one user and a different set of rules for all others. In addition, this user is an important whale in their ecosystem. If the wallet owner withdraws all funds from Solend, the platform TVL will be placed in the tank. Whether or not this move mitigates broader market risk, this is an example of how rich people are treated differently from other users.
Solend treats this wallet specially. The platform also announced that “3oSE … uRbE has a grace period to reduce their leverage on their own.” Small account owners do not receive the aforementioned grace period, but the platform itself does not carry over the account.
Under contract Fat Man Terra comment,
“This is a crazy and fundamental solution, and while facing the spirit of DeFi, it’s probably one of the better options in terms of market impact and protocol health. Sadly, it’s rising. You don’t have to worry about the intensive risks of a big whale account inside, it just goes down. “
Does the DeFi platform need to be able to control a user’s account in principle? Are Solend trying to protect the ecosystem, or just changing the rules to save them? This situation is arguably a dangerous precedent for cryptocurrencies and can have a much wider impact as the bear market continues.
CryptoSlate I contacted Solend and its founder, Rooster, but neither responded to the request for comment.
