Solana DeFi Protocol Votes to Liquidate Whale’s Account to Protect the Network

June 21, 2022, 10:40 AM AEST - 1 week ago

The team at Solana-based DeFi protocol, Solend, recently liquidated a whale’s account, ostensibly to mitigate risks posed to the Solana network.

A vote was undertaken by the Solend community on whether or not to take temporary control of the whale’s account and liquidate its holdings through an over-the-counter (OTC) trade.

Among the major concerns was that with the price of SOL dropping to US$22.30, the whale’s account would liquidate up to 20 percent of borrows, estimated at around US$21 million, and in such event could have landed Solend with a significant amount of bad debt.

Potential Chaos Alert

Apparently, but for Solend’s actions, liquidations would otherwise have placed significant strain on the Solana network, and liquidators would be especially active and spam the liquidate function – which has been a known factor causing Solana to go down in the past:

Solend Forced to Take Decisive Action

Despite its best efforts, the team at Solend has been unable to contact the whale via on-chain messages to reduce the risk, forcing it to take decisive action:

Options presented to the community included doing nothing, which would present a systemic risk to Solend and its users. Allowing liquidations of this magnitude to happen on-chain is risky as the DEX liquidity isn’t deep enough to handle a sale of this size and could cause cascading effects.

The team at Solend decided that any action taken had a set of trade-offs to consider and it posed a vote to the community with two possible outcomes:

  • Vote Yes – enact a special margin requirement for large whales that represents over 20 percent of borrows and grant emergency power to Solend Labs to temporarily take over the whale’s account so that liquidation can be executed OTC; or
  • Vote No – do nothing.

Votes were cast and the community voted yes:

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