What decentralization? Solend approves whale wallet takeover to avoid DeFi implosion

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On Sunday, the decentralized finance (DeFi) sector got here beneath scrutiny once more after Solend, a preferred DeFi protocol on Solana (SOL), put collectively a spur-of-the-moment governance proposal related to one of many whale wallets liable to liquidation. 

The proposal, dubbed “SLND1 : Mitigate Threat From Whale,” was abruptly launched on Sunday with out announcement and the vote closed with a 97% approval ranking. The scandal comes on the heels of final week’s sudden layoffs from Coinbase and BlockFi, and the liquidation debacle of Three Arrows Capital. Including to the melee of sudden volatility and market sell-offs, the spur-of-the-moment alterations of a supposed decentralized autonomous group, or DAO, present that crypto is just not as “decentralized” as its customers could have thought.

Particulars of the proposal embrace the whale’s pockets tackle and deeper data in regard to why this account was inflicting points for Solend. A part of the principle concern is the massive account is going through liquidation which might put a pressure on Solend and its customers.

Based on the proposal, “If SOL drops to $22.30, the whale’s account turns into liquidatable for as much as 20% of their borrows ($21M).” The purpose of the proposal is to take management of the whale’s account and conduct the liquidation via an over-the-counter (OTC) transaction.

Speedy kickback from Twitter ensued as regular. Arguments embrace the injury this transfer may trigger to the general picture of DeFi. Taking management of one among Solend’s wallets means the basic ideas of DeFi fall into query. The transfer additionally leaves a stain on Solend’s potential to handle its debt.

As identified by Emin Gün Sirer, founder and CEO of Ava Labs, further ramifications from this transfer may embrace cascading liquidations throughout the decentralized change (DEX) e-book if the worth of Solana (SOL) drops too low.

Maybe, the a number of cracks within the crypto ecosystem are starting to disclose themselves via rushed, compelled and manipulated selections made in haste. At-whim layoffs and breaking into DeFi wallets is much from the sacred concepts underlining crypto’s tradition of decentralization and such strikes are more likely to deliver additional criticism and mock to the sector.

This can be a creating story which will likely be up to date as extra data turns into accessible.

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