Another lending protocol got into trouble; the way he wanted to deal with them remains common sense

While the entire cryptocurrency sector is struggling with falling prices, the wave of collapses, in which lending protocols have been particularly hard hit, worries users. The latter cases include the Solend protocol.

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The Solend lending protocol wanted to deal with the situation in a unique way

The Solend platform is a decentralized lending platform in the Solana network. When investors also threatened to collapse recently, SOL investors were very concerned. Concerns have been raised that the whale, which had 95 percent of its SOL tokens stored in Solend in its wallet, is facing liquidation.

Solan's whale account had an outstanding $ 108 million loan in stableCin USDC and USDT Solend protocols. The whale loan was threatened with liquidation due to the falling price of the Solana cryptocurrency, which in the meantime fell to a minimum of $ 28.54.

Should the price of SOL fall to $ 22.30, the position faces the risk of liquidation of up to 20 % of its total value, ie about $ 21 million, with devastating consequences for Solend.

To avoid this scenario, the co-founder of the "Rooter" network launched the SLND1 proposal. He was to ensure that Solana took control of the whale's account and disposed of the collateral in an organized manner. The proposal was approved by the DAO, which caused a stir.

Decentralized systems are valued precisely because they are uncensored, while in this case it is clear that censorship was. The idea has gone too far for most of the SOL community, so much so that a new proposal to repeal the previous one was later made. This required explicit intervention by the DAO, which means that YES in fact, they can also happen censoring bodies.

The fact is that even the DAO vote itself could be influenced by large token holders, so whales are a problem in two ways: lending protocol operations and voting within the DAO. 

On June 21, good news came for Solend users when the protocol announced the whale 25 million of her USDC debt moved to Mango Markets, a competitive lending protocol. Some risks have been removed, but the $ 84 million debt is still not repaid. It remains to be seen whether there will be a way for the outstanding loan to allow Solenda to escape easily.

However, to avoid such a scenario in the future, the Solana community has approved a proposal that limits the credit limit to $ 50 million. The smart contract on which the protocol is based should also be adapted.

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All content in this article is for informational purposes only and does not in any way serve as investment advice. Investing in cryptocurrencies, commodities and stocks is very risky and can lead to capital losses.