The DeFi platform, Solend is in a rather delicate situation due to the risks of liquidation of one of its liquidity pools. Apart from the detrimental consequences that this problem could have on this lending and borrowing protocol, the Solana network and more specifically its token, the SOL crypto, could also be affected.
Solend, a DeFi platform on the Solana network that enables cryptocurrency lending and borrowing, is in grave danger. Among these 16 liquidity pools, one of them is said to be on the verge of crisis because of a position held by a whale. The latter had borrowed 108 million dollars (in USDC and USDT) on the protocol by providing collateral of 5.7 million SOL, or 196.38 million dollars at the current price of Solana.
As with previous liquidation episodes on Celsius Network or Three Arrows Capital, a good portion, 20% of the position held by this whale on Solend, risks being liquidated if the value of the collateral asset were to fall below of a certain threshold. In his case, Solana (SOL) price should not dip below $22.30. A possible scenario when we know the situation in which the crypto market is currently evolving.
The problem with this position is that it represents 95% of the funds deposited in the liquidity pool, 88% of the USDC tokens in this same digital vault and 25% of the TVL of the Solend platform. Thus, a liquidation of part of the funds would constitute a threat to the survival of the protocol and could have a dreadful effect on the value of the Solana token. This is why Solend officials quickly took action on the matter before it got out of control.
The Solend team member proposal
As early as June 13, Solend team officials attempted to contact the owner of the address, but the latter appears to have been inactive on the network for more than 10 days. Faced with the silence of the holder, the team ended up putting in place measures to try to solve the problem. She has indeed submitted a proposal to members of the Solend community, which would give the developers full control of the whale account.
A posteriori, the DeFi platform team could therefore carry out the OTC liquidation “over the counter (OTC)”.
If it is true that the proposal received more than 97% of votes, it made the crypto sphere react a lot because it would have violated a principle dear to DeFi: decentralization. Sure, there were more than a million addresses that approved the proposal, but the amount of SLND tokens they own doesn’t even equal $800,000. Thus, many people have questioned the legitimacy of the vote because the concern in question represents more than 20 million dollars. Especially since the voting period only lasted six hours.
Back to square one
While criticism rains down on the Solend team on social networks, it therefore reviewed the decision and came back with another proposal, which consisted of a return to the initial situation. This proposal also received a rather impressive wave of approval, with 99.8% of voters giving a favorable opinion.
As a result, the digital safe on Solend runs the risk of liquidation. However, for now, members of the organization might still have time to find a better solution, as the price of Solana (SOL) stands at $34.44 at the time of writing this article.
However, they must hurry a little, because even if the market recorded a slight increase over the last two days, nothing says that it will not fall back to its faults in the near future.
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What happened to the Solend Protocol on Solana? – BeinCrypto France
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