Users of the Solana-based borrowing and lending service Solend voted on Sunday to force the takeover of the protocol’s largest account: a “whale” whose “very high margin position” was dangerously close to a disastrous on-chain liquidation cliff, according to Solend contributors.
If the price of SOL drops too low, the unprecedented governance vote, Solend’s first, will give Solend Labs “emergency powers” to liquidate the whale’s vulnerable assets (around $20 million in SOL) via over-the-counter (OTC) trades rather than decentralized exchanges, where decentralized finance (DeFi) liquidations are usually done.
On-chain liquidation of the whale’s position, according to Solend Labs, “may generate pandemonium” in Solana’s DeFi markets. Using an over-the-counter service would very certainly prevent this. However, it completely replaces the smart contract–coded methodology that Solend uses programmatically for all other borrower liquidations.
Interventionists argued that the Solend whale was not a normal user. The account has stored 5.7 million SOL on Solend, accounting for nearly all of the pool’s funds. It had borrowed $108 million in stablecoins to cover this, significantly more than anyone else.
It would be liable for about $20 million if the liquidation price of $22.30 SOL was met. At the time of writing, SOL is trading at $32.27.
- “Despite our efforts, we’ve been unable to get the whale to reduce their risk, or even get in contact with them,” the proposal said. “With the way things are trending with the whale’s unresponsiveness, it’s clear action must be taken to mitigate risk.”
The proposal asked token holders to yea or nay the following:
- Vote Yes: Enact special margin requirements for large whales that represent over 20% of borrows and grant emergency power to Solend Labs to temporarily take over the whale’s account so the liquidation can be executed OTC.Vote No: Do nothing.
With 97.5 percent of the vote, holders of Solend governance tokens voted yes. With 1.13 percent of the vote in favor, the measure narrowly cleared a 1% quorum.
A single yes vote made all the difference: it was only because of them that the proposal passed the 1% threshold.
