DeFi platforms are pushing the boundaries to limit the damage from the dramatic sell-off in cryptocurrencies.
Solend, a Solana-based lending platform tried to gain control of its largest account, a so-called “whale” investor that it said could significantly influence market movements.
Solend’s users have voted to block the move.
Solend is a DeFi (decentralized finance) app that allows users to lend and borrow funds without the help of intermediaries.
Solend explained that a whale is sitting on an “extremely large margin position,” which could potentially put the protocol and its users at risk. “In the worst case, Solend could end up with bad debt,” the firm said. “This could cause chaos, putting a strain on the Solana network.”
The account concerned had deposited 5.7 million sol tokens into Solend, accounting for more than 95% of deposits. Against that, it was borrowing $108 million in the stablecoins USDC and ether.
If sol’s price sank below $22.30, 20% of the account’s collateral — about $21 million — is at risk of being liquidated, Solend said. Sol was trading at a price of $34.49 on Monday.
On Sunday, Solend passed a proposal granting it emergency powers to take over the whale account, an unprecedented move in the DeFi world.
Solend said the measure would allow it to liquidate the whale’s assets via “over-the-counter” transactions — as opposed to on-exchanges trades — to avoid a possible cascade of liquidations.
MakerDAO, the creator of a dollar-pegged stablecoin called DAI, recently disabled a feature that allowed traders to borrow DAI against staked ether, a derivative token causing mayhem in the crypto market.