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

On Sunday, the decentralized finance (DeFi) sector got here underneath scrutiny once more after DeFi protocol Solend put collectively a spur-of-the-moment governance proposal related to one of many whale wallets vulnerable 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 just isn’t as “decentralized” as its customers could have thought.

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Particulars of the proposal embrace the whale’s pockets deal with and deeper data in regard to why this account was inflicting points for Solend. A part of the primary subject is the big account is dealing with liquidation which might put a pressure on Solend and its customers.

In keeping with 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 goal of the proposal is to take management of the whale’s account and conduct the liquidation by way of an over-the-counter (OTC) transaction.

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

1) Solend labs is a foul precedent in DeFi. They’re proposing to take over consumer pockets so the liquidation will be executed through OTC. It is a unhealthy thought for a number of causes:

— Høus (@0xHous) June 19, 2022

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) ebook if the value of Solana (SOL) drops too low.

What on earth is that this. https://t.co/OQZGLgu2jC

— Emin Gün Sirer (@el33th4xor) June 19, 2022

Maybe, the a number of cracks within the crypto ecosystem are starting to disclose themselves by way of 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 carry additional criticism and mock to the sector.

It is a creating story which might be up to date as extra data turns into obtainable.

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