Solend, a lending protocol based on Solana, has passed governance proposal SLND2 that invalidates the controversial “emergency powers” proposal from Sunday. It will also give the team time to take less drastic measures on a large on-chain liquidation.
The SLND2 proposal, as well as invalidating the previous proposal, also increases governance voting time to one day.
SLND2 received 1,480,264 “yes” votes and 3,535 “no” votes with a majority of 99.8%. One wallet paid $700,000 for additional voting power, ultimately making up 90% of votes.
The Solend team will now “work on a new proposal that does not involve emergency powers to take over an account,” according to the company’s blog.
“We recognize that a voting time of 1 day is still short,” a blog post by co-founder Rooter said, “but we need to act swiftly to address the systemic risk and fact that normal users can’t withdraw USDC.”
The liquidation crisis
The anonymous wallet at the heart of the crisis had deposited 95% of Solend’s entire SOL pool and represented 88% of USDC borrows. But Solend’s single-largest user came dangerously close to a massive margin call with SOL’s cratering price. If SOL hit $22.30, the protocol would automatically liquidate up to 20% of the whale’s collateral.
Solana’s price had rebounded to around $35 at 6:30 a.m. ET Monday.
Protocol developers feared that multi-million dollar liquidation would flood Solana decentralized exchanges with too much sell pressure and even jam the network. They pushed through a vote to commandeer the whale wallet and execute its liquidation more seamlessly via OTC.
Crypto Twitter erupted. An attorney called it “illegal;” a popular personality scoffed at the low turnout repo; a chain founder derided the seat-of-pants governance hack job; a competing lending service on Ethereum said it was “an indictment of DeFi on Solana.”
“The crazy backlash” on Twitter and in the press forced Solend back to the drawing board, pseudonymous founder Rooter told CoinDesk in a telegram message. SOL price recovery has granted a bit of liquidation wiggle room, Rooter said, but the issue of what to do about the nonresponsive whale wallet remains.
“$120M worth of USDC is stuck in the protocol that average users can’t withdraw,” Rooter said (the whale’s loans alone have locked up $108 million in value).
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