Users of Solana-based borrowing and lending service Solend have voted in favor of a proposal aimed at mitigating risk imposed by a specific user with a big margin position on Solend.
Due to the volatility in the market, Solend is concerned that “if SOL drops to $22.30, the whale’s account will become liquidatable for up to 20% of their borrows (~$21M), which will be difficult for the market to absorb such an impact since liquidators generally market sell on DEXes.” In the worst case scenario, Solend could end up with bad debt.
Due to concerns about risk, many users have withdrawn, causing USDC and USDT utilization in the Main Pool to spike to 100%. This means depositors can’t withdraw, and positions collateralized by USDC or USDT can’t be liquidated.
The proposal was launched at 8:33 AM on June 19, 2022, and was passed by 3:45 PM. This gave the whale only seven hours to view, read and vote on the proposal. The proposal has now passed.
The exact wording of the proposal is shown below:
“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.”
The action that would result in the best outcome is as follows:
Enact special margin requirements for large whales that represent over 20% of borrows. If a user’s borrows amount to over 20% of all borrows for the Main Pool, a special liquidation threshold of 35% is required. This policy will go into effect upon approval of the proposal.
Grant emergency power to Solend Labs to temporarily take over the whale’s account so the liquidation can be executed OTC and avoid pushing Solana to its limits. This would be done via a smart contract upgrade. Emergency powers will be revoked once the whale’s account reaches a safe level.
Solend governance token-holders who participated voted yea with 97.5% of the vote. The proposal barely cleared a 1% quorum in the affirmative with 1.13% share. Some voters questioned the authenticity of the results.
Some crypto insiders expressed their views about the proposal.