What’s going on with $SOL and the Solend protocol, and why should you care?
What’s going on with $SOL and the Solend protocol? After Celsius and 3AC crashed the market, another worrying event has started to emerge. With nearly $1 billion in liquidations on the line, the price of one of the largest L1s in crypto is up for grabs. Right now, there are three major liquidations: Celsius: 23,962 [...]

What’s going on with $SOL and the Solend protocol?
After Celsius and 3AC crashed the market, another worrying event has started to emerge. With nearly $1 billion in liquidations on the line, the price of one of the largest L1s in crypto is up for grabs.
Right now, there are three major liquidations:
- Celsius: 23,962 $wBTC at $13,604 ($477 million).
- SOL Whale via Solend protocol: 5.7m $SOL (~$160m).
- ETH whale via Aave protocol: 152k $ETH (~$141m).
But the $SOL situation is by far the most intriguing and has sparked intense debate.
Here’s a breakdown of what’s going on:
A $SOL whale deposited $160 million in the Solend protocol to borrow $108 million.
As this position neared liquidation, it began to raise fears that user funds could be put at risk. Solana’s recent instability lends itself to potential problems in the midst of a massive liquidation event. Also, user funds could be vulnerable due to high slippage.
In response, the Solend protocol decided to approach the whale to negotiate a solution. They stated that:
- The whale will always present a systemic risk to Solend and its users, and
- Allowing a liquidation of this size to occur on-chain is extremely risky.
But the whale never responded, so Solend issued a proposal that he intends “Grant emergency power of attorney to temporarily take over the whale account so that the settlement can be executed OTC.” The proposal was met with a huge public reaction, as many claimed that the intervention directly combats the essence of decentralization.
Emin Gun Sirer, founder of Avalanche, @FatManTerra Y @Coachkcrypto contested the proposal.
Prominent cryptanalyst Cobie called the situation $SOL “comedy”, with the CEO of Binance apparently also questioning the decision.
If we learned anything from the Celsius and 3AC situations, it is that On-chain transparency is a much-needed component of the crypto-financial ecosystem. This is the exact problem that DeFi aims to solve.
I got into crypto out of disgust with the banks that control your money so now I use DEFI where random devs control my money
https://t.co/90uQkLkthn
— Byzantine General (@ByzGeneral) June 19, 2022
Even FTX CEO Sam Bankman-Fried agrees with this sentiment.
so can DeFi; FWIW 3AC/etc. could not have happened with a chain protocol that was transparent
— SBF (@SBF_FTX) June 19, 2022
But despite the backlash to the proposal, 97.5% voted “Yes.” This is where things get interesting.
The proposal was approved with 1.15 million votes in favor and 30,101 votes against.
A single voter provided 1 million of the “yes” votes, approving the proposal. pic.twitter.com/tlgb7z3AWm
— web3 is great (@web3isgreat) June 19, 2022
It turns out that more than 90% of the votes were cast by a single user. The fate of the $270 million in user assets is being decided by a single entity. This is a fundamental flaw in the system, as voting power is decided by your DAO holdings.
This resulted in further division among the community. The Solend protocol quickly rushed to correct its error, INVALIDATING vote #1, and instead issued a new proposal to:
- Invalidate the last proposal
- Increase governance voting time to 1 day
The voter turned to Discord to justify his position. They stated that they would prefer to save “$120 million retail dollars instead of delaying the spirit of DeFi for a whale that is gambling degenerately.”
The decision to invalidate the vote raises another important issue: What good is a DAO if the results of the proposal are not met?
The initial proposal was a) fundamentally flawed, and b) too easy for a single party to manipulate. But in addition, canceling the proposal invalidates the very authority that a DAO claims to have. A double blow of degradation of decentralization.
Despite all this uncertainty, the CEO of FTX stated that “the real solutions are coming”. Many accused him of “saving his bags” as the timing of this tweet coincided with the dumping of $SOL. Until now, he has been quiet for months on the Solana front.
it would be ironic if @solarium it overcame most of its validation issues once and for all as the 2021 era bull run ended; shit time
it is also entirely possible; afaik, there are real solutions on the way, some of which have been implemented https://t.co/g1CU4uivHt
— SBF (@SBF_FTX) June 19, 2022
So what does the Solend situation mean for $SOL? Once again, it highlights the concerns of network centralization. Controlling user funds is a big no, and it goes against the essence of decentralization.
In terms of implications, this event negatively affects the Solend protocol more than $SOL itself. $SOL remains virtually unscathed. But it does highlight the increasingly relevant decentralization argument.
This is the classic case of need vs want in crypto. What we WANT is decentralization, but what we NEED (in this case) is user protection. Striving for a healthy balance between the two is what we need to progress as an industry.
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