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 susceptible 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 surprising 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 might have thought.

Particulars of the proposal embody the whale’s pockets handle and deeper data in regard to why this account was inflicting points for Solend. A part of the primary problem is the massive 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 purpose 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.

Fast kickback from Twitter ensued as standard. Arguments embody the injury this transfer may trigger to the general picture of DeFi. Taking management of one among 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.

As identified by Emin Gün Sirer, founder and CEO of Ava Labs, extra ramifications from this transfer may embody cascading liquidations throughout the decentralized change (DEX) guide if the value of Solana (SOL) drops too low.

Maybe, the a number of cracks in the crypto ecosystem are starting to disclose themselves by way of rushed, pressured and manipulated decisions made in haste. At-whim layoffs and breaking into DeFi wallets is way from the sacred concepts underlining crypto’s tradition of decentralization and such strikes are prone to convey further criticism and ridicule to the sector.

This can be a creating story which will probably be up to date as extra data turns into out there.