Solend, the DeFi lending platform on Solana has been facing critical reviews from the entire cryptocurrency community for its actions to protect its platform.
Announcements from the project have been sparking conversations around the authoritarian actions of DeFi platforms when push comes to shove. To understand the entire matter completely, we will take a look at what Solend actually is.
Your capital is at risk
What is Solend?
Solend is a Decentralised Lending Platform that enables lending and borrowing on the Solana Network. The concept is similar to banks, except there are no intermediaries.
This means that in Solend, the borrowers can receive other cryptocurrencies by locking up a particular cryptocurrency- which in this case is Solana. This action is the same as borrowing money from a bank against some collateral, except there is no bank and the transactions are completely decentralized.
In the crypto realm, CEX (Centralized Exchanges) and DEX (Decentralized exchanges) are both prominent. Centralized exchanges or CEX are simply online banks that deal with cryptocurrency. So naturally, a majority of the cryptocurrency enthusiasts prefer DEX which functions based on the concept of Decentralization. This means total autonomy over one’s assets.
What Triggered the Backlash?
DeFi platforms run on predetermined functions, which means ideally, there should be no authoritative figurehead. Thus, to make decisions about the further advancements of the platforms, DAOs or Decentralized Autonomous Organizations are put in place. Solend worked on the same principle.
Things went sideways when the largest platform user and an alleged whale, who had deposited over 95% of the total Solana deposits in Solend amounting to around 5.7 million SOL, borrowed $108 million in the form of USDC and Ether. The platform was at a risk of going bust if the price of Solana dropped to US$22.30, thereby liquidating around $21 million.
Taking the matter into their own hands, the Solend team proposed a poll on the DAO to grant them emergency authority to take control of the wallet and carry out the liquidation via over-the-table transactions to save the protocol.
This decision was fiercely opposed by the community, as it straight up went against the very concept of decentralization. The poll went in favour of the Solend team too. But the backlash forced them to put up another poll so as to overrule the previous poll. The deadline to vote for the same was 7 hours initially, which then was increased to over 24 hours following heavy criticism.
This time, the decision was overturned, with a majority of the participants voting for decentralization and the whale’s right to autonomy over his or her assets.
Your capital is at risk
At the time of writing, the Solend team has been consistently updating the community regarding every action on Twitter, the latest being that the previously unreachable and inactive whale has now started transferring assets.
Several members of the crypto community have been calling out Solend on its actions against decentralization; the core concept behind DeFi. However, the team has claimed to take responsibility for their actions and that they will coordinate with the whale to ensure the sustenance of the protocol. Currently, the price of Solana is $37.86.
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