If Solend is unable to take over the account, some believe that it could cause a meltdown, driving Solana’s price to zero.
Solana-based decentralized finance (DeFi) lending protocol Solend has created another governance vote to invalidate the recently-approved proposal that gives Solend Labs "emergency powers" to access a whale's wallet to avoid liquidation.
On Sunday, the crypto lending platform launched a governance vote titled “SLND1 : Mitigate Risk From Whale.” This allows Solend to reduce the risk that the whale’s liquidation poses to the market by letting the lending platform access the whale’s wallet and letting the liquidations happen over-the-counter (OTC).
According to Solend, if Solana (SOL) drops in price and the whale gets liquidated, the lending platform may “end up with bad debt” and strain the Solana network. The proposal was approved, triggering criticism from members of the community.
As the community condemned the move, calling it the opposite of what DeFi should be and outright illegal, the Solend team initiated a second governance proposal vote to invalidate the previously-approved proposal. The proposal ended with 1,480,264 votes in favor of disregarding the SLND1 proposal.
The new proposal invalidates the previous vote and will push Solend to find another solution that does not involve forcibly taking over an account. Additionally, it also increases the governance voting time to 1 day.
The situation has put the crypto lending platform into a gruesome dilemma. If Solend succeeds at taking over the whale’s wallet and being granted emergency powers, it may save SOL from a DeFi implosion. However, this will show that anyone’s assets can be confiscated within the platform and can cause a boycott. Cryptokk.eth tweeted:
No matter what the team does, there is no way to change the fact that assets deposited into the platform can be confiscated by the team at any time. Escape from the platform is the best way out. At any time the team can tweet an announcement to forfeit your assets.— cryptokk.eth (L,3) (@Black_K168) June 20, 2022
On the other hand, if the Solend team is not able to mitigate the risks surrounding the whale’s account, some believe that it can trigger a Solana meltdown, causing SOL's price to dump heavily.