Decentralized companies are being hit hard by current market conditions, leading them to make extreme decisions to prevent mass sell-offs of crypto.
Solend, which is a crypto lending platform built on the Solana blockchain recently attempted to take control of a whale holder’s crypto account in an attempt to prevent him from selling and causing a massive market movement.
Solend’s users voted to block that from happening.
Solend is a DeFi app that allows its users to lend and borrow assets without the need to use an intermediary.
Solend said a single whale is sitting on an “extremely large margin position,” potentially putting the protocol and its users in a risky situation. “In the worst case, Solend could end up with bad debt,” continued the firm. “This could cause chaos, putting a strain on the Solana network.”
The whale account that the company is concerned about had deposited around 5.7 million Solana coins into the app, which is more than their overall 95% of deposits. To note, the company was also borrowing $108 million in stablecoins USDC and Ether.
Solend laid out that if the whale sells and Solana’s (SOL) price falls below the $22.30 marker, which is 20% of the company’s collateral, or $21 million, the company would be forced to liquidate.
On Sunday, the company did something unprecedented and legally risky in the crypto space by proposing that it take emergency powers over the account to prevent this from happening.
Solend stated that this measure would allow them to liquidate the whale’s asset in a way that wouldn’t influence SOL’s price as drastically, via “over-the-counter” transactions. This is opposed to on-exchange trades and is meant to prevent a flood of liquidation.
This move had a ripple effect on Twitter, with users expressing skepticism towards the company as a whole. This is problematic because the company represents a space that is still under regulatory consideration, and could probably influence upcoming regulation decisions negatively.
On Monday Solend’s users were asked to vote on a new proposal to overturn the earlier vote. The community voted in favor, with over 99% voting “yes.”