Author |

Editor | Hao Fangzhou

Produced | Odaily (ID: o-daily)

Author |

Editor | Hao Fangzhou

Produced | Odaily (ID: o-daily)Solend, the largest lending agreement on top of Solana, has staged a farce in the past two days.

The incident started when Rooter, the founder of Solend, recently tweeted that a giant whale (address starting with 3oSE) had SOL deposits worth US$170 million (the pool accounted for nearly 95%) and USDC+ worth US$108 million on Solend. USDT debt position (the USDC pool accounts for nearly 86%). Considering the overall downward trend of the market, the price of SOL at that time was getting closer and closer to the liquidation line of the address (about 22.27 US dollars). Rooter hopes that the address can replenish the mortgage as soon as possible assets or pay off some debts to avoid potential liquidation hassles.As for why the giant whale has not carried out any risk-removing operations on its loan positions, there are actually many possibilities. You can say that the giant whale has not had time to operate, or it can be said that the giant whale does not think that SOL will fall to its liquidation line , but the most terrifying but most reasonable possibility is——Considering that the address is almost full of stablecoins borrowed within the scope allowed by the agreement, the giant whale may not have thought about keeping its position at the beginning, but wanted to achieve "disguised shipments" through the lending agreement. Because today's market sentiment is extremely panicked, selling such a large amount of tokens directly in the secondary market is likely to cause a series of stampedes, and the final market impact loss may be higher than the sum of loan discounts and liquidation penalties, so It is better to hand over (mortgage) SOL, which has doubtful liquidity, in exchange for (lend) real price chips (USDC+USDT).

After days of unsuccessful attempts to contact the whale, Solend is leaning more and more towards this last possibility. Combined with the reality that the position size accounts for an excessively large proportion of the protocol size, and the historical lessons of Solana’s overload and downtime when dealing with such a large-scale liquidation, Solend believes that once the address is passively liquidated, the smooth execution of on-chain liquidation cannot be guaranteed. It is very likely that there will be a large amount of bad debts

• (Odaily Note: Here you can refer to the impact of the Terra event on MIM)

• , which in turn brings systemic risks to the protocol (insolvency, losses must be borne by other users), and even affects the smooth operation of the entire Solana ecosystem.

In an emergency, Solend finally took a hedging measure beyond everyone's expectations-proposing to give Solend Labs emergency powers to temporarily take over the whale account. Specifically:First, Solend will formulate special mortgage requirements for giant whales that account for more than 20% of the total loan amount. If the user's loan exceeds 20% of all loans in the main pool, a special liquidation threshold of 35% is required;

The second is to propose to grant Solend Labs emergency powers to temporarily take over whale accounts so that liquidation can be performed in off-exchange transactions to avoid Solana’s downtime caused by the submission of a large number of transaction requests in a short period of time. Once the whale’s account reaches a safe level, the emergency power will be It is revoked.From the content of the proposal alone, it has to be admitted that Solend’s measures are very targeted. First, it can effectively reduce the proportion of the size of the position in the agreement. Second, it can balance the pressure of centralized liquidation at the price of $22.27 by adjusting the liquidation threshold. The third is to introduce over-the-counter transactions to further reduce the impact of large-scale liquidation on Solana performance. The idea of ​​the whole proposal is very clear,

In the end, after only six hours of community governance voting, the proposal was quickly passed under the push of several big households.

However,(Odaily Note: It has been rejected by Proposal 2, which will be mentioned later.)

Odaily Note: From the voting weight chart of the proposal in the above figure, it can be seen that the big players starting with 6HFx almost single-handedly promoted the passage of the proposal. What needs to be added here is that some people think that the biggest failure of the proposal is that the big households have taken over the consciousness of the community, but I personally do not fully agree, because the big households and other community members have economic interests in this matter. Consistent, if the giant whale encounters liquidation, the potential bad debts need to be borne by all users.However,

This seemingly "correct result" proposal caused an uproar in the entire DeFi circle, and even elicited the mourning of "DeFi is dead". Stand still, which means that Solend has "programmed bugs" along the way to achieve the desired result.

The most salient question among these is: Does the community have the right to decide whether a person lives or dies if his "death" is in everyone's interest?Dominating an individual's assets with the will of the community is contradictory to the so-called DeFi, which takes "controlling one's own financial sovereignty" as one of its core concepts.

This can't help but remind me of a very absurd story. On a leaky boat, other people pushed a fat man down together in order to fight for a greater chance of survival. On Solend's boat, the giant whale is the fat man.

Some people may say that the above description is not completely appropriate. In Solend's story, the giant whale may have "intentionally went to death" (deliberate liquidation), and the community just changed the details to make his "death" more meaningful to everyone. It is beneficial. This also doesn't make sense,

The "financial sovereignty" implemented by this giant whale is to mortgage some assets and lend some assets at the liquidation price of 22.27 US dollars. Any targeted changes made by the community in the later stage will undermine the implementation of its "financial sovereignty".Collective voting to intervene in individual assets is not the first case in the history of cryptocurrency. Previously, Juno Network had also deprived a giant whale address of holding tokens through a governance proposal. The difference was that Juno Network could more or less accuse the giant whale of maliciously exploiting rule loopholes when it was "executed". Whales are much harder to fault in their behaviour. The so-called deliberate liquidation is only a guess for the time being (even if it is a fact, there is nothing wrong with it). Judging from the fact that he just deposited some coins and borrowed some coins, it is for this reason that everyone will sympathize The innocence of the giant whales, and then they criticized Solend one after another.But from Solend's point of view, as the leaking ship, they also had to do some self-rescue operations. At that time, Solend was in a seemingly unsolvable dilemma. Intervention would cause the agreement to fall into a great crisis of public opinion, and the consequence of letting it go would be a systemic collapse.Fortunately,

Due to the short-term recovery of the market, things have temporarily started to develop in a good direction.

As the price of SOL moved further and further away from the whale's liquidation line, the sword hanging on Solend's neck was gradually lowered, which gave the agreement a breathing space.

This morning, Solend once again launched a governance proposal (which has now been passed), intending to withdraw the previously passed "takeover control" proposal, hoping to find a new solution that does not involve taking over account control.But what if things don't improve? If this round of small rebound does not occur, and the price of SOL continues to approach 2.227 billion US dollars, when it is time to make an immediate decision, how will Solend, which has obtained the results of community awareness, make decisions between "correct results" and "program errors"? I don't know the answer.

For other and more DeFi projects, instead of thinking about how to choose when faced with such a situation, it is better to think about how to effectively avoid such incidents.

Looking at the Solend incident this time, today's situation can be said to be both accidental and inevitable. If Solana’s performance is not afraid of such a large-scale on-chain liquidation at all, if Solend can take pre-set risk response measures for similar scenarios in advance, if the governance module can be clearer (such as clear restrictions that cannot involve user asset sovereignty)... this story Maybe it will develop in a different direction,

However, under the general environment of limited underlying performance, insufficient risk pre-preparation, and imperfect governance model, no one can be sure that there will not be another leaky ship in the future.