So Long to Solend

By Gideon6ix | CryptoNuances | 21 Jun 2022


So Long to Solend
Solana’s lending Dapp moves to become Crypto’s IRS

by Gideon 6ix

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Pay attention friends, Solend is attempting to establish itself as a Defi regulator. Even worse, their attempts are garnering support. Solana will soon have a version of the IRS in its hands. This action could be a slippery slope that will overregulate cryptocurrency in the future.

Background

Solend is Dapp built on the Solana (SOL) blockchain designed to be a lending and borrowing platform for Defi. They claim to be the least expensive, fastest, and most scalable lending protocol. They have a total of 46 assets across 16 pools to choose.

Solend is governed by a DAO and has its own utility token-Solend (SLND). Here is a snippet of the token distribution, taken directly from the whitepaper:

The Problem

A whale has accumulated a large position that could threaten the stability of the network. According to Ryan Browne, a wallet “deposited 5.7 million sol tokens into Solend… borrowing $108 million in the stablecoins USDC and ether.” This move caused users to become worried about their own positions.

Sounds Solution (Theft)

Solend immediately gave itself “emergency powers” to seize the account and threatened to liquidate it. Since this announcement, there have been two DAO votes (SLND1, and SLND2,) and a third vote is on the way.

SLND1 passed and placed special margin requirements on accounts that control 20% or more of total borrowing.

SLND2 swiftly passed to invalidate SLND1 and allowed more time for voting (1 whole day)- yikes.

SLND3 is expected to pass. It will limit accounts to $50M USD and threatens to liquidate any account in violation. It will also “temporarily reduce the liquidation close factor to 1%, and temporarily reduce the liquidation penalty to 2%.” There is no explanation for what they define as “temporary.”

Photo by Uday Mittal on Unsplash

This voting effort is market manipulation at its best. Solend is cryptocurrency’s version of Too Big to Fail. Solend should not be allowed to vote itself the ability to seize accounts that they deem dangerous. This is eerily similar to how the IRS can seize accounts whenever it decides it is appropriate (they get it wrong sometimes.)

Defi is supposed to be a space without overbearing regulators. What Solend is doing goes against that ethos at its core. I would encourage people to think carefully about supporting Solend if they continue to grant themselves “special powers” over investor accounts.

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All the best,

Gideon 6ix

Twitter: https://twitter.com/Gideon_6ix

Minds: https://www.minds.com/gideon6ix/

LinkedIn: https://www.linkedin.com/in/gideonsix/

Sources:

https://solend.fi/

https://docs.solend.fi/DAOToken/token

https://www.cnbc.com/2022/06/20/users-of-defi-app-solend-block-attempt-to-take-over-whale-account.html

https://blog.solend.fi/slnd1-mitigate-risk-from-whale-1504285ab4d2

https://blog.solend.fi/slnd3-introduce-account-borrow-limit-19030792eb8c

https://en.wikipedia.org/wiki/Too_big_to_fail

Solend (SLND) | Dashboard | Token Terminal

View several financial metrics and valuation multiples for Solend (SLND) and compare them against those of other…

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https://www.coingecko.com/en/coins/solana

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Gideon6ix
Gideon6ix

Entrepreneur, Crypto Enthusiast, Author, Minds Profile- Gideon6ix- https://www.minds.com/gideon6ix/about Twitter- @gideon_6ix


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