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One of the major issues that crypto firms are facing amidst ongoing market crashes is the liquidation crisis due to a lack of securities and various other reasons
The eruption broke out on Twitter following the decision of Solana-based lending and borrowing protocol, Solend, to decide on the basis of community voting for what to do with the whale account. Twitter seems to have divided opinions regarding the approach of Solend, where some think of it as an absurd idea while others consider it a necessary thing to do. Among those supporters of Solend’s decision, David Schwartz, CTO of Ripple (XRP) network, also stands out while justifying the action of the lending protocol.
In response to a Twitter user who said that he doesn’t think such action could be possible on XRPL, Ripple’s CTO took the stand for Ripple. Schwartz said that if someone wants to change the code or rule, he would need to convince the community of this and see if they would accept it. He said that nothing is permanent here, and decentralized systems are themselves very democratic as in no one can force the majority to accept or reject anything until they agree to it.
The whole matter started at the core of the decentralized protocol of Solana – Solend, where an anonymous wallet had deposited a huge portion of Solana’s SOL pool. This constituted about 95% of the entire SOL pool of Solana and 88% of USDC borrowings. Given the consistently dropping price of Solana’s native SOL token, the wallet belonging to the single largest user of Solend had come to the verge of being close to a huge margin call.
The situation worsened when the SOL token reached $22.30; then, the protocol would automatically liquidate about 20% of the collateral belonging to the whale. Developers behind the Solend protocol of Solana were concerned about the overwhelming impact of this potential multi-dollar liquidation on decentralized exchanges on the Solana blockchain that could even result in shutting down the operations on the network.
To take the whale wallet’s control and handle its liquidation more smoothly, the engineers of Solana’s protocol managed to get past a vote. However, this action received a huge backlash. Following this, Solend is now holding a quick vote that would determine the possibility that the action taken previously to control the largest whale account on the platform should be invalidated.
Nancy J. Allen is a crypto enthusiast, with a major in macroeconomics and minor in business statistics. She believes that cryptocurrencies inspire people to be their own banks, and step aside from traditional monetary exchange systems. She is also intrigued by blockchain technology and its functioning. She frequently researches, and posts content on the top altcoins, their theoretical working principles and technical price predictions.
