Plot to defeat crypto meltdown: Solend votes to seize, liquidate whale account
- Reference: 1655736365
- News link: https://www.theregister.co.uk/2022/06/20/defi_platform_solend_votes_to/
- Source link:
Despite our efforts, we've been unable to get the whale to reduce their risk, or even get in contact with them
Solend, which allows users to deposit cryptocurrencies for lending to other users, has one "whale" responsible for 95 percent of the SOL cryptocurrency deposited on its platform (worth $107 million). The same user has borrowed 88 percent of available USDC, a stablecoin pegged to the US dollar. All said, the account has borrowed around $108 million in USDC and Ethereum. According to Solend's [1]website , it has lent a total of $195 million in crypto assets.
"Despite our efforts, we've been unable to get the whale to reduce their risk, or even get in contact with them," Solend said in its [2]vote proposal .
The successful vote gave Solend the ability to liquidate the user's account via OTC trades if SOL dropped to $22.30. It has come perilously close to doing so recently – SOL is currently trading in the $35 range but dropped to $26 last week as other cryptocurrencies have tumbled.
At its peak alongside other cryptocurrencies in November 2021, SOL hit $260. Given its plummet in value and hovering near the liquidation point, it's understandable why Solend might be worried.
'CeFi at its finest'
Comments on the governance page relating to the first such vote in Solend's history are a mix of support for what some voters saw as proactive customer protection, and frustration that the move represents the opposite of decentralized finance.
Decentralized finance (defi) eschews intermediaries, banks and other authority-vested institutions that make centralized decisions. Ideally more democratic in practice, defi has proven to be [3]ripe [4]for [5]the [6]picking by cybercriminals. The unregulated nature of defi and cryptocurrency has also been a key component of its meteoric fall from November 2021 highs. In just over half a year, the total cryptocurrency market cap has fallen to less than a third of its peak value.
[7]
Solend's vote was done to give it a chance to beat margin-triggered trading bots that, presumably, would act in the interest of Solend's whale and sell SOL tokens as fast as possible.
[8]
[9]
The OTC trade Solend would perform on behalf of the whale [10]would involve selling to a specific buyer at an agreed upon price.
[11]Inverse Finance stung for $1.2 million via flash loan attack
[12]Bill Gates says NFTs '100% based on greater fool theory' amid crypto cataclysm
[13]Crypto market crashes on Celsius freeze, inflation news
[14]Coinbase CEO cuts 1,100 jobs, warns of 'crypto winter'
A second vote, held less than a day after the first, [15]invalidated the initial policy change and garnered more support than the first.
In addition to stripping the ability for Solend to seize the whale's account, it also increased governance vote time to one day, and gives Solend time to "work on a new proposal that does not involve emergency powers to take over an account."
Celsius, another crypto lending platform, has arguably been at the heart of some of the latest dips in the value of cryptocurrency. Like Solend, Celsius allows users to deposit funds that others can borrow, and last week it [16]froze all activity .
[17]
Celsius on Sunday [18]updated its users, saying this was ongoing, and that Celsius was also freezing activity on its Twitter Spaces and pausing Q&A sessions. ®
Get our [19]Tech Resources
[1] https://solend.fi/
[2] https://realms.today/dao/7sf3tcWm58vhtkJMwuw2P3T6UBX7UE5VKxPMnXJUZ1Hn/proposal/HuaL6cDtuNtfnJgvwMnYiZDHVCoLAuDtVFgJD8kYChJ4
[3] https://www.theregister.com/2021/10/01/compound_crypto_bug/
[4] https://www.theregister.com/2021/10/28/cream_ethereum_theft/
[5] https://www.theregister.com/2022/02/04/wormhole_currency_theft/
[6] https://www.theregister.com/2022/04/18/beanstalk_loses_182m_flash_loan/
[7] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/personaltech&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=2&c=2YrCZp6JQVPa1vQcCYKrFSAAAABE&t=ct%3Dns%26unitnum%3D2%26raptor%3Dcondor%26pos%3Dtop%26test%3D0
[8] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/personaltech&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44YrCZp6JQVPa1vQcCYKrFSAAAABE&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[9] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/personaltech&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33YrCZp6JQVPa1vQcCYKrFSAAAABE&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[10] https://www.bloomberg.com/news/articles/2022-06-19/mounting-crypto-liquidation-risks-cause-defi-to-go-to-extremes
[11] https://www.theregister.com/2022/06/17/inverse_finance_heist/
[12] https://www.theregister.com/2022/06/16/bill_gates_nfts/
[13] https://www.theregister.com/2022/06/13/celsius_freeze_wipes_out_18/
[14] https://www.theregister.com/2022/06/14/coinbase_cuts_jobs/
[15] https://realms.today/dao/7sf3tcWm58vhtkJMwuw2P3T6UBX7UE5VKxPMnXJUZ1Hn/proposal/3geE5P3D7VJRaNNDVfZciGsXgwGiao1hSNpRM6jWNa5A
[16] https://www.theregister.com/2022/06/13/celsius_freeze_wipes_out_18/
[17] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/personaltech&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44YrCZp6JQVPa1vQcCYKrFSAAAABE&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[18] https://blog.celsius.network/a-note-to-the-celsius-community-e5af1f5a7998
[19] https://whitepapers.theregister.com/
Re: Reinsurance spiral....?
The big problem stat Lloyds, as I recall, was that they recruited a huge number of new names and stuck them with ruinous asbestos reinsurance deals, so many of them made huge losses without every having had the good times at all.
Basically the sort of dirty dealing which in the crypto world they call "Tuesday".
"we've been unable to get the whale to reduce their risk, or even get in contact with them"
How can this be legal? How on earth can you have a customer with hundreds of millions invested in your platform and not even be able to communicate with them? That statement alone would convince me that this is a disaster waiting to happen - if any more convincing were required.
Re: "we've been unable to get the whale to reduce their risk, or even get in contact with them"
And what sort of person invests hundreds of millions (admittedly in funny money worth perhaps three decryption keys and a small box of crystallised fruit in the real) in an organisation which by design has no headquarters, no legal staff, no compliance staff and only a few pseudonymous contacts about whom nothing can be known.
Because you can see the code, they say, and the code is all that matters. Yeah. That's working beautifully.
Re: "we've been unable to get the whale to reduce their risk, or even get in contact with them"
Not only did they "invest" $107 million they took out $108 million in loans and now they can not contact them!
Looks to me they have used them to cash out, they should not expect to get repaid.
Re: "we've been unable to get the whale to reduce their risk, or even get in contact with them"
Anon investor puts $100m+ cash into funny money trading outfit and uses the credit to buy funny money pegged to the $.
Can anyone else smell the washing powder?
And yet again - it happens time after time - all these opponents of centralisation and believers in code alone suddenly want centralised action as soon as tits start heading upwards. Coo. It's almost as if a century and more of developing regulation in financial services has been for more than the fun of exercising power.
Still, with Bitcoin at less than a third of its peak value and heading rapidly downwards, I think we sane people are going to get a lot of fun out of crypto over the next weeks and months.
I feel it appropriate to note that "SOL" usually stands for Sh*t Outta Luck...
Now why would you want to deposit a lot of crypto coins and then take an almost equal sized loan of crypto coins? Except for the obvious money laundering of course. What is the betting the FBI are watching the deposited tokens because they are stolen and the whale has cashed out the loan, out of view of the FBI, with no intention to return and repay/reclaim...
Reinsurance spiral....?
This is getting to resemble the Lloyds (of London) reinsurance spiral crisis from the 1980s/1990s (for those of us old enough to remember that).
It turned out that a lot of insurance was (in the end) reinsured with many of the original insurance when all of the intermediate contracts were factored out.
One large adverse event/failure and the whole spiral unwinds catastrophically...
This led to greater regulation/oversight/disclosure for good reason, some of which was that relatively unsophisticated "Names" (private individuals) made loads of money in the good times, but when it all went wrong, they were on the hook for liquidity/claims etc. and many lost everything.
Everything old is new again.