Solend has invalidated yesterday’s controversial DAO decision to take over its largest user account.
Solend, a lending and borrowing protocol on Solana, has reversed yesterday’s controversial DAO decision to take control of its largest user account.
A new governance vote has passed that invalidates yesterday’s move, with 99% of the votes supporting the new decision.
This all started when, on Sunday, the Solend team put up a governance vote asking to take over a large user loan in order to prevent a on-chain liquidation event.
The issue was that an unknown user held a $108 million stablecoin loan collateralized by 5.7 million Solana (SOL) tokens ($170 million) on Solend.
The main problem was that if the price of SOL dropped to $22.30, the whale’s account would be liquidated.
In its proposal, the Solend team claimed that a liquidation of this size on-chain was risky due to thin liquidity on the lending protocol.
The team further made the case that if the on-chain liquidation went through, Solend would be at risk of accruing bad debt due to a cascading drop in SOL’s value.
The team suggested that rather than a protocol liquidation, the loan should be wound up via an over the counter (OTC) deal.
The Solend governance system then hurriedly passed a vote that gave the team full power to confiscate the user’s position. In this vote, 88% of the voting power came from a single address.
Later on social media, the governance decision received a lot of criticism from many commentators.
In response, the team today said it took note of the criticism and put up a second proposal seeking to invalidate yesterday’s decision.
The DAO voted today with 99% of votes in favor of invalidating the last proposal.