Working on the Solana blockchain base, Solend said he accepted a management proposal that overrides his proposal on Sunday. The new proposal will increase the voting time for administrative changes to one day, limiting network administrators from taking similar measures in the future.
This change of mind is the latest in a series of measures implemented by decentralized lending platforms to deal with panicked withdrawals due to the decline in cryptocurrencies as a result of tightening monetary policies implemented by central banks around the world. This highlights the challenges faced by a new “decentralized” financial system that seeks to exist without a centralized intermediary such as a regulated bank.
Solend's executive team announced on Sunday that it will take control of a "whale account" whose activities constitute a speculative attack on Solana's value. The account deposited 5.7 million Solana, worth 170 million, and received its return as stable cryptocurrency USD Coin. This meant that the “whale” would profit if Solana fell against the dollar, on which the USD Coin was pegged.
At the time, the account represented around 95% of Solana deposits in the system and 80% of the total USDC – a clear contrast with traditional finance where a single counterparty is inherently prohibited by regulators from risking more than a certain level.
Solend said he took this emergency action only after the unknown whale did not respond to its offers for nearly two weeks, during which time Solana fell to its lowest level since last summer. The team stated that if Solana drops below $22.30, it will have to partially liquidate the position.
The disaster that Solend faced last week was averted thanks to a jump. The coin bottomed just above $26 and rebounded to $36.65 on Monday. However, it is still 75% lower than the April peak.
Solend's team admitted on Monday that it was this leap that allowed it to change course. Solend said he is now working on a new management proposal to ensure system resilience "that doesn't include emergency authorizations to take over an account."