This week, Solend Labs, another crypto lending app, tried to take over a whale account to prevent it from collapsing. The governance vote is a sign of decentralization. It is also a sign of trouble for Celsius. But, despite the controversies surrounding decentralized investing in bitcoin lending, it is still an excellent example of how decentralization is not working.
Solend is a decentralized exchange and debt management company, and its actions will have a broader impact on the DEX book if they don’t stop the whale from collapsing. The decision to take over a whale’s account is one of many signs of trouble for the entire ecosystem.
The plan of Solend Labs to take over the whale’s account and make it unusable has sparked outrage from neighborhood members. It is unclear why a group that tries to gain control of a crypto asset would go to all that length to try to stop it from collapsing. A new governance proposal put forth by Solend Labs has nullified the previous proposal. It demands that Solend find an alternative to taking control of the whale account and shortens voting time.
It seems as though the world of cryptocurrency lending has entered a new stage. After the LUNA cryptocurrency crisis and Celsius’s problems, trust in the crypto industry has plummeted. Reports suggest that users are worried about losing their homes after the company fails to pay them back. Users say the company failed to provide them with a guarantee for their deposits, and the CEL token they received in exchange for their money ran down to zero.
The company is not a bank, and the funds it raises from customers are not protected from bankruptcy. The company pools investors’ funds and then lends them to people who put up crypto as collateral. Many critics have compared these lending platforms to Ponzi schemes, but that’s not the case. In contrast, they’re certainly not banks. The app pools investors’ funds and earns its profits by lending them back the cryptos.
Another cryptocurrency lending platform
The decentralized platform allows users to borrow and deposit money without an intermediary. Its largest account, which contains $108 million in stablecoins, has been frozen by users. It prevented the account from collapsing because it had deposited 5.7 million Sol tokens into the Solend network and borrowed $108 million in USDC stablecoins.
The decision to freeze withdrawals on the Celsius Network caused mass hysteria and sell-offs. However, it has also caused a different type of issue to emerge in the crypto lending space: another crypto lending platform has tried to take over whale accounts to prevent them from collapsing. After the first failed attempt, the company extended the time for voting, allowing more people to weigh in on the issue. It also said it would continue working on a new proposal, but it needed to act fast to avoid systemic risk.
Solend’s governance vote is a show of decentralization
After a week of uncertainty, the team behind a crypto lending service has announced that it is extending the voting period for its governance tokens to one day. The proposal initiates to counter critics who were upset that the first proposal had not been approved. The new proposal also ostensibly invalidates the first, but only after they extended the time for voting. With its second vote, the company is attempting to regain user confidence and maintain a high level of decentralization.
Solend’s users voted to block the move
As a result of the recent change in the governance of the Solana blockchain, the whale’s proposal to take over the platform has come under fire. The whale used to control the company’s whale account, borrowing $108 million in stablecoins and holding them in his wallet. The move would have had a drastic impact on the price of SOL.
To protect its users, the Solend DAO has voted to rescind its previous decision to take control of the most extensive user accounts. At this time, it will be best to trade in cryptocurrencies through bitcoin trading software. However, the Solend community has criticized the proposal as contrary to decentralized finance principles.
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