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Comment by 55555 | Hacker News Reader

Sorry, I've read this again and now I think this has little to do with Solana and entirely to do with Solend, and I think they're separate. Maybe someone who knows more about the space can clarify things. I now presume the funds needed to be deposited in Solend's smart contract in order for the trader to borrow the funds against his collateral, and Solend is pushing a patch in order to modify the code so they can seize the funds that are held within their own smart contract. So the Solana team may be totally innocent. But it's still news, because Solend doesn't look much like a "decentralized" lending platform where no one can seize your funds if they can seize your funds and modify the loan and partially raise the liquidation price, and I assume this is the biggest market on Solana. It's quite reminiscent of the ETH split / DAO hack.

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Not only does this not have to do with Solana (it could happen on a protocol on any chain), it's literally what people sign up for when they use a protocol which is upgradeable via a governance vote.

Sensible protocols put upgrades behind a time lock (3 days or 5 days seem to be common). That way anyone who doesn't like the changes can exit the protocol. Solend apparently doesn't have one, which means if you agree to use it, you agree the protocol may change while you're using it (though this should happen after a governance process at least).

If you choose to use a protocol that is upgradeable without a timelock, that's your own decision. Also, this supposed "whale" likely has enough Solend tokens to block the vote if they wanted to.

Since it's even open to a vote, I'd argue it's still fairly decentralized. A more centralized protocol would have privileged users who can make changes or seize funds without needing to go through a vote.

The /r/cryptocurrency subreddit also seems to have an axe to grind with Solana, and people will grind that axe without caring to understand the details of how these things work. I don't use Solana (have maybe $50 of SOL coins, but mainly play on EVM chains), but the frenzied shrieking of crypto shitposters who pile onto FUD bandwagons without doing any due diligence is headache-inducing.

A better title would be "Solend seized $170MM of user funds".

Claiming it was done by "Solana" is incorrect. Claiming it's to prevent a drop in Solana's price is clickbait & editorializing.

>Claiming it's to prevent a drop in Solana's price is clickbait & editorializing.

But … that’s one of the reasons they cite in justifying the proposal.

>> It'd be difficult for the market to absorb such an impact since liquidators generally market sell on DEXes. In the worst case, Solend could end up with bad debt. This could cause chaos, putting a strain on the Solana network. Liquidators would be especially active and spamming the liquidate function, which has been known to be a factor causing Solana to go down in the past.

https://realms.today/dao/7sf3tcWm58vhtkJMwuw2P3T6UBX7UE5VKxP...

Ok, we've changed the title to that. (Submitted title was "Solend just seized $170MM of user funds to prevent a decrease in Solana's price".)

If someone suggests a better title (i.e. more accurate and neutral, preferably using representative language from the submitted article), we can change it again. And if there's a better URL than the Reddit thread, we can change that too.

I think a better url would be the governance proposal itself

https://realms.today/dao/7sf3tcWm58vhtkJMwuw2P3T6UBX7UE5VKxP...

Linked from this tweet by solend

https://twitter.com/solendprotocol/status/153844135044142284...

That first link is very accurate and already explains the proposal in depth rather than the clickbait and low effort reddit post who are reacting aggressively and screeching at the headline.

Speaking of which suggests to me that the majority of the tribal redditors in that subreddit commenting have not been around since the controversial Ethereum DAO hack which already abandoned the nonsensical 'cOdE iS lAW' idea and already set that precedent and is no different to what is happening to Solend on Solana.

So it is no surprise that the majority of DeFi, DAOs, etc has been one giant scam which will result in the collapse of many tokens, projects and even blockchains because of these false promises from the very beginning. The reality is that after regulations come in, only a select few blockchains projects will stick around.

I have zero clue what's going on with this story—seriously zero—but my spidey sense is that if we change the URL to either one of those, we'll trigger a bunch of complaints about it being one-sided.

That's not to say the current URL is the best one. But probably a neutral third-party source would be better, though such a thing may not exist.

I work in crypto. I have nearly no stake in Solana or any Solana based project, but I have done a little bit of smart contract programming on Ethereum (actually working on changes to a popular lending protocol that has built-in governance for upgrades)

My personal opinion is that the Governance URL would be far more neutral than any article or thread where people are piling on to use this to criticize Solana (the same change to a protocol could happen, and probably has happened, on Ethereum). The /r/cryptocurrency subreddit is not neutral when it comes to Solana, and 99% of the commenters don't understand what they're talking about.

Criticizing Solend if the proposed changes are made is fair, but this is basically how DAOs work... token holders vote to make proposed changes. If you don't like the existing implementation and governance process, you should avoid the protocol, or pay attention to what might change that could affect you.

If I sign up for a web service and agree to a ToS (which always says it may change and that continued use means I'm agreeing to any future changes), I have far less transparency into what changes might be made. Solend users agreed to the protocol implementation which includes upgrading without a timelock (bad practice). But at least there is a governance process, which gives users a chance to get out when unfavourable changes are happening.

Also, I don't know enough about Solend or Solana to verify this, but users of lending protocols typically get a distribution of the governance token based on their stake, which means the "whale" being discussed likely could block this vote if they wanted to.

I’m planning on writing a book about you, btw

That’s how much I appreciate what you do here.

Your “spidey-senses” are invaluable. I hope you train a mentor before you leave us.

I'm only surprised why would the Solend team care about crashing the price of Solana. Why would the Solana care either for that matter (I don't know if they are the same people though). If it crashes because of a sudden bulk market liquidation then it is just working as intended, and eventually the price of SOL will recover if there is user confidence.

It might not have a lot to do with price. The Solana network itself is too fragile to handle a liquidation like this. They're trying to keep the network from crashing. Needless to say, the network has one job, and it keeps failing miserably.

Solana goes dark for the seventh time in 12 months - https://www.cryptopolitan.com/solana-why-is-solana-down/

whale has put up $170M of SOL and borrowed $100M of USD. that USD was supplied by other people on Solend who expect to be repaid. “liquidation” is a way to ensure those lenders are repaid: if the borrower no longer has enough collateral to be incentivized to pay back the loan — or rather before that happens — liquidators will recover the lenders’ money by seizing the borrower’s collateral, selling it on the market, and returning the USD proceeds to the lenders.

the worry about SOL price drop is: can this $170M of SOL really be sold to make the lenders whole of their $100M USD? or will SOL significantly drop as that trade is executed and the lenders can only recover (say) half that?

most lending platforms place a cap on the total amount of each type of collateral they’ll accept — in large part to protect against these liquidation scenarios. it looks like there’s worry that Solend was too lax with their cap.

Is that literally the case though?

Or is it that if the price crumbles the whale will be able to pay back the loan for pennies on the dollar because they need to repay in the crashed tokens?

One way was a really good bet and having their tokens confiscated to ensure they don’t benefit is probably outright fraud while the other way is just a bankruptcy where confiscating their tokens is probably outright fraud unless they have a previous contractual agreement which states it is permissible.

Hard to tell what is happening in the cryptocurrency space because too many people have an agenda to just state the facts.

—edit—

Or a loan which may or may not need to be liquidated at some future point and they seized the collateral “just in case” like pre-crime.

Heh, user confidence comes from the price. If the price goes near zero, many people will leave and never return.

But a $170m liquidation o a DEX will only cause a flash crash on the DEX. Its a boon for arbitrageurs, its an oligarch level opportunity if you are paying attention.

Even with such a crash or "liquidation function" also crashing the network, blocks will eventually continue to be produced even with Solana's level of availability. So just let it happen.

Anyway, too late, half a million dollars of tokens voted to control $170m of user funds.

The holders of the governance token had to vote on whether to seize the funds. Something being "decentralized" is different from something lacking any means whatsoever to evolve.

Some of these DAOs are really dumb, and at the end of the day there is a team just asking for "straw poll" in a very real sense of the community before taking unilateral action, but there is no reason to invoke that here: the contract might simply be delegated to another contract on chain that allows an on chain vote to update the code to another version.

To me the damning thing here is that they have a 1% quorum and it was barely met and it seems like a large amount of that 1% might have been one large holder and so much like how democracy is certainly decentralized and yet in some countries (such as mine) no one votes and it gets awkward how decisions are made, that's also the state of decentralized organizations :(.

You could simply delete your post.

I thought there was a 10 minute rule. But actually I can still edit the headline and have. It's pretty big news imo.

You might want to remove the editorializing in your title as well.

This is a correct description, though. From the quote in the article (emphasis added):

> [A large liquidation] could cause chaos, putting a strain on the Solana network. Liquidators would be especially active and spamming the liquidate function, which has been known to be a factor causing Solana to go down in the past.

> Letting a liquidation of this size to happen on-chain is extremely risky. DEX liquidity isn’t deep enough to handle a sale of this size and could cause cascading effects. Additionally, liquidators will be incentivized to spam the network in an effort to win very lucrative liquidations. This has been known to cause load issues for Solana in the past which would exacerbate the problems at hand.

So, according to Solend, there are two issues at stake here:

1. The network might have technical problems processing the amount of transactions.

2. DEX liquidity isn’t deep enough to handle a sale of this size and could cause cascading effects

What they mean by this second point is that, should a sale happen, then:

1. not enough people will stand willing to buy at a favorable price ("liquidity isn't deep enough")

2. this price crash could cause others to get liquidated in turn ("cascading effects")

This is a statement about the impacts on prices, so IMO it's not editorialized.

The "headline" of the reddit post OP linked to is way to long to be a HN title.

The headline on HN has already been updated to "Solend just seized...", rather than "Solana just seized..."

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