Erik Weijers, a year ago
A controversial move by the Solends Labs team: it had the community vote on a proposal to take over a large user's account. It goes to show that with this "decentralized" blockchain when all is said and done, you don't own your own money.
What's going on? It's about Solend, a lending app on Solana (one of Ethereum's biggest competitors) with over 1 billion in deposits. A 'whale' (owner of a large amount of SOL) had borrowed $100 million of stablecoins there with a large amount of SOL as collateral. Because the price of SOL was falling rapidly, there was a real risk that the collateral of this whale would be liquidated. This would mean that the price of SOL would crash even harder, which was obviously not in the best interest of SOL owners.
To prevent this on-chain liquidation, Solend hastily set up a DAO (Centralized Autonomous Organization). This is a way for community members to vote on a proposal. In this case, the proposal 'grant emergency power to Solend Labs to temporarily take over the whale's account so the liquidation can be executed OTC.' OTC means Over the counter, i.e. a negotiated deal. By allowing the liquidation to take place in this way, a more controlled sale could be arranged and thus, hopefully a less deep price drop. The community voted yes to the proposal.
The way the Solend team took over a user's account goes against principles of crypto, namely that power does not lie with a small team but with the users. What happens to someone's money should be laid down in programming code: code is law. Although the proposal was voted on, there was hardly any time to do so: the deadline was six hours away. Only 1% of token holders cast a vote. Hardly a solid basis to push through such a far-reaching proposal. In crypto circles, there was fierce criticism of what happened: 'Absolute Comedy, decentralized in name only', 'This is flat out wrong and you know that'.
Although the current example is extreme, it is not the first time that an application that runs on a proof-of-stake blockchain, which is supposed to run autonomously, has been tampered with. That's the stakeholder way of governance. The most famous case is Ethereum's DAO, which was hacked in 2016. Ethereum's developers decided to roll back the transactions on the blockchain to the point before the block where the hack took place. This led to a fork: a new blockchain in which the bug was fixed. The Ethereum hard fork was controversial but more understandable than the Solend one: in Ethereum's case it was a bug and a hack. In the case of Solend, it's about a price drop that users would rather not see happen.
UPDATE: voting time extended
The Solend team has issued an update: the last proposal is invalidated. The voting time will be extended to 1 day and they will work on a proposal that won't involve taking over an account. They feel they have this room as the price has recovered and whale liquidation risk is smaller.
May 22, 2023
On Saturday, Tornado Cash's DAO was taken over by an attacker, or group of attackers. It's another backlash for the plagued coin mixer which makes privacy for Ethereum holders possible. In an interesting turn of events, a day later the attacker proposed to undo his attack. Never a boring day in crypto!
May 17, 2023
Ripple has been fighting against the SEC in court since December 2020. Some analysts believe that the case could conclude this year, while others argue that each party could try to appeal the court’s decision. Whether the subject is finally settled, all believe the first verdict will provide essential guidance in the US judicial system. Should the SEC lose, then many other crypto projects could be strengthened. Winning the case could mean the SEC could go after many other cryptos.
May 16, 2023
Apple's WWDC 2023 event will kick off on June 5. Rumors that Apple will present a first look at its AR/VR headset are doing the rounds. Supposedly looking like a pair of ski goggles, the headset will only arrive on the market at the end of this year. Being crypto investors, let's talk a bit about the potential implications of this for metaverse coins.
May 15, 2023
Today the Bitcoin Cash network will go through a voluntary hard fork to implement an upgrade. One particular part of that upgrade is highly interesting since it introduces tokens on the Bitcoin Cash blockchain. Tokenization has been a topic for several years and it seems that Bitcoin Cash is late for the party. However, Ordinals have proven on Bitcoin that even a late arrival can still unleash a storm and create a billion-dollar market.