[HN Gopher] Solend seized $170M of user funds
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Solend seized $170M of user funds
Author : 55555
Score : 216 points
Date : 2022-06-19 19:35 UTC (3 hours ago)
(HTM) web link (old.reddit.com)
(TXT) w3m dump (old.reddit.com)
| moralestapia wrote:
| LOL, all of these "decentralized" currencies turned out to be
| quite centralized in practice.
|
| I like crypto, but it is true that it brings nothing new to the
| table.
| RichardHeart wrote:
| Not your keys not your coins. Not your admin keys, not your
| coins.
| cuteboy19 wrote:
| Admin keys?
| yieldcrv wrote:
| A lot of "decentralized finance" projects have a way for a
| centralized entity to control them. Often times an
| individual. And other times a multisignature address
| controlled by two of the same individual's addresses.
|
| Users should be more discerning but are not.
| vkou wrote:
| You can't, and don't have time to be discerning if you want
| to 'get rich quick' during a bull market in an ecosystem
| that produces nothing of value.
| soared wrote:
| Is there a good article. Pearly explaining the potential issue
| here? I don't really know anything on chain liquidation,
| liquidators, etc.
| jakelazaroff wrote:
| If you want a non-Reddit summary:
| https://web3isgoinggreat.com/?id=solend-dao-passes-proposal-...
| DantesKite wrote:
| Thank you. Following all these events has been difficult and
| having a place that provides context for each of these events
| is so useful.
| 55555 wrote:
| There is some more analysis/coverage here:
| https://twitter.com/FatManTerra
|
| > The Solend team just confirmed to me that when this change is
| implemented, the whale will instantly be partially liquidated
| down to a safer ratio. SOL is $32 but his current liquidation
| price is only $22. On the fence about the main proposal, but I do
| not agree with this part.
|
| This is messed up.
| rvz wrote:
| Solend. Not Solana. Nice try though.
|
| Time to put the pitch forks down and is no different to the DAO
| hack for Ethereum.
|
| Next time, just read beyond the headline, titles rather than
| quickly spreading outrage everywhere in the comments section. It
| really doesn't help.
|
| Especially if the source is... ...Reddit.
| Kiro wrote:
| Readable link on mobile:
| https://www.reddit.com/r/CryptoCurrency/comments/vfszpt/sole...
| mminer237 wrote:
| New reddit's even worse. Here's the better mobile version:
| https://i.reddit.com/r/CryptoCurrency/comments/vfszpt/solend...
| edf13 wrote:
| Just to clarify - this is Solana, which is and always has been
| big vc funded and controlled.
|
| It has always been semi-centralised... but has big funds for pr.
|
| It isn't bitcoin or even Eth... it isn't decentralised
| baq wrote:
| defi at its best. zero upside of centralized finance with all the
| downsides, after all.
| [deleted]
| Melting_Harps wrote:
| > defi at its best. zero upside of centralized finance with all
| the downsides, after all.
|
| DeFi definitely over promised, and under delivered: the part
| that I take issue with is why build these tools on centralized
| alt currencies? I mean if you think NFTs are the extent of DeFi
| (much of which is what web3 hinged on) than this was
| predictably going to fail just like the ICO craze did.
|
| Smart contracts based on oracles are likely to be the real big
| advent, and I foresee it to be what Dorsey is proposing with
| now the absurd titled 'web5.' I just can't see why anyone would
| place this much trust in a PoS coin with a central governance
| and with major stake by VC in SV. The whole point was to get
| away from these gate-keepers, not allow them to have a major
| share of the coins in existence where they can, likely have,
| cornered the entire market.
|
| Whatever, a purging was necessary: I hope this makes CONbase
| fold once and for all.
|
| I just wish I had kept my cash and been able to take advantage
| of this major dip in BTC: I made major purchases back when we
| hit mid 30s (~50% of ATH) after liquidating some positions in
| late Nov.
| scrlk wrote:
| >I just can't see why anyone would place this much trust in a
| PoS coin with a central governance and with major stake by VC
| in SV.
|
| In a bullrun, no one cares about "decentralisation" or
| "fundamentals", they just want to make as much money as
| possible, even if it means interacting with
| CEXs/CeFi/centralised L1 scamchains etc.
|
| Only when things go south do people understand why
| "decentralisation" is important.
| Melting_Harps wrote:
| > Only when things go south do people understand why
| "decentralisation" is important.
|
| So the greater fool theory isn't a feature of the platform
| as it's often portrayed as by it's detractors, but rather a
| self-imposed one by the new cohorts?
|
| I guess that while the tech matures the fomo aspect never
| seems to go away regardless of time.
|
| > because the decentralized cryptocurrencies are expensive
| to transact with -- because many people, like you, strongly
| prefer to use the decentralized ones and so pay a premium
| to do so.
|
| It's currently .20 to do a 10 min tx on BTC layer 1, and
| near free and instant on layer 2. How is this expensive?
| colinsane wrote:
| > the part that I take issue with is why build these tools on
| centralized alt currencies?
|
| because the decentralized cryptocurrencies are expensive to
| transact with -- because many people, like you, strongly
| prefer to use the decentralized ones and so pay a premium to
| do so.
| foepys wrote:
| This is a fight between whales, nothing more. If the average
| "retail" coin holder thinks they have any influence, they are
| dead wrong.
|
| This is the cryptocurrency reality where the small man is
| overpowered by the bourgeoisie who own so much more capital that
| they only need to fear each other.
| tharne wrote:
| > This is the cryptocurrency reality where the small man is
| overpowered by the bourgeoisie who own so much more capital
| that they only need to fear each other.
|
| How is this any different than the traditional financial
| system? Remember 2008, where bankers were reckless and the
| government bailed them out, while regular people who were
| reckless got f--ked?
| threeseed wrote:
| > This is a fight between whales, nothing more
|
| It clearly shows you that even in crypto the rich and powerful
| can manipulate the rules.
| [deleted]
| sva_ wrote:
| Maybe Solend is short for Solana-end
| throwoutway wrote:
| A smart contract can be upgraded to take over a whale's account?
| How is that a thing? I remember the whole "code is law" on the
| chain, rather than trusting escrow/third party/judges
|
| >Grant emergency power to Solend Labs to temporarily take over
| the whale's account so the liquidation can be executed OTC and
| avoid pushing Solana to its limits. This would be done via a
| smart contract upgrade. Emergency powers will be revoked once the
| whale's account reaches a safe level
| gruez wrote:
| >I remember the whole "code is law" on the chain, rather than
| trusting escrow/third party/judges
|
| Yeah, but in this case the code _is_ law, it 's just that the
| code in question also says that it can be modified by a
| majority vote.
| itake wrote:
| Contracts can be written as dumb proxies that allow people to
| 'update' their code (to correct for bugs or add new features).
| I believe at a high level, the creators have a 'proxy' contract
| that only they can set a variable that points to new versions
| of the primary contract.
| mirntyfirty wrote:
| I thought the whole point of crypto was to help the unbanked,
| save us from the evils of fiat, provide anonymous decentralized
| transparency that protected users, and serve as a hedge against
| inflation or market turmoil. /s
| PragmaticPulp wrote:
| One of the themes in pro-crypto writings has been the idea that
| as long as you "do your own research" then the bad things won't
| happen on _your_ chosen cryptocurrency. The prevailing idea
| (among pro-crypto spaces) is that bad things only happen to other
| people who deserve them because they didn't do the right
| research.
|
| Recently we're seeing the bad things happen in more and more
| mainstream chains. Even famous NFT proponents have been losing
| their NFTs to scams at a shocking rate. I wonder if this will
| drive people back to simpler chains like Bitcoin, or if we're
| going to see enough bad things (including crashes) that it just
| sucks the enthusiasm out of the crypto space entirely.
| tatertots1234 wrote:
| Most of the things that cause these problems, like stolen apes,
| would not work on Bitcoin as it lacks smart contract
| functionality.
| cowtools wrote:
| Bitcoin has some scripting[0] functionality, and its non-
| fungibility[1][2] can facilitate NFT-like colored coins[3][4]
|
| [0] https://en.bitcoin.it/wiki/Script
|
| [1] https://en.bitcoin.it/wiki/Fungibility
|
| [2] https://sethforprivacy.com/posts/fungibility-graveyard/
|
| [3] https://en.wikipedia.org/wiki/Colored_Coins
|
| [4] https://www.youtube.com/watch?v=889JSfIaPzs
| AdrianEGraphene wrote:
| Colored coins is one of my #1 favorite topics! The same
| issue (high fees) that plagued ETH would soon arise if
| doing "Colored Coins" for NFTs on BTC. Regardless, this
| could certainly be done. Colored coins was actually one of
| the 1st concepts that seriously drew my interest to this
| space.
|
| One might think Lightning Network would be a good solution,
| but LN is fungible, so that wouldn't work.
|
| Still, colored coins is an awesome concept and I'm planning
| to help with at least 1 use-case (fingers crossed!) in the
| next few months.
| 3a2d29 wrote:
| Not to be super "arm chair psychologist" about this, but I
| always thought the whole "you deserve it if you got scammed"
| mentality comes from the people that believe crypto will
| replace all modern finance.
|
| For crypto to replace modern finance, it needs to be better in
| every way (so it's a total replacement).
|
| Decentralized currency is better for some things, worse for
| things like preventing scams. If modern finance prevents scams
| better, than crypto won't replace it in that area at least.
|
| Solution? Easy: scams aren't a problem. Modern finance isn't
| better in fixing that problem, cause it's not a problem. Now
| crypto is once again better in every way.
| douglaswlance wrote:
| >it needs to be better in every way
|
| It only needs to be better in enough ways to persuade enough
| people to adopt it such that it hits a tipping point and
| becomes the de facto standard.
| iJohnDoe wrote:
| No, it needs to be better in every way. If it's not, then
| what's the fucking point? Popularity and a better
| replacement are two different things.
| gruez wrote:
| >No, it needs to be better in every way. If it's not,
| then what's the fucking point?
|
| I take it that you still use a CRT monitor then? After
| all, modern displays (eg. IPS/VA) aren't better than CRTs
| in every respect (response time, motion clarity,
| arbitrary scaling).
| jacobedawson wrote:
| Here's a new type of computer - it's exactly the same as
| your current computer, except it consumes 1/10th of the
| power...
|
| A replacement doesn't have to be better in every single
| facet.
| charcircuit wrote:
| Do you mean 10x the power?
| SgtBastard wrote:
| > consumes 1/10th the power.
|
| No.
| filoleg wrote:
| Unless you value inefficiency and spending a lot of money
| on electricity, the answer is "no", the parent comment
| actually meant 1/10th power.
| rvz wrote:
| The pro-crypto folks have created the delusion that _' crypto
| will replace all modern finance'_ and they will quickly
| realise that regulations will wipe out the majority of tokens
| and projects unable to comply with them; and a remaining few
| of them existing and surviving.
|
| It also means the anti-crypto folks will also realise that
| destroying _' all of them'_ is another delusion that
| activists like the free software foundation for example who's
| mission is still to remove _all_ non-free software in
| existence. After 37 years, its still here and it is co-
| existing with some open-source software.
|
| The undeniable fact is that regulations will be put in place
| for crypto and only a surviving useful few will continue to
| co-exist with the current system which both the anti-crypto
| folks and pro-crypto maximalists will be disappointed in
| achieving their utopian ideals.
| colinsane wrote:
| > they will quickly realise that regulations will wipe out
| the majority of tokens and projects unable to comply with
| them
|
| might this be part of the DYOR reasoning? some gut-level
| reaction that "unless we encourage every individual user to
| take responsibility, then most of those users will welcome
| 3rd party (govt/bureaucratic) regulators"?
|
| i don't know that this is wholly delusional, either -- i
| think it's just a difficult culture to preserve during
| massive growth. but look at any mid/large crypto project
| and they usually show off their audits. audits which they
| willingly paid for because enough users care about it that
| demonstrating your system is hardened actually has positive
| ROI. it happens enough that distinct auditors each have
| their own reputation (oh, X audited notable project Y =>
| their audit on new project Z probably _means something_ ).
| this whole auditing system is in some very real sense a
| form of "self-regulation" -- but the whole thing is
| predicated on DYOR.
| cowtools wrote:
| >The undeniable fact is that regulations will be put in
| place for crypto
|
| why is this so undeniable? I would think well-implemented
| cryptocurrencies would be fairly regulation resistant
| ReptileMan wrote:
| Because you have to convert the crypto into fiat to
| procure goods and services and the state will just
| control the border.
|
| There will be cases in which a weak state economy can
| become bitcoinized the same way some have become
| dolarizesld, but for strong states it is easy to make the
| border between the currencies as tight as they want it.
| cowtools wrote:
| >Because you have to convert the crypto into fiat to
| procure goods and services
|
| You do? What is the purpose of cryptocurrency if you are
| just going to convert back into cash the moment you use
| it? I think the end goal for cryptocurrency is to create
| a circular, P2P economy[0][1]
|
| Seems pretty difficult to regulate only _some_
| cryptocurrencies if it 's already possible to anonymously
| and trustlessly swap between them[2]
|
| [0] https://monerica.com/
|
| [1] https://localmonero.co/
|
| [2] https://unstoppableswap.net/
| malka wrote:
| At some point, you ll need to pay taxes. in the money of
| choice of your current governing body.
| [deleted]
| babyshake wrote:
| Would these regulations prevent something like offshore
| merchants selling goods, perhaps gold bars or something,
| for crypto and converting into fiat?
| OtmaneBenazzou wrote:
| well it already happens with cash, so no
| csa wrote:
| Do an internet search for UIGEA for a blueprint on how to
| do this in the US.
| NikolaNovak wrote:
| Xkcd of course had it right even back when "crypto" meant
| something else :)
|
| https://xkcd.com/538/
|
| Regulation and law indeed may not be able to beat crypto
| technologically. They don't need to. Humans are the weak
| squishy link in the chain. I don't need a supercomputer
| to crunch down your crypto, I need a warrant for your
| arrest or subpoena to ask for all your documents. I can
| outlaw your ability to operate without logs. Sure that
| would suck, but equally in crypto currency and normal
| world. Either exists as much at the mercy of the
| government, democratic or otherwise, to preserve the
| privacy, as much as the technological capability.
|
| Unless we go completely anarchic (and I'm not personally
| looking forward to that), humans will remain squishy and
| laws will remain relevant.
| roenxi wrote:
| > I can outlaw your ability to operate without logs.
|
| Even going full Nazi, how do you enforce a law that
| technically challenging without bankrupting the
| government or crippling the economy? And what time-frame
| does it take to phase in?
| JumpCrisscross wrote:
| > _how do you enforce a law that technically challenging
| without bankrupting the government or crippling the
| economy?_
|
| Drugs paid with cash are challenging. Crypto is not.
| Authoritarian states can do deep packet inspection and
| random phone/computer checks. Advanced states can just
| roll it into their AML frameworks, as well as track the
| purchase of mining equipment and their inputs. Both will
| offer whistleblower rewards.
|
| There will still be people who use it. But it will fall
| out of the mainstream. More people are more enthusiastic
| about cocaine than about crypto, and your enjoyment from
| an ounce of cocaine isn't dependent on others using it.
| For crypto, it is.
| cowtools wrote:
| Go ahead, unlock your hard drives then. Disable HTTPS, it
| makes no difference right? The government can just do
| evil maid attacks while you're asleep or rubber-hose
| whatever CA you're using anyways. While you're at it, why
| don't you leave the door to your house unlocked? The
| government can just kick it in whenever they want, no
| biggie, right?
|
| Strong cryptography still remains a formidable barrier
| for law enforcement, regardless of what pessimists like
| munroe would have you think.
| ethbr0 wrote:
| Munroe isn't a pessimist: he's a humorist.
| cowtools wrote:
| well you know what they say about humor on the internet,
| poe's law and all.
|
| I guess the joke is that security is presented as an all-
| or-nothing situation, when in reality security is just
| about disproportionally increasing the cost for attackers
| and decreasing the severity of their attacks.
| nemothekid wrote:
| > _Go ahead, unlock your hard drives then. Disable HTTPS,
| it makes no difference right?_
|
| In what world is the Government your only threat?
| cowtools wrote:
| It's a good question. I wonder this too.
|
| But until we can make cryptography that is criminal-proof
| but not government-proof, and until the government can
| feasibly enforce its use, then I don't think it really
| matters.
|
| It's hard to imagine any tool that only works against
| criminals but not against the government. Especially
| considering that there's a spectrum between criminal
| organizations and government organizations.
| djbusby wrote:
| How would a technical implementation detail block
| legislation?
| rglullis wrote:
| The point is not the legislation. The point is
| _enforcement_.
|
| You can write and pass whatever law you want. If it can
| not be enforced, it does not exist.
| JumpCrisscross wrote:
| There is a crypto subculture that thinks crypto is
| unbannable for a variety of reasons that fail the hit-
| them-with-a-wrench test.
| cowtools wrote:
| With some level of plausible deniability, you pass the
| hit-them-with-a-wrench test because you can't just hit
| everyone with a wrench.
| michaelt wrote:
| To be fair, "you deserve it if you got scammed" also plays
| well with the anti-crypto crowd.
|
| A person pays the price of a house for NFTs of pictures of
| apes, gets tricked into giving them away to scammers, then
| buys them back from the scammers? Ha, what a fuckin' idiot.
| itronitron wrote:
| From what I have read, crypto folk seem to claim primarily
| that the decentralized currency 'not be a scam' in contrast
| to a currency managed by a central bank. Whether or not the
| currency discourages or enables scams via the currency is a
| secondary concern. Of course, Solend's interference seems
| like something 'a central bank' might do.
| diob wrote:
| This is a common life viewpoint in general.
|
| Bad things happen to other people because they did something to
| deserve it. Good things happen to them because of luck.
|
| Good things happen to me because I deserve it. Bad things
| happen to me because of bad luck.
| cowtools wrote:
| We're not talking about people getting struck by lightning
| here, we're talking about an intentionally built and
| voluntarily used computer system. If you don't understand the
| risk, don't invest.
| diob wrote:
| SergeAx wrote:
| NFT is just an URL pointing to CDN (or even S3) stored on the
| ledger, how one can "lose" it?
| yieldcrv wrote:
| That's not the impression I get about this one action being
| discussed, but odd take.
|
| There are a variety of amateurish and hysterical things about
| this Solend project. Why don't you just talk about that
| project?
|
| Like, how the liquidation won't be that bad? Or how half a
| million dollars in Solend tokens gets to vote to seize $170m of
| funds? those things are hilarious.
| TrackerFF wrote:
| DYOR = watching 10 min vids from influencers pumping up
| shitcoins, hanging around in various discord or telegram echo
| chambers, skimming through whitepapers you don't understand.
| granddemolisher wrote:
| I find it as absurd as anyone else.
|
| The field is unfortunately rifled with people who are shills
| and religious believers. I have talked to a few VCs and
| technical people drilling down into the tech - I had better
| arguments than them for why someone would use the projects they
| funded or created.
| jasonwatkinspdx wrote:
| Just last night the owner of the neighborhood convenience
| store was asking me to explain NFTs, as one of his other
| regulars was hyping them up earlier that day. This man has
| run his business for decades, understands commercial banking
| services, etc. I could not for the life of me fully convince
| them that with NFT's, "there's no there there." Like these
| things have been so hyped by so many people close enough to
| the main stream that the fomo style "those rich guys have to
| be onto something smart with this" assumption is incredibly
| hard to disprove. The closest I got was using beanie babies
| as an example.
| ethbr0 wrote:
| I lead with "Amateurs calculate gains; professionals
| calculate risk."
| wyager wrote:
| Basically anyone I consider especially credible has been
| consistently saying "everything except bitcoin is
| overwhelmingly likely to be a scam", which has proven to be a
| fairly reliable heuristic. I think anyone who actually "DTOR"
| and has the brain power to interpret the results comes to a
| similar conclusion.
| rglover wrote:
| They say "do your own research" and then when you do and have
| questions about difficult to conceive (or seemingly irrational
| things) they belittle you, attack you, and--at least on Twitter
| --reply with snarky memes. As soon as I started investigating
| Ethereum, ERC-20 tokens, etc. at a technical level, I realized
| it was a house of cards of immense proportions.
|
| The place that didn't happen? Bitcoin. There's not a lot of
| esotericism around Bitcoin (skim 1-2 books, listen to a couple
| of talks on YouTube, and generally speaking you "get it"). If
| you're genuinely interested, people are more than happy to help
| you and set you on the right path.
| Spartan22 wrote:
| That's a straw man. Doing your own research doesn't guarantee
| protection against all scams or losses, it just increases it
| and scams and freezes are to be expected, that's why
| diversification and taking profits is key.
|
| Very flawed argument.
| agumonkey wrote:
| Research is fuzzy word in this bubble. I've seen people
| crafting their own tiny metric: twitter liveness, github
| activity, size of source code, website quality. White paper
| reading (I skimmed through a few, it felt like marketing speach
| most of the time). It only feels solid for newbs who never
| designed a system or seen math above HS level.
| flaque wrote:
| The current headline "Solana just seized $170MM of user funds to
| prevent a decrease in Solana's price" is factually incorrect.
|
| A project on Solana, called "Solend", froze $170m of funds
| deposited into its protocol.
|
| "Solana" didn't seize the funds, nor was the purpose specifically
| to protect Solana's price.
| eknkc wrote:
| Also, it looks like the liquidation was pre approved by the
| contract that the whale deposited into. It was gonna happen
| regardless. They are doing this to change the way it is handled
| (off the chain instead).
|
| I'm not sure about the implications but even Solend did not
| seize anything.
|
| I still think this fucked up but it had nothing to do with
| solana.
| SilasX wrote:
| Right, the contract definitely allows Solend to seize the
| collateral at certain collateral ratios, but I can't tell if
| this change just affects how they liquidate when that ratio
| hits, or it pre-emptively does so now, while the price is far
| from hitting that ratio.
|
| Edit: okay it's the latter. But remember this is not a
| seizure as in, just taking it, but also forgiving some of the
| debt at the same time.
|
| https://news.ycombinator.com/item?id=31802692
| potatototoo99 wrote:
| Smart contracts are supposed to embody "code is law". It's
| not very lawful to then switch the liquidation with a vague
| "sell OTC over an undetermined amount of time".
| eknkc wrote:
| I agree. They abused their power and perhaps they should
| not even be able do it technically (at least without
| forking the chain).
|
| Just wanted to clarify what dhey did.
| 55555 wrote:
| Sorry, I misattributed this in a big way.
|
| > nor was the purpose specifically to protect Solana's price.
|
| I think it was. What else would the purpose be? Note that I
| think the true purpose of "preventing Solana network downtime"
| would be to protect the price.
|
| They're trying to avoid cascading liquidations down to zero,
| because everyone involved in the governance is holding
| substantial amounts of Solana. I think letting the liquidations
| happen on-chain, and even cascade, is much more in the spirit
| of crypto. But an argument could be made, just like with what
| happened in the LME Nickel market, if you think that letting
| people wrestle for control of the chain is true
| decentralization, or if you think that the true goal of a
| market provider is to provide stability above all else...
|
| Forcibly "partially liquidating the position" above liquidation
| price is pretty indefensible. Are they going to point to a line
| in their TOS that says that at the end of the day they always
| have the right to do whatever they want?
| tylersmith wrote:
| This is entirely about a single a project trying to prevent
| cascading issues within itself. Claiming this is about Solana
| itself is a lie and this post should be deleted.
| laweijfmvo wrote:
| > This is entirely about a single a project trying to
| prevent cascading issues within itself. Claiming this is
| about Solana itself is a lie and this post should be
| deleted.
|
| I'm trying to understand this, but it's beyond me. Can
| someone ELI5? Here's what I get:
|
| Someone borrowed $108M (in USDC and USDT) and put up 5.7M
| SOL ($170M USD) as collateral, with the terms that if SOL
| should fall the lender can liquidate the SOL to recoup
| their loss; in this case, if SOL reaches $22.30, they can
| recoup ~$20M USD. This all sounds like a perfectly normal
| lending process.
|
| SOL is (was) currently at $32, but the claim is that the
| borrower seems to have no interest in taking any action and
| allowing the liquidation to occur. Question: who's making
| this claim and on what basis?
|
| The next claim is that this liquidation, if it were allowed
| to occur, would cause the price of SOL to fall even
| further, which also makes sense. The market cap of Solana
| seems to be ~11.5B (billion with a B); $20M shouldn't be
| the end of the world? 24hr volume is ~$2B, so this would be
| 1%. Question: why is allowing this liquidation the end of
| the world?
|
| Last question: what does any of this have to do with
| Solend? Are they the ones that lent the $108M out, or are
| they just the middle man? If the former, is the concern
| that they won't be able to recoup their losses under the
| terms of the contract and falling price of SOL?
| yieldcrv wrote:
| > Question: who's making this claim and on what basis?
|
| The Solend Team.
|
| https://realms.today/dao/7sf3tcWm58vhtkJMwuw2P3T6UBX7UE5V
| KxP...
|
| > Question: why is allowing this liquidation the end of
| the world?
|
| Its not. They believe a function in their own project
| will cause the underlying Solana blockchain to have some
| uptime issues, because a similar function has been a
| culprit in the past, according to them. (Solana has
| failed to produce blocks periodically, I haven't followed
| more specifically why) This function will be called
| autonomously if the price of the collateral in question
| continues to decline. The rebuttals are:
|
| a) a big cascading liquidation being interrupted by block
| production issues will just resume as block production
| resumes. so that's stupid. Solana goes down all the time,
| if other applications there can't handle that by now
| that's those application's problem.
|
| b) DEX liquidity isn't all liquidity. So if $170m crashes
| the price on a DEX, that's just an opportunity for
| anybody paying attention to buy Solana cheap on the DEX
| and sell it for more on centralized exchanges like
| Binance and Coinbase. Its not Solend's problem. It is a
| completely unnecessary and amateurish "vote".
|
| > what does any of this have to do with Solend? Are they
| the ones that lent the $108M out, or are they just the
| middle man?
|
| They're the service being used where people deposit
| collateral, yes.
| laweijfmvo wrote:
| > Its not Solend's problem.
|
| Right, that's my confusion. Which is what makes the whole
| thing smell fishy.
| flaque wrote:
| > What else would the purpose be?
|
| I would suspect to protect Solend itself.
|
| "Preventing Solana network downtime" feels more like an
| appeal to Solana people to vote on their proposal rather than
| ignoring it.
|
| > Note that I think the true purpose of "preventing Solana
| network downtime" would be to protect the price.
|
| It is possible, and even the norm among people building
| things, to not think of everything in terms of "protecting
| the price" of a token.
|
| When Github goes down, the engineers at Github are not
| thinking "oh no, we must protect $MSFT". They are thinking
| "Github is down, let's make Github not down".
| wmf wrote:
| That's because Github is useful. The only purpose of crypto
| is to increase in price, so protecting the price is
| protecting the system.
| 55555 wrote:
| 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.
| jacquesm wrote:
| You could simply delete your post.
| 55555 wrote:
| I thought there was a 10 minute rule. But actually I can
| still edit the headline and have. It's pretty big news imo.
| peyton wrote:
| You might want to remove the editorializing in your title
| as well.
| nrmitchi wrote:
| 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..."
| heartbeats wrote:
| 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.
| flaque wrote:
| 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.
| SilasX wrote:
| >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.
| ..
| dang wrote:
| 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.
| smoe wrote:
| I think a better url would be the governance proposal
| itself
|
| https://realms.today/dao/7sf3tcWm58vhtkJMwuw2P3T6UBX7UE5VKx
| P...
|
| Linked from this tweet by solend
|
| https://twitter.com/solendprotocol/status/15384413504414228
| 4...
| rvz wrote:
| 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
| redditors commenting have not been around since the
| controversial Ethereum DAO hack which already abandoned
| the nonsensical 'code is law' idea and set that precedent
| and is no different to that.
|
| So it is no surprise that the majority of DeFi, DAOs, etc
| has been one giant scam which will result in a 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.
| potatototoo99 wrote:
| 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.
| wmf wrote:
| Heh, user confidence comes _from_ the price. If the price
| goes near zero, many people will leave and never return.
| yieldcrv wrote:
| 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.
| colinsane wrote:
| 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.
| ntoskrnl wrote:
| 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/
| ChuckMcM wrote:
| And @patio11's take :
| https://twitter.com/patio11/status/1538601104098852865 which is
| illuminating as well. The whole "crypto is speed running through
| the finance playbook" theme is fascinating to me.
| laweijfmvo wrote:
| Thanks, this Twitter thread explained it all in plain English.
|
| Edit: Last question:
|
| > On the one hand here, we have one (rich) guy. Perhaps he is
| sophisticated, perhaps not, perhaps he believes code is law,
| perhaps not.
|
| > He used a computer program to borrow $100M.
|
| > The people who wrote that computer program are now terrified
| of it.
|
| So does Rich Guy get to keep the $100M in stable coin
| regardless of what happens to the SOL he put up?
| melony wrote:
| So what is the downside of crypto? All the furor seems to be
| about how the whale's funds were seized. But there is no
| evidence to the contrary that this won't happen in day to day
| Wall Street banking.
|
| From patio11's
|
| > _When we say "crypto is speedrunning learning what finance
| already knows" sometimes it is about attacks but sometimes it
| is about quotidian topics like "Can you adversarially blow your
| clients out of trades which you think imperil your firm or
| other clients?"
|
| Answer in traditional finance by the way: yes you absolutely
| can. Your lawyers have long since thought of that and put that
| language in your contracts, making it very explicit that if you
| trigger it you don't need a vote on Discord to do so._
|
| There is nothing that proves that traditional finance is any
| better than crypto. Though I do not recall the British
| government arresting Soros when he broke the pound.
| threeseed wrote:
| > So what is the downside of crypto?
|
| * Ordinary people being financially ruined along the journey.
|
| * Environment being harmed by pointless mining.
|
| * Investment money being wasted on companies that are simply
| cloning TradFi.
| SgtBastard wrote:
| >So what's the downside of crypto?
|
| Ecologic vandalism, for one.
| timeon wrote:
| You are right, crypto is pointless then.
| nrmitchi wrote:
| > The proposal succeeded hours after it was proposed, with one
| whale providing 1 million votes out of the 1.15 million votes in
| favor.
|
| Decentralized my ass
| mjburgess wrote:
| Just like land under feudalism -- the land was /everywhere/ !
| ATsch wrote:
| Hey, at least we have a good example of what "voting with your
| wallet" actually looks like if brought to it's logical
| conclusion.
| jancsika wrote:
| In all fairness to crypto aficionados, it's not "voting with
| your wallet." It's more about using whatever is in your
| wallet to gain _control_ over the financial...
|
| Oh shit, someone stole my apes.
|
| Can someone PM me to help me recover my apes? _I can 't vote
| without them!_
| yunohn wrote:
| Let me get this straight. They used the majority voting power
| of a DAO whale, to seize the funds of a user whale?
|
| Irony at its finest.
| vkou wrote:
| The DAO whale only staked half-a-million dollars, the seized
| funds are $170 million.
|
| The $170 million whale didn't show up to vote, so I guess
| under the rule of code-is-law, that means he can now be cut
| up, processed, and turned into whale burgers.
| rossdavidh wrote:
| Crypto has been an interesting experiment in rediscovering the
| reasons for all the financial regulations which we developed for
| regular currency in the late 19th and early 20th century.
| wronglebowski wrote:
| How did the "whale" have so much invested in the market but such
| little voting rights?
| renewiltord wrote:
| They don't have voting rights because they don't have SOL. They
| don't have SOL because they put it in there to get USDC+USDT.
|
| If they don't believe in the depth of the SOL/USD(C|T) books
| this could just be a way to sell SOL or go short SOL.
|
| This whale is probably just happy to default on the loan and
| get liquidated at this point.
| wronglebowski wrote:
| Are they in the red on the loan? The numbers and functions
| are where I get confused.
|
| "a whale has deposited 5.7M SOL ($170M and borrowed 108M USDC
| and USDT borrowed)"
|
| So they put in 5.7 SOL at some price, and used it to borrow
| stablecoins? If their position is liquidated how does that
| play out? If he traded coin for coin how do they get the
| traded assets back?
| renewiltord wrote:
| He keeps what they gave him, they keep what they get from
| what he gave them.
|
| Ideally they over collateralize. So if SOL is 100 USDT, he
| puts in 5 SOL and gets 50 USDT per SOL (250 USDT). If SOL
| approaches 50 USDT, (say 51 USDT) they sell the SOL he gave
| them and keep the proceeds (they have 255 USDT and are
| ahead by 5 USDT). The loan has reached an end condition.
|
| Another thing that could happen is he does something with
| the 250 USDT loaned to him and he gets 300 USDT. He gives
| back the 250 USDT and gets back his 5 SOL and now has 5 SOL
| and 50 USDT (minus some small interest or fee). This is
| another end condition.
|
| All works on the small scale. But presumably you can think
| of exploits on the large scale.
|
| A simple one is that the loan is so large in that they
| can't liquidate without slippage (price moving as they sell
| causing them to gain less than they anticipated). In this
| case, they might want to exit a little earlier.
| granddemolisher wrote:
| > This whale is probably just happy to default on the loan
| and get liquidated at this point.
|
| Understandable but absurd given the systematic risk.
| yieldcrv wrote:
| I think SLND (Solend) is the token involved in voting rights
| here.
| renewiltord wrote:
| Ah, my mistake. Thanks for correction.
| psKama wrote:
| > This whale is probably just happy to default on the loan
| and get liquidated at this point.
|
| It's too bold to assume this. This whale is probably so angry
| right now because they ruined his/her plan causing him/her
| million of dollars. 1) Find an opportunity to drive the price
| of SOL down due stupid DeFi design lacking 101 Economy
| knowledge. 2) Go short on SOL 3) Use the opportunity to cause
| a slippage of 46% in price which further triggers chain
| liquidation which causes the price even to go further down
| and most likely cause Solend to shut down creating more and
| more panic sell. 4) Make crazy profit.
|
| Solend to call themselves "decentralized" now is just a joke.
| [deleted]
| SilasX wrote:
| If they wanted to do that, they would have deposited
| stablecoins and borrowed Solana.
| qabqabaca wrote:
| The whale has been inactive and almost certainly didn't vote on
| this proposal. The Solend team tried to reach out to them via
| socials multiple times and they never responded. You can see
| their attempts in the "What We've Tried" section here[1]
|
| [1]
| https://realms.today/dao/7sf3tcWm58vhtkJMwuw2P3T6UBX7UE5VKxP...
| 55555 wrote:
| > has 170MM staked and isn't picking up the phone
|
| Three Arrows Capital?
| qabqabaca wrote:
| This needs a title change. The main effect this would have on the
| Solana network would be congestion due to so many liquidators
| trying to claim the collateral. It is not related to the price.
|
| >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.
| renewiltord wrote:
| Account gov'd. All my SOLs gone.
| leodriesch wrote:
| Solana boasts about being scalable and capable of processing more
| than 1000 transactions per second, how is it that this is
| threatening the performance of the network?
| tatertots1234 wrote:
| Misleading title. This is Solend, not Solana.[1]
|
| Not that this would be entirely surprising by Solana itself,
| which is a centralized chain that has been struggling to handle
| its network uptime and throughput in recent months.
|
| [1]
| https://mobile.twitter.com/solendprotocol/status/15384413504...
| Zaskoda wrote:
| I've been working on a game for Ethereum for a while. In recent
| times, "I" has become "we" and we're getting a fair bit more
| serious about it. In the last year, we watched a bunch of local
| startups with relatively weak game concepts get heavily funded to
| build with Solana. It made me sad and, admittedly, a bit jealous
| at the time. In retrospect, I couldn't be more happy that we're
| still building for the Ethereum virtual machine. It turns out
| that pumping tons of money into a developer community for a half-
| baked platform isn't the best approach.
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