As CoinGape reported, the Solana-based “decentralized” lending protocol Solend has struggled to avoid a liquidity crisis amid the SOL price collapsing and whale accounts having massive margin calls.

Previously, the Solend Protocol planned to catch up with the whale accounts with emergency powers. However, it faced a huge backlash from the community. While liquidity risk continues to hover above Solend. It has come up with a third proposal SLND3 which aims to limit the borrowing limit and reduce the maximum liquidations.

Solend’s SLND3 suggests the following:

Set a maximum borrowing limit per account at $50 million. Regardless of the collateral value, any debt above that qualifies for settlement. Start with a per-account borrowing limit of $120 million USD and gradually lower it to $50 million. Solend will make a cut of $500K per hour. Solend plans to limit the liquidation per trade by a factor of 20. This means that the maximum liquidation close factor per trade will be reduced from 20% to 1%. Solend will also reduce the liquidation penalty for SOL from 5% to 2%. This will help to reduce liquidation spam.

For his third proposal, Solend has so far reduced nearly 5,000 votes from the community, with 98% in favour. The announcement notes:

Solend is reaching out to market makers to help provide better on-chain liquidity. This combined with our proposals should reduce the DEX market impact to a manageable level.

Several anomalies have been noted in the voting on Solend. A single voter who passes over 90% for votes and determines the fate of $270 million in user assets.

Well, Solend really needs to fix things before things go from bad to worse and the community loses trust. Currently, the recent market reversal and SOL price trading at $35 gives them breathing room. However, if the market collapses and the SOL falls to $20, major liquidations could occur.

Bhushan is a FinTech enthusiast and has a good flair in understanding financial markets. His interest in economics and finance draws his attention to the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In his spare time, he reads thriller-fiction novels and sometimes explores his culinary skills.

The content presented may contain the personal opinion of the author and is subject to market conditions. Do your market research before investing in cryptocurrencies. The author or the publication is not responsible for your personal financial loss.



This post Solana-Based Solend Protocol Introduces Loan Limit, Reduces Maximum Liquidation

was published first on https://coingape.com/solana-based-solend-protocol-introduces-borrowing-limit-reduces-max-liquidation/

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