Plot to defeat crypto meltdown: Solend votes to seize, liquidate whale account Decentralized finance lending platform Solend tried to fend off the effects of the crypto meltdown at the weekend when 97.5 percent of its users voted to give it emergency powers to liquidate its largest customer account. A second vote held today reversed the first. Despite our efforts, we've been unable to get the whale to …
This is getting to resemble the Lloyds (of London) reinsurance spiral crisis from the 1980s/1990s (for those of us old enough to remember that).
It turned out that a lot of insurance was (in the end) reinsured with many of the original insurance when all of the intermediate contracts were factored out.
One large adverse event/failure and the whole spiral unwinds catastrophically...
This led to greater regulation/oversight/disclosure for good reason, some of which was that relatively unsophisticated "Names" (private individuals) made loads of money in the good times, but when it all went wrong, they were on the hook for liquidity/claims etc. and many lost everything.
Everything old is new again.
The big problem stat Lloyds, as I recall, was that they recruited a huge number of new names and stuck them with ruinous asbestos reinsurance deals, so many of them made huge losses without every having had the good times at all.
Basically the sort of dirty dealing which in the crypto world they call "Tuesday".
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How can this be legal? How on earth can you have a customer with hundreds of millions invested in your platform and not even be able to communicate with them? That statement alone would convince me that this is a disaster waiting to happen - if any more convincing were required.
And what sort of person invests hundreds of millions (admittedly in funny money worth perhaps three decryption keys and a small box of crystallised fruit in the real) in an organisation which by design has no headquarters, no legal staff, no compliance staff and only a few pseudonymous contacts about whom nothing can be known.
Because you can see the code, they say, and the code is all that matters. Yeah. That's working beautifully.
Not only did they "invest" $107 million they took out $108 million in loans and now they can not contact them!
Looks to me they have used them to cash out, they should not expect to get repaid.
It's not impossible, but it's really hard to tell (even with the advances that have been made in de-anonymization of cryptocurrencies and related tech). Thanks to the 2021 bubble, even many individual investors ended up with notional hundreds of millions of dollars' worth of cryptocurrencies. So this could be J. Random Dude.
I have a different question - how can a group of smaller investors have a say in whether the whale liquidates? That would be akin to other customers of your investing company deciding that you should be forced to liquidate your account at a loss because you own more shares than them. It's nobody else's business who owns how much of this. If you have a problem with one guy owning 98 percent of a crypto, YOU need to be the one that gets out.
Not only that, but the proposed "solution" of "The OTC trade Solend would perform on behalf of the whale would involve selling to a specific buyer at an agreed upon price." seem to indicate simpley swapping one "whale" for another "whale", albeit one they "know" and can communicate with.
And yet again - it happens time after time - all these opponents of centralisation and believers in code alone suddenly want centralised action as soon as tits start heading upwards. Coo. It's almost as if a century and more of developing regulation in financial services has been for more than the fun of exercising power.
Still, with Bitcoin at less than a third of its peak value and heading rapidly downwards, I think we sane people are going to get a lot of fun out of crypto over the next weeks and months.
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Now why would you want to deposit a lot of crypto coins and then take an almost equal sized loan of crypto coins? Except for the obvious money laundering of course. What is the betting the FBI are watching the deposited tokens because they are stolen and the whale has cashed out the loan, out of view of the FBI, with no intention to return and repay/reclaim...
Because you realise that the coins you put in are shit, but the coins that they will let take out are - in comparison - almost as good as real dollars.
You would have big problems - especially now - selling that much of the shitcoin for dollars, but converting what they took out will be much, much easier.
This was never a loan as far as the whale was concerned, this was cashing out with a vengeance.
The real world equivalent would be somewhere that let you hire a new Lamborghini by just leaving them with ten junkers that the hire company reckons are worth twice as much... and nothing else, including no proof of identity or driving licence. That Lambo ain't coming back
I thought the whole point of crypto money was that takeover by a centralised authority would be technically impossible?
If that is not true, then what's the point? Yeah, I can come up with a whole set of snarky answers too, but, seriously, if there is a central authority that can seize control of my wallet, then what's the benefit compared to a bank account? Is it just anonymity?
Some cryptocurrencies were implemented to prevent a central authority, at least without a lot of expensive and difficult work. This is not a cryptocurrency. It's a platform that works with them, and they did not want to prevent centralized control because they've realized that the average users, the ones with lots of money and the gullibility not to figure out what they're doing with it, would not be happy with something nobody can control. Either that or they had their own plan to run off with the money, but I think this case is option 1.
Some people really want a decentralized financial system and understand the risks involved when cryptocurrencies implement it. A lot of other people really don't want that because they want the benefits of externally-controlled financial systems but trust cryptocurrency anyway because they didn't bother to learn how it works. They may have assumed that it works like stocks or similar investments (which many of them also didn't bother to understand but there are some safety systems set up by central authorities which can come to their aid). Many of those people are going to lose their money, and most of them will probably be surprised when they learn that the lack of an authority means they've got no way to recover it.
Not necessarily. You can have centralized control at one level without having it all the way down. This is not that much more complicated than an early bank that took deposits of gold. The bank couldn't make gold and couldn't protect you if the price of gold changed, but it could make loans from your gold and make transfers easier. This example is not just a bank and isn't run like one, but it too could create a platform that functions. It's also worth considering while processing this example that a lot of early banks failed; just making a centralized platform is no guarantee that it will be done successfully, but it is possible and has been accomplished before.
"Whale" is a term used by dubious investment consultants to describe a customer that's got a lot of money then sense. It should be thought of in a Moby Dick sense, a giant floating blob of money waiting to be picked up and picked over. The way things are supposed to go is that this customer's hard assets (e.g. money) is invested for them in dubious paper (which is obviously going to make them fabulously rich). For a fee, of course.
In this case the whalers appear to have been taken as the whale seems to have used some not so spiffy securities as collateral for borrowing somewhat harder ones. Oops.
Its nice to see the players being played for a change even if ultimately its the little guy and gal who's going to end up broke. (Heads, they win. Tails, you lose.)
"Whale" is a term used by dubious investment consultants to describe a customer that's got a lot of money then sense.
Its also a term used by phishing type scammers when they stop trawling and concentrate all their efforts on hooking one big target.
its telling that this platform is using the term and about to "liquidate" their biggest customer
"In this case the whalers appear to have been taken as the whale seems to have used some not so spiffy securities as collateral for borrowing somewhat harder ones. Oops."
Excellent point. And who's to say this anonymous "whale" hasn't used that tied-to-the-US$ "harder" crypto and done the same but this time borrowed actual hard cash using that as the collateral?
In the first vote, 97.5% of voters voted to harpoon the whale.
However, in the second vote, the whale voted, and it had 1 million out of 1.15 million votes or 86.9% because of how much of this shit they owned, leaving the small guys shipwrecked and all at sea.
It's like Moby Dick but with even bigger idiots. And a voting whale.
Oh yeah. Just search for "flash loan" on web3isgoinggreat if you want some representative examples. (Not all the flash-loan attacks involve increasing stake for a voting takeover, but some do.)
Those suffering a schadenfreude deficit may want to head over to web3isgoinggreat occasionally for more like this story, by the way. It's generally pretty horrortaining.
I'm sorry, but if I had €100 million in the bank, and suddenly found out that the bank's other customers had voted to liquidate my account, I would be pissed to the extreme.
As noted, it's hilarious to watch all these "decentralize" zealots suddenly rush to centralize when their feet go cold.
I love fireworks.
You would be pissed, but in this case the whale dumped a load of what they saw - rightly - as shit and were allowed to borrow - in comparison - gold.
They were never going to want to repay the 'loan'.
The only reason they might object to the shit being sold privately is that it won't completely crash the price in the way that trying to sell the shit publicly would do: virtually all of the project's non-shitcoins have gone and they were never going to come back.
Hell, some of the DeFi platforms and other cryptocurrency outgrowths (cryptocurrency exchanges and funds, DeFi insurers, NFTs, ...) make CDOs look almost sensible. I mean, at least with CDOs you could roughly gauge your exposure by what tranche you were in and what sort of diversity might be in the underlying securities. And even doomed mortgages have some real estate backing them, even if it's overvalued.
Many of the cryptocurrency enthusiasts seem to be not so different from the Sovereign Citizen true believers, in that they live in a fantasy world where recording things has magical power, and nothing more is necessary to win any argument. But I suppose that's not surprising – that's hardly the only point of resemblance.
https://forums.theregister.com/forum/all/2022/06/17/inverse_finance_heist/#c_4479489
Put in $107 million, borrow $108 million, that's $1 million to them and they don't care what happens next which is why they can't reach them. This would be illegal in several ways if they had tried it in regulated securities market.
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