In an exclusive interview with CryptoSlate, Rooter, the founder of the Solana-based lending protocol Solend, provides a revealing account of the events behind the protocol's drastic proposal to seize control of a whale's account. As the crypto community watched, the Solend DAO voted to intervene to prevent the liquidation of a massive position that could have created catastrophic bad debt. Ultimately, the decision was reversed, allowing Solend to work with the whale to reduce his position through alternative means.
In the candid discussion, Rooter opens up about the "sleepless nights" and the genuine fear that the Solana network might not have been able to withstand the fallout from the whale's liquidation. We delve into the reasoning behind the contentious decision to take over the account, its perceived necessity, how the risk became so concentrated, and the comprehensive measures Solend is implementing to prevent a repeat of this systemic threat.
Interestingly, Rooter claims that users with direct exposure to the liquidation event were largely supportive of the DAO's proposal. In contrast, the most vocal opposition came from those with "nothing to lose"—members of the broader DeFi community who viewed the DAO's intervention as a fundamental violation of the core tenets of decentralized finance.
Furthermore, Rooter pointed out that the liquidation bots designed to handle such events were not equipped to process transactions of such monumental scale on DEXes. While the DAO's decision was deeply unpopular, he argues it may have been the only option available for a DeFi protocol facing an existential threat without the necessary tools. Read the full interview below to understand why Solend believed this liquidation event could have severely impacted the entire Solana network.
When did you first become aware of the potential issue with the whale's position?
The whale's wallet has been on our radar since February. We monitored it intermittently. It became clear that the risk had become untenable on June 15.
Do you believe DeFi protocols need better methods for user communication?
Yes, a universally adopted notification system with broad acceptance would be highly beneficial.
Wasn't there a recognized risk of having a single wallet control such a large portion of the liquidity pools?
All the steps Solend took during this incident were proactive to avert an actual crisis.
For a long time, Solend's total deposits and borrows were so massive ($2B/$1B) that it seemed improbable a single account could represent such a significant share. However, the recent market selloff and deleveraging events caused the whale's proportional size to balloon rapidly. We are now implementing automated monitoring for concentration risk to be even more proactive in the future.
You've decided to lower deposit caps since the incident—do actions like this restrict the potential of DeFi?
Solend has always had deposit limits, which have been reduced further since the incident.
The true potential of DeFi lies in 1) its ability to create transparent and efficient financial systems, preventing liquidity crises like the ones we're seeing now with 3AC/Celsius/etc., and 2) making access to financial services permissionless for anyone. Limits are simply a necessary safeguard as the DeFi ecosystem matures.
You stated your users were the primary focus and that voting to take over the whale's account was not a selfish act. What analysis or modeling did you use to determine that liquidating ~$113 million in assets would harm the Solana network more than a short-term intervention?
When a real-world trolley problem emerges, our users come first. Solend's liquidation bots are designed to operate entirely on-chain, meaning they would execute on DEXes. You can get a slippage quote on Jupiter, which showed about 5% slippage for a $2M SOL sale—a figure less than 2% of the total liquidatable amount. A liquidation of this whale's size would trigger a frenzy of bots, with liquidators racing for the reward and arbitrageurs exploiting price differences across exchanges. An MEV opportunity of this magnitude is unprecedented on Solana. In the worst-case scenario, the Solana network could have gone down for hours during one of the most volatile periods in its history.
Do you feel the need to maintain growth during a bull market pressured your decision-making?
Solend was launched during a bull market. Risk management has always been our top priority. Initially, we had low deposit limits of $1M per asset and $10K per user per asset, which were increased gradually. Solend also launched with a bug bounty program, paying up to $1M for a critical security vulnerability. We also launched Isolated Pools to contain riskier assets in separate markets.
Did you consider the precedent you would be setting by taking over a user's Solend account?
The phrase "taking over a user's account" is a mischaracterization. The proposal was to liquidate the assets in a way that minimized systemic risk for all users. The user's capital would have been returned. There was no perfect solution. We implemented the only option we believed was available to us at the time. We are now building the infrastructure to ensure we never face that dilemma again.
What was the atmosphere behind the scenes during this event?
Behind the scenes, there were many sleepless nights and high-pressure situations. We also spent a significant amount of time in our Discord, engaging directly with users and the community. One key insight was that the majority of users with assets at risk due to the whale (withdrawals were paused because the USDC pool was at 100% utilization) were supportive of taking action. The loudest complaints came from those with nothing at stake. We're just grateful that in the end, the situation was resolved gracefully. No users lost funds.
What's next for Solend?
Solend is reinforcing its systems to ensure an issue of this nature never happens again.
Rooter is the founder of Solend.
