February 5, 2023

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An old story that demands some attention in the light of recent problems within the DeFi community and the upcoming merge of Ethereum. One of the reasons many users of the ETH network are against the upcoming merge is that the PoS (proof-of-stake) consensus mechanism may compromise the integrity of the network allowing holders of huge capital to control the market and define the future of the network in general.

This vulnerability seems unlikely based on the sheer market cap and good distribution of tokens across many independent holders. However, some issues can rise due to the presence of whales, who own large amounts of coins. The story with a whale who was close to crashing Solano is a teaching one.

One large holder of Solana borrowed heavily from Solend to buy a huge position in Solano compromising the whole network and creating a risk of liquidating SOL tokens at high risk due to failure to fulfill his obligations toward their debt to Solend which would start liquidating their assets automatically. $108 million in USDC and USDT were borrowed with collateral in Solana.

The network decided to take over the wallet through the DAO mechanism and started liquidating his position slowly to reduce any risks to the token. However, it was a very worrying moment for the whole crypto community as we observed how a single individual can pose an existential danger to a project.

Many DeFi platforms and DAO organizations are often criticized for vulnerabilities related to being weak to actions of single or multiple united individuals who would decide to crash a token. It already happened to Terra Luna where a single user was able to significantly increase the speed of the downfall of the now-infamous stablecoin.

We have to think carefully about such situations considering the huge pressure applied to many DeFi projects that may struggle to survive the influx of ill-intended investments amidst the chaos in the crypto market.

On the other hand, the merge of the Ethereum network is also another issue where we have rumors about potential hard forks and more.

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