David Canellis

This is a segment from the Empire newsletter. To read full editions, <a href="https://blockworks.co/newsletter/empire" target="_blank" rel="noreferrer noopener">subscribe</a>.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Today’s subject is an unsolved mystery of crypto market microstructure. We only have so many facts, and we’ll likely never know all the details.



To get up to speed with the fundamentals of what happened over the weekend, I recommend the <a href="https://x.com/i/broadcasts/1YqGolZBBRgJv">Empire livestream</a> from Sunday with Doug Colkitt, as well as Doug’s <a href="https://x.com/0xdoug/status/1976850615621107743">helpful X thread</a> on Auto-Deleveraging.



For those wanting the quick and dirty headline summary, here goes.&nbsp;



For some silly reason, Binance was using spot prices to value three tokens accepted as collateral for margin positions — liquid staking derivatives wBETH and BNSOL, alongside Ethena’s synthetic dollar USDE.



Not exactly a problem when Binance’s order books for those tokens were thick with bids on either side. But they’d quickly dried up around the time that bitcoin and other coins started dumping on word that Trump’s trade war with China would persist, leading prices to slip well below par, and in the case of the two staking derivatives, almost to zero.



Bad news for anyone using the affected coins as collateral for margin trading on Binance. Suddenly their collateral wasn’t considered valuable enough to cover their position — even though prices remained much more stable elsewhere — and they were liquidated.&nbsp;



At the same time, leveraged traders on perps DEXs like Hyperliquid, many incentivized to take margin by points campaigns for airdrops, were also hit as a result of second-order price effects.&nbsp;



So, if you’re after an analogy, it’s easiest to consider Binance as the epicenter of an earthquake. Had Binance valued USDE, wBETH and BNSOL using an index or some other pricing system, rather than its own illiquid spot markets, maybe there would have been no earthquake at all. The Ethena protocol was still redeeming USDE tokens for $1 value throughout the entire ordeal, for instance.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">While we share these suggestions privately with any partner we work with across both DeFi and CeFi, want to surface this publicly so there is zero doubt going forward on what we view as appropriate oracle design and risk management for USDe: <a href="https://t.co/lb4OeaGn9Y">pic.twitter.com/lb4OeaGn9Y</a>&mdash; G | Ethena (@gdog97_) <a href="https://twitter.com/gdog97_/status/1977302774636540403?ref_src=twsrc%5Etfw">October 12, 2025</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Now comes the mystery: As Colin Wu <a href="https://wublock.substack.com/p/opinion-is-this-crash-an-attack-on">pointed out</a> earlier this week, Binance had, only days before the liquidation quake, publicly <a href="https://www.binance.com/en/support/announcement/detail/d6deec042d784b6ba5d8710a8c69d79d?utm_source=chatgpt.com">announced</a> that it would be reconfiguring its price oracles away from its own spot markets for wBETH and BNSOL “to minimise the risk of depegging.”



Hypothetically, that opens the door to the whole situation amounting to a coordinated attack on Binance (or one of its market makers).&nbsp;



Whether Binance knew it or not, the announcement made it clear that there was a structural weakness in the way its oracles were valuing certain tokens used as collateral. Any malicious whale with a decent-enough position in the implicated spot markets could (again, hypothetically) dump enough coins to depeg those assets, triggering liquidations that shouldn’t be triggered at all.



Which, I suppose, could be the case. But for such a plan to work, it would take knowing that the order books were so thin that prices would actually collapse under a certain amount of acceptable selling pressure applied by the malicious whale.&nbsp;



As it so happens, there is data that suggests that this might’ve been possible.&nbsp;



The tip off came from an X poster by the name of Benson Sun, who has been unpacking the implications in a series of articles. Sun <a href="https://x.com/BensonTWN/status/1978083314121552360">wrote</a> that between 21:18 and 21:20 UTC, Binance underwent an “abnormal, synchronized withdrawal of liquidity,” through which “order books were nearly drained, leaving the market in a brief but total vacuum.”



Indeed, bid and ask volumes on Binance’s BTC/USDT market evaporated by more than 95% between 21:13 and 21:22, per Blockworks Research data and as shown on the chart below. The orderbooks were drained almost completely in under 10 minutes and would take the better part of an hour to recover to reasonable levels.



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1282" height="718" src="https://blockworks-co.imgix.net/wp-content/uploads/2025/10/image-45.png?w=1024&amp;h=1024" alt="" class="wp-image-109104" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2025/10/image-45.png?w=1282 1282w, https://blockworks-co.imgix.net/wp-content/uploads/2025/10/image-45.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2025/10/image-45.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2025/10/image-45.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2025/10/image-45.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2025/10/image-45.png?w=466 466w, https://blockworks-co.imgix.net/wp-content/uploads/2025/10/image-45.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2025/10/image-45.png?w=80 80w" sizes="auto, (max-width: 1282px) 100vw, 1282px" /></figure>



Binance, meanwhile, compensated liquidated users affected by localized depegs that occurred between 21:36 UTC and 22:16 UTC.&nbsp;



Which makes sense: The depegs had started around 21:40 UTC, with the worst of it coming about 10 minutes later. Trump’s announcement of potential additional tariffs on China came 20 minutes after that, at 20:00 UTC, on Truth Social.&nbsp;



Curiously, two Hyperliquid accounts <a href="https://www.wsj.com/finance/currencies/a-historic-crypto-selloff-erased-over-19-billion-but-two-accounts-made-160-million-3144cccd">got ahead of the news</a> by shorting bitcoin and ether minutes before that post, leading to $160 million profits.



Were those traders the same whales who might’ve intentionally crashed prices on Binance after they simultaneously pulled their chips off the table, imploding markets that they themselves turned illiquid? Was that a strategy to profit even more from their shorts, fueled by the tears of liquidations across the exchange ecosystem?



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">Reminded by <a href="https://twitter.com/BensonTWN?ref_src=twsrc%5Etfw">@BensonTWN</a> <a href="https://twitter.com/Arthur_0x?ref_src=twsrc%5Etfw">@Arthur_0x</a>, I further explored the data points of <a href="https://twitter.com/ethena_labs?ref_src=twsrc%5Etfw">@ethena_labs</a> price at 9:18 pm UTC and 9:19 pm UTC on 10 Oct across <a href="https://twitter.com/binance?ref_src=twsrc%5Etfw">@binance</a> <a href="https://twitter.com/okx?ref_src=twsrc%5Etfw">@okx</a> <a href="https://twitter.com/Bybit_Official?ref_src=twsrc%5Etfw">@Bybit_Official</a> <a href="https://twitter.com/bitgetglobal?ref_src=twsrc%5Etfw">@bitgetglobal</a> . 0.34 -&gt; 0.27 at 9:18 pm 0.27 -&gt; 0.15 at 9:19 pm It looks like mms withdrew the liquidity… <a href="https://t.co/PhtTWMHAqx">https://t.co/PhtTWMHAqx</a> <a href="https://t.co/Fyvycbethz">pic.twitter.com/Fyvycbethz</a>&mdash; YQ (@yq_acc) <a href="https://twitter.com/yq_acc/status/1978138671531618777?ref_src=twsrc%5Etfw">October 14, 2025</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



We’ll never know without Binance publicly releasing details of how their largest traders operated around the time of the crashes (which would never happen).&nbsp;



But remember the part about pattern recognition: In a separate post, another analyst <a href="https://x.com/yq_acc/status/1977433963728867630">catalogued</a> four other instances of attacks on oracles prone to manipulation since late 2020, including bZx, Harvest Finance, Compound and Mango Markets.



So the $19 billion question of whether a single culprit caused the chaos might be a misnomer. It was a situation that could’ve easily been caused by just one person.&nbsp;



Whether or not they intended to trigger the situation is the real kicker. And it doesn’t take a tinfoil hat to suggest that exchange operators (CEX or otherwise) would do well to consider this a coordinated attack in any case.&nbsp;



Fingers crossed, at least.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Get the news in your inbox. Explore Blockworks newsletters:



<ul class="wp-block-list">
<li><a href="https://blockworks.co/newsletter/the-breakdown">The Breakdown</a>: Decoding crypto and the markets. Daily.</li>



<li><a href="https://blockworks.co/newsletter/0xresearch">0xResearch</a>: Alpha in your inbox. Think like an analyst. </li>
</ul>

Binance

Attack on Binance? Crypto meltdowns are starting to rhyme

This is a segment from the Supply Shock newsletter. To read full editions, <a href="https://blockworks.co/newsletter/supplyshock" target="_blank" rel="noreferrer noopener">subscribe</a>.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Bitcoin news (and crypto news more broadly) has clearly defined tropes. But they aren’t static.&nbsp;



Tropey headlines tend to play on our base instincts. Fraud stories were historically a go-to for legacy and mainstream outlets looking for a quick hit about crypto — “Bitcoin Thief Allegedly Bought Royalty Rights to Rap Songs, Has Middling Taste” from <a href="https://www.vice.com/en/article/bitcoin-thief-allegedly-bought-royalty-rights-to-rap-songs-has-middling-taste/">VICE</a> in 2019 is a prime example.&nbsp;



That story, and others like it, had <a href="https://blockworks.co/news/crypto-fraud-financial-scam">less to do with Bitcoin</a> and more to do with crime, but the crime itself wasn’t particularly interesting. Bitcoin brought the novelty factor to an otherwise-dull low-level crime. Consider your click harvested!



Over time, those types of stories have given way to a trope more relevant to bitcoin holders: “Old whale moves coins for the first time in ages.”



The most recent iteration has played out this month. Across two weeks, an address dormant since 2011 transferred a total of 80,009 BTC ($9.3 billion) to Galaxy Digital.&nbsp;



Come this morning, Galaxy had directed more than 10,000 BTC ($1.2 billion) to a number of exchanges across an eight-hour period.&nbsp;



The price of bitcoin slid nearly 2.5%, from about $118,000 to under $115,300, before recovering slightly.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">Update:<a href="https://twitter.com/hashtag/GalaxyDigital?src=hash&amp;ref_src=twsrc%5Etfw">#GalaxyDigital</a> has transferred nearly 30,000 <a href="https://twitter.com/search?q=%24BTC&amp;src=ctag&amp;ref_src=twsrc%5Etfw">$BTC</a>($3.5B) out today, most of which went directly to exchanges and were sold. Then <a href="https://twitter.com/hashtag/GalaxyDigital?src=hash&amp;ref_src=twsrc%5Etfw">#GalaxyDigital</a> withdrew 1.15B <a href="https://twitter.com/search?q=%24USDT&amp;src=ctag&amp;ref_src=twsrc%5Etfw">$USDT</a> from exchanges.<a href="https://twitter.com/hashtag/GalaxyDigital?src=hash&amp;ref_src=twsrc%5Etfw">#GalaxyDigital</a> still holds 18,504 <a href="https://twitter.com/search?q=%24BTC&amp;src=ctag&amp;ref_src=twsrc%5Etfw">$BTC</a>($2.14B).<a href="https://t.co/bVtNwP2iXI">https://t.co/bVtNwP2iXI</a> <a href="https://t.co/Wv1cD3aHbf">pic.twitter.com/Wv1cD3aHbf</a>&mdash; Lookonchain (@lookonchain) <a href="https://twitter.com/lookonchain/status/1948665986573631687?ref_src=twsrc%5Etfw">July 25, 2025</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Around the same time, a separate whale awoke to <a href="https://news.bitcoin.com/2011-bitcoin-whale-wakes-after-14-years-moves-470m-but-why-now/">move</a> almost 3,963 BTC ($462.5 million) between addresses, although at this point it doesn’t appear to have made it to any exchanges.



We don’t usually get any closure when these types of transfers happen. In the past five years or so, there have been at least a dozen other instances of dormant Bitcoiners awakening to shuffle coins amounting to over 195,400 BTC ($22.8 billion) when combined, by my very quick count.



Of that dozen, only three are believed to have led to coins actually being sold on exchanges, including this morning’s situation with Galaxy. The possibility does exist that each of the others were peer-to-peer, over-the-counter sales, but we’ll never know for sure.



Still, the “dormant whale moves bitcoin” trope is the perfect blend of feel-good and abject terror.&nbsp;



We’ve all heard the horror stories about <a href="https://www.bbc.com/news/articles/c74zel3ng1vo">lost private keys</a> to bitcoin fortunes, and maybe even lived a few of them ourselves. Hearing about old coins being accessed for the first time in a&nbsp; decade is the great antidote.



Meanwhile, the notion that the 30% of all coins which haven’t <a href="https://cryptoquant.com/asset/btc/chart/network-indicator/utxo-age-bands-percent?window=DAY&amp;priceScale=log&amp;metricScale=linear">moved</a> in at least five years — almost six million BTC, worth $696 billion — might one day be suddenly sold is a little scary, depending on how heavy one’s bags are.



Which makes for perfect clickbait, no matter how scant the details.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Get the news in your inbox. Explore Blockworks newsletters:



<ul class="wp-block-list">
<li><a href="https://blockworks.co/newsletter/the-breakdown">The Breakdown</a>: Decoding crypto and the markets. Daily.</li>



<li><a href="https://blockworks.co/newsletter/0xresearch">0xResearch</a>: Alpha in your inbox. Think like an analyst. </li>
</ul>

Bitcoin

Bitcoin whales are waking up — it’s perfect clickbait

This is a segment from the Supply Shock newsletter. To read full editions, <a href="https://blockworks.co/newsletter/supplyshock" target="_blank" rel="noreferrer noopener">subscribe</a>.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



About 15 million people go whale watching every year — many in places like Mozambique, Costa Rica and Sri Lanka.



Stuck in Iceland, a travel magazine, <a href="https://www.stuckiniceland.com/whale-watching/">labeled</a> whale watching “a demanding contact sport where you battle the elements while looking for creatures that care nothing, whether you see them or not.&nbsp;



“Sometimes you are lucky, and the whales take a long time when they are visible. Sometimes they move fast, pop up all over the place, and you must be quick to see them.”



Today’s post celebrates Bitcoin’s version of the sport. So grab your spray jacket and binoculars, and let’s go crypto-catamaranning. 



Thar she blows!



The earliest known efforts to find, track and even identify Bitcoin whales occurred in August 2013, as bitcoin was crossing over the $100 mark for the last time ever.



Prominent Bitcointalk user prophetx had <a href="https://bitcointalk.org/index.php?topic=282879.0">proposed</a> three whale-hunting commandments and encouraged others to join in:



<ol class="wp-block-list">
<li>Post any address holding in excess of 5,000 BTC ($500,000 then, $522 million now) in the last 90 days on a rolling basis.</li>



<li>Collaborate to identify the owner of the address, either in the real world or through their online footprint.</li>



<li>Use that information to map the biggest whales in the Bitcoin economy and follow the movement of their coins.</li>
</ol>



“Why?” was the first response.



“I study economics, so observing and studying the spending of the capitalist group is important to me,” prophetx said.



“It seems a bit creepy and stalkerish…,” replied another.



Prophetx: “This is no different than Forbes’ richest list. Bitcoin enables this and it should be used to advance knowledge. And if someone is that concerned perhaps they shouldn&#8217;t use a currency with a public tx ledger…”



Quickly, though, other whale hunters joined in. Within two days, someone had produced a rich list of about 300 addresses with more bitcoin than anyone else, discovered at 50,000 block increments (every 350 days or so).



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXfmEBT3konP17uSTDNxl1F-STSovvFFbLJkZ4WcERKvLJsOexHrVCbDI9i3THmHDjskl24ToYjX69qg9vcJafJt1saW2r6BNK8HICQZgcPyw50EvIu_5d4JlWywyKA2COYj8b2QfQ?key=cMtRQN4-8YMqHSlqsgMNgw" alt=""/><figcaption class="wp-element-caption">In the future, bitcoin would be worth much more than $500.</figcaption></figure>



Among those whales was an address starting with “12ib7…” with 31,000 BTC — $3.1 million at 2013 prices and $3.2 billion today. It’s the 967th address ever created and was initially funded in May 2010.



The address can still be found on Bitcoin’s <a href="https://bitinfocharts.com/top-100-richest-bitcoin-addresses.html">rich list</a>, currently ranked 28th, closely trailing behind a Binance mining pool and cold wallet.



Prophetx’s thread never went far beyond that, with no whales identified under the actual post. Years later, as part of the depressingly long Kleiman estate court case, Craig Wright would falsely <a href="https://blog.wizsec.jp/2018/02/kleiman-v-craig-wright-bitcoins.html">assert</a> ownership of the address alongside others via Tulip Trust.&nbsp;



Wright had claimed that hackers had stolen the private keys and any backups were deleted — even though the coins in question had not been moved following the theft. He also attempted to sue Bitcoin developers into somehow granting control of the coins.&nbsp;



Of course, Wright ultimately lost the Kleiman case and was <a href="https://www.zdnet.com/article/craig-wright-to-pay-100-million-in-kleiman-v-wright-56b-case/">ordered</a> to pay the estate $100 million, dropping the case against the Bitcoin devs shortly after.



So, who owns 12ib7? Nobody knows. 12ib7’s last outgoing transaction was in July 2010, when it directed 9,000 BTC to an unidentified address (its first outgoing transaction was also on this day in 2010!)



Much juicier: Coinbase director Conor Grogan got as far as potentially linking the address to Satoshi.&nbsp;



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">This address is also associated with funding 12ib, one of the largest active BTC address of all time, which hold 3B of BTC today. This lends credence to the link that 1PY was associated with Satoshi or a very early adopter/contributor <a href="https://t.co/q0b0H8PrMj">pic.twitter.com/q0b0H8PrMj</a>&mdash; Conor (@jconorgrogan) <a href="https://twitter.com/jconorgrogan/status/1887154642267574302?ref_src=twsrc%5Etfw">February 5, 2025</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



A so-called Patoshi address originally funded 12ib7 with 3,700 BTC. Patoshi addresses are believed to have mined bitcoin using a method that <a href="https://blockworks.co/news/satoshi-bitcoin-holdings-wallet-123b">only Satoshi may have known</a> was possible.



Whether that means Satoshi technically controls 12ib7 is unclear. All we know for sure is that the true owner was an early adopter and, for whatever reason, a Satoshi-linked wallet felt it necessary to send them thousands of bitcoin. Lucky them!&nbsp;



If they still have the keys, that is.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Get the news in your inbox. Explore Blockworks newsletters:



<ul class="wp-block-list">
<li><a href="https://blockworks.co/newsletter/the-breakdown">The Breakdown</a>: Decoding crypto and the markets. Daily.</li>



<li><a href="https://blockworks.co/newsletter/0xresearch">0xResearch</a>: Alpha in your inbox. Think like an analyst. </li>
</ul>

Bitcoin whale watching is a sport for having fun, staying poor

Sebastian Sinclair

Macauley Peterson

<div id="highlights-block_62afc95119535" class="highlights">
 <ul>
 <li>Solend Labs ponders emergency powers, in challenge for decentralized governance ideal</li>
 <li>Should the price of SOL have dropped below $22.30 before a vote was made, chaos would have ensued Solend Labs said in a post</li>
 </ul>
 
</div>



Users of the Solana-based lending and borrowing protocol Solend granted emergency power to the platform&#8217;s steward in order to mitigate liquidation risks presented by Solend&#8217;s biggest bagholder.



Those powers, gifted via the Solend-based decentralized autonomous organization&#8217;s (DAO) first <a href="https://realms.today/dao/7sf3tcWm58vhtkJMwuw2P3T6UBX7UE5VKxPMnXJUZ1Hn/proposal/HuaL6cDtuNtfnJgvwMnYiZDHVCoLAuDtVFgJD8kYChJ4" target="_blank" rel="noreferrer noopener">governance proposal</a>, allow Solend Labs to take over the whale&#8217;s account in order to execute an over-the-counter trade should the price of Solana&#8217;s native token SOL drop below $22.30.



But, after public outcry, a <a href="https://realms.today/dao/7sf3tcWm58vhtkJMwuw2P3T6UBX7UE5VKxPMnXJUZ1Hn/proposal/3geE5P3D7VJRaNNDVfZciGsXgwGiao1hSNpRM6jWNa5A" target="_blank" rel="noreferrer noopener">second signalling proposal</a> sought to walk back the first.



The first proposal gave developers a green light to implement special margin requirements for large whales borrowing more than 20% from the protocol&#8217;s primary pool, with a 35% liquidation threshold now in place.



More than 1.15 million votes were cast in favor of authorizing the special powers or roughly 97.5%, versus 30,101 against (2.5%). However, a single account, representing 1% of the total users participating, cast more than 1 million votes in the affirmative, Solana-based Realms <a href="https://realms.today/dao/7sf3tcWm58vhtkJMwuw2P3T6UBX7UE5VKxPMnXJUZ1Hn/proposal/HuaL6cDtuNtfnJgvwMnYiZDHVCoLAuDtVFgJD8kYChJ4/explore" target="_blank" rel="noreferrer noopener">data shows</a>, revealing a stark centralization in the decision-making process.



The whale <a href="https://solend.fi/dashboard?wallet=3oSE9CtGMQeAdtkm2U3ENhEpkFMfvrckJMA8QwVsuRbE" target="_blank" rel="noreferrer noopener">account</a> in question presents a systemic risk to the protocol, Solana&#8217;s network and its users, due to the account holding &#8220;an extremely large margin position&#8221; close to liquidation, Solend said in a <a href="https://blog.solend.fi/slnd1-mitigate-risk-from-whale-1504285ab4d2" target="_blank" rel="noreferrer noopener">post</a> ahead of the vote on Sunday. 



After repeated attempts to contact the whale, Solend said it was put to a vote to take premptive action over the account. The move raises questions regarding the principles and spirit of decentralized finance, which aims to remove middlemen and empower financial self-sovereignty. 



Roughly $108 million worth of USDC and USDT is being borrowed by the whale, against $170 million worth of SOL deposited as collateral in the protocol&#8217;s main pool. That represents roughly 88% of USDC borrows and 95% of SOL deposits for the lending platform.



Should the price of SOL drop below $22.30 the whale’s account could be liquidated for up to 20% of their borrowings, estimated to be worth $21 million, Solend said. SOL was last seen changing hands for around $32.60 after bouncing from a 24-hour low of $29, <a href="https://www.blockworksresearch.com/assets/sol/" target="_blank" rel="noreferrer noopener">Blockworks Research</a> data shows.



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">&#8220;It&#8217;d be difficult for the market to absorb such an impact since liquidators generally market sell on DEXes,&#8221; Solend said in its post. &#8220;In the worst case, Solend could end up with bad debt. This could cause chaos, putting a strain on the Solana network.&#8221;</blockquote>



Following concerns about the potential risk, users have begun withdrawing assets en masse, forcing USDC and USDT utilization in the protocol&#8217;s primary pool to spike to 100%, Solend confirmed in its post. The result leaves remaining depositors unable to withdraw. What&#8217;s worse, any positions collateralized by deposits of the two stablecoins are unable to be liquidated.



&#8220;Letting a liquidation of this size to happen on-chain is extremely risky.&nbsp;DEX liquidity isn’t deep enough to handle a sale of this size and could cause cascading effects,&#8221; Solend said.



The governance move has roiled DeFi proponents, who see it as a tacit admission that not only Solend&#8217;s design choices failed, but the Solana Ventures-backed protocol is centralized — a DAO in name only.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">Sqlana&#39;s Solend leverage platform just spun up a fake vote as cover to control a whale&#39;s account so that it wouldn&#39;t get liquidated &amp; crash the <a href="https://twitter.com/search?q=%24SOL&amp;src=ctag&amp;ref_src=twsrc%5Etfw">$SOL</a> server again. Solend is an official portfolio company of Solana. Insider deals. Central servers. This is the definition of CeFi. <a href="https://t.co/AZ5N3eJmaB">https://t.co/AZ5N3eJmaB</a>&mdash; Evan Van Ness 🦇🔊 (@evan_van_ness) <a href="https://twitter.com/evan_van_ness/status/1538610017573773318?ref_src=twsrc%5Etfw">June 19, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



It&#8217;s unclear what the next steps are following the second vaguely-worded proposal meant to placate critics of the first. The proposal, which was approved by a similarly overwhelming majority of SLND — the protocol&#8217;s governance token — ostensibly &#8220;invalidates&#8221; the first, and lengthens the duration of governance votes from a comically short six hours to a full day.



The team also pledges to &#8220;work on a new proposal that does not involve emergency powers to take over an account.&#8221;



The conundrum marks another headache for the budding Solana ecosystem, whose network has experienced <a href="https://cms.blockworks.co/solana-price-dips-after-another-network-outage/" target="_blank" rel="noreferrer noopener">several outages</a> this year, shaking faith in the stability and resiliency to maintain consistent uptime in the face of intense market activity.



Solana has a history of downtime caused specifically by on-chain liquidations, though this instance represents a 100 times greater impact to the network and ecosystem, Solend <a href="https://twitter.com/solendprotocol/status/1538553657158881280?s=20&amp;t=gL7a9q79nlz9kBdM8WbYaA" target="_blank" rel="noreferrer noopener">tweeted</a> Sunday. 



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">&#8220;It&#8217;s extremely risky for everyone involved.&#8221;</blockquote>



Fears of market contagion continue to plague the confidence and resolve of the crypto market which is still reeling from the aftereffects of Luna&#8217;s implosion in May and lender Celsius halting <a href="https://cms.blockworks.co/celsius-lending-platform-suspends-withdrawals-and-transfers/" target="_blank" rel="noreferrer noopener">withdrawals and transfers</a> a week ago.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Get the news in your inbox. Explore Blockworks newsletters:



<ul class="wp-block-list">
<li><a href="https://blockworks.co/newsletter/the-breakdown">The Breakdown</a>: Decoding crypto and the markets. Daily.</li>



<li><a href="https://blockworks.co/newsletter/0xresearch">0xResearch</a>: Alpha in your inbox. Think like an analyst. </li>
</ul>

DAOs

Solana Lending Protocol Faces Governance Conundrum

<div id="highlights-block_eec3016a22b7dcde07607dcf874ead2e" class="highlights">
 <ul>
 <li>Proposal 20, which passed over the weekend, is expected to take effect on May 4</li>
 <li>Over 3 million JUNO tokens will be transferred to a community-controlled wallet</li>
 </ul>
 
</div>



Juno, a smart contract platform that runs on the Cosmos blockchain, is on the verge of resolving a two-month-old governance conundrum.



An upgrade, slated to be executed Wednesday, will strip some three million JUNO tokens from a single wallet, belonging to an organization alleged to have exploited a loophole in the token’s initial distribution.



Juno’s token was distributed to stakers of the native Cosmos asset ATOM, but the team implemented a 50,000 “whale cap” — and deliberately excluded centralized exchanges, such as Kraken and Binance, which offer staking services.



In March, 40% of token holders <a href="https://cms.blockworks.co/juno-network-stakeholders-to-decide-fate-of-whales-millions-in-a-crypto-first/" target="_blank" rel="noreferrer noopener">signaled their intent</a> to remove tokens that were distributed to a collection of wallets that were later determined to belong to a single entity, in contravention of the stakedrop rules.



On-chain sleuths <a href="https://wallet.keplr.app/#/juno/governance?detailId=4" target="_blank" rel="noreferrer noopener">discovered</a>, in October 2021, that multiple recipient wallets of the initial drop were pooled together, implying that they belonged to the same owner or organization.



But stripping the JUNO assets from the wallet was controversial.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">Regardless of your take on it, <a href="https://twitter.com/hashtag/Prop16?src=hash&amp;ref_src=twsrc%5Etfw">#Prop16</a> should be a big wake up call. Politics is coming to a blockchain near you, and no chain or DAO will be immune. What&#39;s happened on Juno could happen on any chain (or DAO) with on-chain governance&#8230; a community can vote to change things.&mdash; Multichain Maximalist 🦇🔊⚛️🏴 (@JakeHartnell) <a href="https://twitter.com/JakeHartnell/status/1503224734258909184?ref_src=twsrc%5Etfw">March 14, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Some viewed the idea of confiscating tokens as a property rights violation of sorts. But centralization of governance power was broadly considered a risk to the long-term prospects of the whole platform.



The owner of the wallet in question <a href="https://gist.github.com/junowhale/f8b3e936cd85ef1501de3e372a10458e#about-juno-airdrop-and-prop4" target="_blank" rel="noreferrer noopener">came forward</a> to explain that they were a team that managed assets on behalf of clients. In the ensuing <a href="https://commonwealth.im/juno/discussion/4044-softwareupgradeproposal-stakedrop-remediation-for-gameccndebo" target="_blank" rel="noreferrer noopener">community discussion</a>, a new consensus emerged. The wallet had not gamed the airdrop, but was instead ineligible for the stakedrop on account of being a virtual currency exchange service.



Before any concrete action could take pace, the blockchain <a href="https://wallet.keplr.app/#/juno/governance?detailId=17" target="_blank" rel="noreferrer noopener">had to be upgraded</a> to allow Juno governance to execute smart contracts. Then, a subsequent proposal could implement the voter’s intent on-chain.



Meanwhile, the rogue entity, known as CCN, made <a href="https://wallet.keplr.app/#/juno/governance?detailId=18" target="_blank" rel="noreferrer noopener">a proposal of its own</a>, offering to split the funds equally with the DAO. It then <a href="https://twitter.com/wolfcontract/status/1514280496192278534" target="_blank" rel="noreferrer noopener">used its tokens</a> to vote in favor of the compromise. But the proposal was overwhelmingly rejected.



CCN <a href="https://wallet.keplr.app/#/juno/governance?detailId=19" target="_blank" rel="noreferrer noopener">tried once more</a>, offering to distribute the JUNO proportionally to its clients, following a know your customer (KYC) process from an independent auditor. That, too, was resoundingly defeated, with just 3.6% voting in favor.



The <a href="https://wallet.keplr.app/#/juno/governance?detailId=20" target="_blank" rel="noreferrer noopener">latest proposal</a>, 20, gave the community a vote on an upgrade that will remove CCN&#8217;s disproportionate token ownership and voting power. It passed April 29 with 71.2% of the vote.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Get the news in your inbox. Explore Blockworks newsletters:



<ul class="wp-block-list">
<li><a href="https://blockworks.co/newsletter/the-breakdown">The Breakdown</a>: Decoding crypto and the markets. Daily.</li>



<li><a href="https://blockworks.co/newsletter/0xresearch">0xResearch</a>: Alpha in your inbox. Think like an analyst. </li>
</ul>

Juno’s DAO Votes To Confiscate $35M in Tokens From Whale in Messy Dispute

Jacquelyn Melinek

<div id="highlights-block_265c0c79e983282d327edc3de0c8788e" class="highlights">
 <ul>
 <li>If the whale abruptly pulled out their funds — currently worth about $122 million — they could single-handedly wipe out JUNO liquidity on decentralized exchanges</li>
 <li>The proposal, if passed, could set an “interesting” and “potentially dangerous” precedent, a community member named Kavaskous on Twitter said</li>
 </ul>
 
</div>



In less than 24 hours, thousands of Juno token stakeholders have banded together in a bid to correct perceived errors in the network’s stakedrop by confiscating one crypto whale’s token wealth. A stakedrop is a method of widely distributing tokens as a reward for staking the tokens of another blockchain or decentralized application.



Holders of the governance token of Juno, a layer-1 blockchain in the Cosmos ecosystem, are <a href="https://wallet.keplr.app/#/juno/governance?detailId=16" target="_blank" rel="noreferrer noopener">voting</a> on proposal #16 to reduce a whale address from over 2.5 million JUNO tokens to 50,000 tokens — removing over 98% — which would be placed in a community reserve fund. For reference, a whale is an entity or individual that owns a significant amount of tokens for a specific cryptocurrency. The move, according to the text of the proposal, comes after “numerous discussions with the community.”



The Juno Network launched with the full intention to be completely community driven, a community member TheJunonaut <a href="https://twitter.com/TheJunonaut/status/1501957396779855874?s=20&amp;t=eJ6QATBcRs-FN44TVTioPw" target="_blank" rel="noreferrer noopener">tweeted</a>. “Hence, $JUNO was distributed to $ATOM stakers via a 1:1 stakedrop with a hard whale cap of 50K as the community agreed to ensure fair distribution across the network,” they added.



At issue is whether the individual or entity in question deliberately circumvented the rules of the stakedrop by staking ATOM across dozens of wallets, thereby unfairly inflating its resulting stake in JUNO. The disparate wallets were subsequently consolidated into one.



Given the amount of tokens the whale now has, if they abruptly converted their JUNO to other assets, they could single-handedly wipe out liquidity on decentralized exchanges, resulting in a sharp decline in the JUNO price. But the concern among community members is not limited to their short-term financial interest. The asset concentration itself creates risks to on-chain governance by enabling the whale to potentially bribe validators — the guardians of network consensus — with delegations to serve the whales’ interests, a community <a href="https://gateway.ipfs.io/ipfs/Qmf3bGHiSiPTTNohNv4tBn5rvTChoQZNp8UDbGMxPq9HYC#Correcting-the-gamed-stakedrop---Proposed-by-Core-1-after-numerous-discussions-with-the-community" target="_blank" rel="noreferrer noopener">post</a> said.



“Proposals as a whole have flaws to them, but this proposal itself is super complicated,” Twitter user cryptolikemo said <a href="https://twitter.com/L1am_Crypto/status/1502316603177906178" target="_blank" rel="noreferrer noopener">during a Twitter Spaces</a> discussion, Friday.



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">
“People are saying this is black and white, and saying, ‘yes is the obvious answer,’ and if you voted no, people are saying you’re evil.”
</blockquote>



It’s not clear that gaming the system was the whale’s explicit goal, however. The ATOM staking, required to be eligible for JUNO’s airdrop, must have occurred prior to Feb. 18, 2021, the date of an important <a href="https://stargate.cosmos.network/resources" target="_blank" rel="noreferrer noopener">Cosmos milestone</a> upgrade. But Juno’s stakedrop <a href="https://medium.com/@JunoNetwork/jun%C3%B8-tokenomics-and-utility-powering-the-worlds-first-fully-interoperable-smart-contract-ce9f490c4d97" target="_blank" rel="noreferrer noopener">was not announced</a> until July.



Regardless of the intent, not everyone agrees with the concept of redistributing wealth in this way.



“People who game airdrops deserve to keep their money,” George Wosmongton, a pseudonymous founder of <a href="https://cms.blockworks.co/?s=osmosis" target="_blank" rel="noreferrer noopener">Osmosis</a> Protocol, <a href="https://twitter.com/wosmongton/status/1502116226637524992?s=20&amp;t=pgZ6VJNQzjSZTyv36Uj-wQ" target="_blank" rel="noreferrer noopener">tweeted</a>. Wosmongton said holders should direct the blame toward the JUNO team instead of condemning the whale.



The wallet address in question currently has about <a href="https://www.mintscan.io/juno/account/juno1aeh8gqu9wr4u8ev6edlgfq03rcy6v5twfn0ja8" target="_blank" rel="noreferrer noopener">3.1 million JUNO tokens</a>, worth about $122 million as of Friday. The tokens are currently bonded, meaning they are staked to the network and are receiving additional rewards. Overall, about 28.77 million, or 38.5%, are bonded JUNO tokens, and 44.6 million, or 59.73%, are unbonded tokens, according to JunoScan <a href="https://junoscan.com/" target="_blank" rel="noreferrer noopener">data</a>.&nbsp;



Bonded tokens contribute to the security of delegated proof-of-stake networks such as Juno. In return for this commitment on the part of token holders — in this case, it takes 28 days for tokens to unbond — owners continuously earn rewards in the form of more tokens. By contrast, unbonded tokens are not locked, and an owner can transfer or exchange them at any time.



“If every day they’re getting 10% of staking rewards, that’s a lot of money,” cryptolikemo said. The whale was regularly selling a significant fraction of the staking rewards into the market, <a href="https://twitter.com/TheJunonaut/status/1501957438584475648" target="_blank" rel="noreferrer noopener">data shows</a>.



The proposal could be a first for the crypto community as it tries to redistribute the wealth of a major holder in the network. This gives some members pause, while others underline the urgency of the matter.



“Action needs to be taken quickly if the proposal goes through,” Liam Connor, Cosmos NFT YouTuber, said on the Twitter space meeting.



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">
“If it takes three weeks to come up with a plan of action after, the whale will unbond and sell the tokens before we take the wallet.”
</blockquote>



Juno Network’s future is uncertain, and the situation may have broader implications for token governance and redistribution among crypto communities, cryptolikemo hinted.



If the proposal goes through, this could set an “interesting” and “potentially dangerous” precedent, Twitter user Kavaskous, who is also a crypto miner and ambassador and liquidity provider for Osmosis, said.



“If it’s executed without any problems [and] as long as this is a one-time thing, I think it’ll be fine in the long term, but if it gets repeated it could be slippery,” Kavaskous said.



Macauley Peterson contributed reporting for this story.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Get the news in your inbox. Explore Blockworks newsletters:



<ul class="wp-block-list">
<li><a href="https://blockworks.co/newsletter/the-breakdown">The Breakdown</a>: Decoding crypto and the markets. Daily.</li>



<li><a href="https://blockworks.co/newsletter/0xresearch">0xResearch</a>: Alpha in your inbox. Think like an analyst. </li>
</ul>

whale

Newsletter

Blockworks Research