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As Solana Collapsed, Some "Liquidators" Earned Big Money: Analysis

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Wed, 01/26/2022 - 10:39
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Vladislav Sopov
Tomáš Eminger, head of blockchain validation infrastructure at Rockaway Blockchain Fund, shares some details about recent problems with Solana
As Solana Collapsed, Some "Liquidators" Earned Big Money: Analysis
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On Jan. 21, 2022, when crypto markets were plummeting, "Ethereum killer" Solana saw a terrible network outage. However, not all users of its ecosystems were sad about the outcome.

How to make six digits on Solana's problems

Mr. Eminger has taken to Twitter to explain the causes of Solana's collapse and emergency solutions proposed by the community and Solana Foundation.

According to him, when the SOL price started its dropdown, many traders who borrowed U.S. Dollars using SOL as collateral, were liquidated as the collateral's price was lower than 120% of the amount borrowed.

Liquidators started to sell positions and return borrowed money to get a 5% "liquidation bonus." This "arbitrage" opportunity motivated some liquidators to run automated bots.

These bots made about $400,000, as calculated by the founder of Solana-based DeFi platform Solend. To accelerate this process, some bots started sending transactions not through RPC but directly to the transaction processing unit of the validator responsible for this or that block.

Now it is all fixed

To be sure about the transaction execution, traders started a) double-sending the transactions, and b) targeting the most influential validators.

As such, the biggest validators suffered the most.

To prevent this from happening again, versions 1.8.14 and 1.8.13 of Solana's node software were released immediately.

Related
Solana Updates to Version 1.8.14 Following Three Days of "Degraded Performance"

As U.Today reported previously, Solana's outage was slammed by Ethereum's cheerleaders.

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About the author

Blockchain Analyst & Writer with scientific background. 6+ years in IT-analytics, 3+ years in blockchain.

Worked in independent analysis as well as in start-ups (Swap.online, Monoreto, Attic Lab etc.)