Have you ever wondered what would happen if a large sum of money were to be liquidated on a timetable? Fantom, on the other hand, gave us a clear picture of what that would look like.
Fantom was brought crashing to the ground when one of its whales chose a loan that was far more valuable than any of them had anticipated. While the situation has improved since then, it was not particularly pleasant when it was taking place.
Fantom was confronted with the harsh reality of how even the smallest of actions, such as picking up a loan, can bring top-notch tech crashing to the ground.
So, Exactly How Did This Fantom Whale Come Close to Running Fantom Into the Ground?
The individual, in particular, is the infamous whale known as Roosh, who chose to deposit approximately $50 million into a decentralized protocol for lending used to gain deep liquidity in Fantom called Scream
He put in such a large amount to obtain a large loan from Scream in exchange for two tokens, the first of which was SOLID and the second of which was DEUS. In this case, SOLID is obtained from Solidex, which operates as a protocol-to-protocol crypto-exchange, and DEUS is obtained from a platform that offers financial services.
In this case, Roosh invested $50 million to obtain both SOLID and DEUS tokens, but he only received $37 million in value for those tokens because every other decentralized lending platform, except SOLID, only provides overcollateralized loans.
Because of the LTV ratio, to obtain loans from Scream, Aave, or Compound, you must put more money into the loan than you are taking out. LTV is known as the loan-to-value ratio, which indicates the ease with which an asset could be exchanged for another. LTV ratio varies from one platform to another in most cases. It is dependent on how unpredictable or expensive the coins are.
Following Fantom whale Roosh’s $50 million deposit on Scream to borrow SOLID and DEUS, he decided to store his entire holding of both tokens in a shaking contract for the next four years.
What Went Wrong, and How Did it Happen?
The markets continued to operate as usual, and when the value of the world’s most powerful cryptocurrency, Bitcoin, rises or falls, so do the values of other alternative coins such as Fantom. As Fantom’s value continued to decline, Roosh’s LTV value on Scream edged closer to the point at which the protocol would initiate the liquidation process for his position.
A $50 million liquidation would be detrimental to any network, so the Fantom network community stood by and observed the unfolding of the situation with interest. In this case, FTM found itself in an awkward situation cause Roosh was practically illiquid and not unable to add to the amount he had already invested to keep his position from being liquidated.
Roosh was finally saved as a benefactor loaned him $2 million to keep his company from going bankrupt. Despite this, the token suffered a significant decline, falling from $0.85 to $0.79 and then dropping to $0.76. Roosh currently has $35 million in FTM, which compares to his initial $59 million investment.