Marginfi TVL Plummets by $260 Million: Can the Protocol Still Stand Firm?
MRGN is in turmoil. Yesterday, Solana’s second-largest lending protocol plunged into chaos, causing great unrest among many users. Should you rush to withdraw your funds?
The drama was sparked by the staking protocol SolBlaze, which publicly accused Marginfi of dishonest behavior, violating BLZE emission guidelines, failing to allocate user incentives within three weeks, and conducting airdrop distributions intended to engage Marginfi in SolBlaze governance, despite attempts to contact the team.
MRGN co-founder MacBrenna Peet openly disagreed with these accusations. He claimed that the failure to pay user allocations was due to congestion on the Solana blockchain, and this only occurred over the past three days. He further defended the protocol’s practice of frequently paying out of pocket to provide BLZE rewards to users and playing a crucial role in promoting the integration of bSOL within Solana DeFi.
As Crypto Twitter became embroiled in debates over the issuance dispute, another co-founder of the MRGN team, Edgar Pavlovsky, shocked the industry by tweeting his resignation from all Marginfi affairs, which was later confirmed by the protocol.
Kyle Samani, co-founder of Multicoin Capital, attempted to rally support for his venture investments, unsurprisingly stating that he had no intention of pulling out from his portfolio companies.
Despite this, others are concerned that the instability shown by the protocol might indicate a potential risk to depositors, even though Marginfi’s multi-signature ownership is distributed among multiple signatories.
In response to the escalating disputes and recent dashed hopes for airdrops, margin depositors began to flee in search of better prospects, leading to a dramatic $260 million drop in the total value locked (TVL) in the application, completely offsetting the gains made in March.
Solend founder 0xrooter smelled blood, condemned the Marginfi team for talking down Solend, and announced that the platform would airdrop tokens to users who exit Marginfi’s lending market and deposit into its lending market.
In the last 24 hours, the sudden outflow of Marginfi’s TVL has indeed attracted widespread attention, but the protocol has been clearly struggling since early March, when it was overtaken by competitor Kamino, which announced the snapshot date for its first airdrop.
Although the initial SolBlaze incident that caused the dilemma seemed to have been amicably resolved, uncertainty about Marginfi’s future continues to grow, and it is clear that the protocol is at a critical juncture, needing either to garner user support or risk becoming irrelevant.
The launch of Marginfi’s YBX decentralized stablecoin and the completion of other 2024 roadmap projects might help the protocol regain its footing, but regaining a leading position in the industry might only be achieved by offering users what they truly want: airdrop tokens.
While Marginfi hopes it can mitigate the damage caused yesterday, the protocol truly controls its own destiny, and its future success depends solely on its willingness to relinquish tokens, a fact recognized by traders continuing to price on Polymarket. The likelihood of an airdrop occurring before the end of June is over 50%.
Considering that Kamino’s snapshot announcement led to a doubling of TVL, expanding its lending market deposits to $1.2 billion, it’s not impossible for Marginfi to regain the crown through a clever airdrop distribution.