There are some potentially crazy consequential secondary consequences for the Solana chain stopping for as long as it has, and could potentially get worse the longer it remains offline.

🧵👇
With all of the DeFi stuff being built out on Solana, there clearly could exist some crazy MEV/arbitrage opportunities the millisecond the network goes live again. Think of all of the DEX liquidity with now-stale prices on them.
The longer Solana is offline, the higher the chance for large price deviations everywhere. Juicy returns for the quickest transactors to arbitrage this away. But it gets even more interesting:
Any form of leveraged derivatives markets are now at risk of undercollateralization. Normally when the network is operating properly, all is good because there are some safety buffers put in place, oracles running, and liquidation incentivization.
However, once the Solana network restarts it's going to be a mad dash for the MEV actors to seek out the most profitable actions. What if the first, most profitable actions are draining the DEXes through arb, and *then* do liquidation?
Suddenly, there are position uncollateralized and subsequently will default. This means that even if you were a humble USDC depositor in a lending market, you may now only be entitled to a portion of that because there isn't enough to go around (80%? 90%? 50%?)
An additional thought to consider is that certainly all of the MEV experts have identified these opportunities and will do anything to pounce and collect the crazy one-time profits to be made upon network restart.
This may end up being another induced, naturally heavy transaction load in pursuit of the profits to be made. If the infrastructure isn't ready for it, it could just crash once again.
There is a potential "way out", but it isn't naturally altruistic yet. The relaunch of the network could be guarded, where only certain actors are whitelisted to transact. This could temporarily rate limit the system, and allow for DeFi things to unwind in a more orderly fashion.
However, this is also the position of a kingmaker. He who has the whitelist has gated opportunities to the profits to be made.
There isn't an easy, fair way to "reimburse" people for the pure DEX arbitrage opportunities that exist. So who is ultimately going to collect the outsized profits?

The Solana team has some work cut out for them.

h/t @dcfgod @0x_Osprey
Oops, said "consequential" and "consequences" basically back-to-back. I guess it does still communicate the gravity of the situation.
Wow... This blew up. Some additional context for people:

Generally speaking, the DEX arbitrage by itself isn't that big of a deal. Yeah it sucks that people can't exit their positions right now and will suffer a loss, but that was already a known risk.
The much more interesting secondary outcome is the "liveness assumption" of leveraged & lending markets was violated when the network went down. Yeah, the borrowers are at risk of liquidation, but now there's also risk to the lenders not being whole anymore.
This is because there's a chance that the liquidations will happen *after* the DEX prices have already moved to a massive extent. If a borrower collateralized $1m of WBTC, borrowed $800k before network failed, there's now risk that if the WBTC is worth $600k at restart, ...
There isn't enough WBTC to liquidate to make the lenders whole. Thus, even the lenders are at some level of risk right now due to default potential of the borrowers. The more that prices deviate at relaunch, the worse the risk gets.
Also, for anyone who might be thinking "all blockchain bad and must be regulated", there is a clear distinction between what has happened with Solana and other blockchains such as Bitcoin and Ethereum.
If you are a regulator, I *HIGHLY* recommend you contact experts like @coincenter to fully comprehend the technological nuances of blockchain and DeFi before moving to regulate.
I'll try to give it a go as a singular dumb person on the internet:
Solana's network halted in part due to it not being a sufficiently decentralized blockchain network at its current state. There are risks involved by participating in such networks that users should already know this before participating.
As built, DeFi smart contracts inherently operates as "code is law". This is *built in* to the technology. You simply cannot do anything that isn't already publicly displayed in the code. All of the rules are there, and the blockchain validators guarantee these rules are followed
Traditional finance operates based upon "trusting you to follow the law, and get punished if you don't do it". With smart contracts, the law is self-written in the contract with all rules available for all to see, and is autonomously verified and impossible to deviate from.
If you inspect the smart contract and then choose to utilize it, you are already aware of the rules and risks pertaining to utilizing it.
Another note:
If you are a *highly skilled* MEV operator, I ask you to consider a being a slightly altruistic actor by participating in the Solana relaunch (I havent heard details yet) and first moving to liquidate the at-risk leveraged positions, and then go about your arbitrage
I do not have any personal funds at stake with regards to Solana. However, it may help support the people who are participating in those lending markets in a more appropriate manner.

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