On Monday, builders of decentralized non-fungible tokens (NFTs) borrowing-and-lending protocol Bend DAO proposed new contingency measures to stabilize the ecosystem. On the identical day, it was revealed that the undertaking solely had 15 wrapped Ether (wETH) value $23,715 to repay the lenders. Round 15,000 ETH had been awarded via the mechanism. To avoid wasting the protocol from a credit score crunch, the Bend Dao growth group proposed capping the collateral liquidation threshold from 85% to 70% of the mortgage value.
Subsequent, the public sale period for NFTs on its platform can be lowered from 48 to 4 hours. Then the requirement that the reserve value of NFTs on Bend DAO be tied to 95% of the reserve value on common digital collectibles trading platform OpenSea can be eliminated. Rates of interest on loans are to be reset to twenty% from the present 100%. Lastly, BendDAO’s treasury can be licensed to cowl the unhealthy money owed and use the proceeds.
Plunging NFT flooring costs within the bear market, even for respectable collections, has put many NFTs vulnerable to being liquidated as rates of interest are pushed to irregular ranges. As rates of interest on “debt-backed” NFTs have skyrocketed to just about 100%, some customers might discover it extra economical to only let go of their digital collectibles (which additionally depreciate in value) slightly than repay the debt, leading to unfavorable credit ratings. Third, NFT markets usually are not as liquid as coin or token markets, which means that through the liquidation strategy of an NFT there could also be no bids, additional including to the loss of life spiral.
Earlier than lending began, Bend DAO was thought of a top-notch NFT lending and lending platform. Voting on the present proposal will final 24 hours and has reached the required quorum of 47 million veBend with 99.23% sure votes.
1/ A on how @BendDAO is at the moment working, why the FUD is flawed, and the true points with the present protocol.
Full Disclosure: I drew all of my $eth yesterday and haven’t any present publicity. That is to assist others perceive their place or think about lending.
— TradFiWhale.eth (@TradFiWhale) August 21, 2022