NFT Bend DAO Lending Protocol Proposes Emergency Changes Amid Credit Crunch
"We're sorry we underestimated how illiquid NFTs could be in a bear market when setting initial parameters ", says the Bend DAO development team.
New
On Monday, the developers of the decentralized non-fungible token borrowing and lending (NFT) protocol Bend DAO proposed new emergency measures in an attempt to stabilize the ecosystem. On the same day, it was revealed that the project only had 15 wrapped Ether (wETH) worth $23,715 to repay the lenders. Around 15,000 ETH has been lent out using this mechanism. To save the protocol from a credit crunch, Bend Dao's development team suggested that the collateral liquidation threshold be capped at 70% of the loan value, down from 85% previously.
Next, the auction period for NFTs on its platform would be reduced from 48 to four hours. Next, the requirement that the minimum bid price for NFTs on Bend DAO must be set at 95% of the floor price on popular digital collectibles trading platform OpenSea would be removed. Interest rates on loans should be reset from 100% to 20%. Finally, BendDAO's treasury would be empowered to cover bad debts and use revenues.
The collapse of NFT price floors in the bear market, even among reputable collections, has placed many NFTs in danger of liquidation as interest rates are pushed to abnormal levels. As interest rates on "debt-backed" NFTs have skyrocketed to nearly 100%, some users may find it more economical to simply ditch their digital collectibles (which are also declining in value) instead. to repay debt, resulting in bad loans. Third, NFT markets are not as liquid as coin or token markets, which means that there may actually be no offers during the liquidation process of an NFT, which further adds to the death spiral.
Bend DAO was considered a top notch NFT loan and...
"We're sorry we underestimated how illiquid NFTs could be in a bear market when setting initial parameters ", says the Bend DAO development team.
New
On Monday, the developers of the decentralized non-fungible token borrowing and lending (NFT) protocol Bend DAO proposed new emergency measures in an attempt to stabilize the ecosystem. On the same day, it was revealed that the project only had 15 wrapped Ether (wETH) worth $23,715 to repay the lenders. Around 15,000 ETH has been lent out using this mechanism. To save the protocol from a credit crunch, Bend Dao's development team suggested that the collateral liquidation threshold be capped at 70% of the loan value, down from 85% previously.
Next, the auction period for NFTs on its platform would be reduced from 48 to four hours. Next, the requirement that the minimum bid price for NFTs on Bend DAO must be set at 95% of the floor price on popular digital collectibles trading platform OpenSea would be removed. Interest rates on loans should be reset from 100% to 20%. Finally, BendDAO's treasury would be empowered to cover bad debts and use revenues.
The collapse of NFT price floors in the bear market, even among reputable collections, has placed many NFTs in danger of liquidation as interest rates are pushed to abnormal levels. As interest rates on "debt-backed" NFTs have skyrocketed to nearly 100%, some users may find it more economical to simply ditch their digital collectibles (which are also declining in value) instead. to repay debt, resulting in bad loans. Third, NFT markets are not as liquid as coin or token markets, which means that there may actually be no offers during the liquidation process of an NFT, which further adds to the death spiral.
Bend DAO was considered a top notch NFT loan and...
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