BendDAO, a lending protocol for nonfungible tokens (NFTs), is the latest project to be hit by an insolvency crisis. According to reports, the platform that has been in existence for five months ran out of ETH this weekend. According to NFTStatistics.eth researcher BendDAO has 12.5 WETH left in its contract.
BendDAO’s lenders have found themselves in a difficult spot. The co-founder of BendDAO said that they have a proposal to improve it, in the hope of getting out from the crisis.
BendDAO Experiences Bank Run Concerns
BendDAO allows NFT holders to use their assets as collateral to lend Ether. A person can borrow up to 40% of the collection’s floor value in ETH if they deposit an NFT on the lending platform. People who borrowed money via BendDAO to buy NFTs using leverage can no longer withdraw their money. NFTStatistics.eth showed that almost 15,000 ETH had been lent.
According to the researcher, borrowers will be required to pay 100% interest on the ETH taken while the “debt against these NFTs” continues to rise rapidly. The NFTs are not being liquidated by any single bidder. Due to the high amount of debt, bidders are unlikely to lock up ETH within 48 hours.
NFTStatistics.eth provides further explanations.
Why are there no bids? There are 2 reasons why there are no bids: (a) BendDAO demands bids that exceed the “debt” the borrower owes and above OpenSea * 0.95 (b). To open a bidding, you must lock up ETH for 48 hours. People don’t want to take the 48-hour risk of floor NFTs because debt is often higher than floor.
Many NFTs from well-known collections like Bored Ape Yacht Club, Mutant Ape Yacht Club, CloneX, Doodles, CloneX, and CloneX are currently on an “alert” list due to the possibility of liquidation. As bank run fears escalated, depositors’ confidence was hampered by the loss of ETH reserves.
CodeInCoffee (pseudonymous BendDAO founder) stated that the protocol works as expected. The new proposal was created by the team “to help ETH depositors build confidence.” It also includes short-term parameter changes, such as adjusting the liquidation threshold or auction period, and internet base rate and UI improvements.
BendDAO will continue to support collateral offers in BendDAO. It will also reach as many exchanges possible to list collateral. The company will support downpayments for auctions, provide liquidity for NFTs, and try to support support for collateral. After approval by the voting process, the update will take effect within 24 hours.
This development is coming as one of the most desired NFTs collections –BAYC’ss – floor prices crashed to a lowest last seen eight months ago.
CryptoPotato’s first article, BendDAO in Trouble and Ethereum Reserves Drained appeared first on CryptoPotato.
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