DAO Propose Urgent Changes to NFT Lending Protocol Amid Credit Crisis!

"We regret that, when setting the initial parameters, we underestimated how illiquid NFTs could be in a bear market," says the Bend DAO development team.

Developers of the decentralized nonfungible tokens (NFTs) borrowing and lending protocol Bend DAO proposed new emergency measures on Monday in an effort to stabilize the ecosystem.

On the same day, it was disclosed that the project had only 15 wrapped Ether (wETH) valued at $23,715 to repay lenders. Approximately 15,000 ETH were lent through the system.

To save the protocol from a credit crisis, the Bend Dao development team proposed lowering the liquidation threshold for collateral from 85% to 70% of the loan value.

Next, the platform would reduce the auction period for NFTs from 48 hours to four hours.

The requirement that the minimum bid price for NFTs on Bend DAO be pegged to 95% of the floor price on the popular digital collectibles trading platform OpenSea would then be eliminated.

Current loan interest rates will be reduced from 100% to 20%.

Ultimately, the BendDAO's treasury would be authorized to cover bad debts and utilize revenue.

Even among reputable collections, the falling floor prices of NFTs in a bear market have placed many NFTs in jeopardy of liquidation as interest rates reach abnormal levels.

As interest rates on "debt-secured" NFTs have skyrocketed to nearly 100 percent, some users may find it more cost-effective to simply give up their digital collectibles (which are also decreasing in value) rather than repay the debt, resulting in bad loans.

Thirdly, NFT markets are not as liquid as coin or token markets, which means there may be no bids during an NFT's liquidation process, which further exacerbates the death spiral.

Prior to credit issues, Bend DAO was regarded as a premier NFT borrowing and lending platform.

The vote on the current proposal will last 24 hours and has passed the quorum threshold of 47 million veBend votes with 99.23% in favor.