NFT-focused lending platform BendDAO is currently facing an insolvency crisis, having run out of funds to pay depositors. This comes shortly after predictions of mass NFT liquidations to reclaim the platform’s loans.
- BendDAO is currently witnessing a bank run as several of the platform’s lenders withdrew their assets over the weekend. At writing the platform has roughly 425 wETH in its reserve and still owes its depositors about 13K ETH.
- As analyst NFTStatistics.eth explained in a Twitter post, BendDAO’s debtors will now have to drop 100% interest on their loans. The collateral NFTs are currently seeing their debt positions swiftly rise.
- Typically, when debtors fail to pay off their loans, BendDAO auctions off the defaulting NFTs. This is due to sinking floor prices, growing debt, or soaring interest rates, all scenarios the company is currently facing. However, the post also noted that most of the defaulting NFTs on the platform have not attracted any bids.
Ok. Long thread on the BendDAO situation:
1) They’ve run out of ETH. There is just 12.5 WETH in the contract.
2) What does this mean? People who lent money to others via BendDAO to buy NFTs on leverage can’t pull their money out. About 15,000 ETH was lent.
— NFTStatistics.eth (@punk9059) August 21, 2022
- NFTStatistics.eth pointed out that with no one bidding on the non-fungible tokens, BendDAO has to hold on to them. However, the platform needs the funds from the sales to pay the lenders. Hence, the looming possibility of insolvency.
- Given the ongoing situation, the founders of the lending platform have come up with some adjustments to their parameters. Potential buyers usually have to bid above the borrowers’ debt for the defaulted NFTs. The bidder must offer up to 95% of the floor price and lock up their ETH for 48 hours.
- The aforementioned requirements are part of the reason BendDAO has received no bids. Thus, co-founder “code in coffee” has proposed modifying the liquidation threshold. The proposal also suggests cutting the auction time to 4 hours and removing the 95% floor price requirement.