BendDAO Is Out Of Money: NFT Crisis Is Close

2 years ago · Updated 2 years ago

✍️ 22 August, 2022 - 18:23 👤 Editor: Jakub Motyka

BendDAO is a crypto lending platform that allows you to borrow Ethereum (ETH) in exchange for delivering an NFT as collateral.
The The problem is that the NFT market is plummeting this year, which has put many users who had taken loans for values higher than the price that their NFTs now have in a situation of immediate liquidation.

According to the latest data, there are only 15 ETH left in BendDAO accounts to pay the around 15,000 ETH owed to users who have contributed their cryptocurrencies for loans.

The BendDAO story is preparing to be the story of a crypto-drama foretold, unless someone fixes it at the last moment. It has been known that in crypto company accounts -loans so there are only 15 Ethereum (ETH) left –in the form of Wrapped Ether (wETH)– to pay a figure close to the 15,000 ETH that they currently owe to their users.

And the problem has only just begun. What no one was counting on was that the NFT market would suffer the crash that is living this year, which has caused two things: one, that the NFTs delivered as collateral for the loans have begun to be liquidated due to their price drop; and two, that nobody is buying them even though they cost much less than they were worth a few months ago.

If users are defaulting on their cryptocurrency loans , and the NFTs that they had provided as collateral have fallen significantly of price (and they don't even find buyers), the cocktail for disaster is ready.

How Does BendDAO Work?

BendDAO works as follows: imagine that you need to borrow a certain amount of ETH and you have some NFT of a certain value; In this situation, you can go to the platform for someone to leave you the Ethers you need in exchange for leaving your NFT(s) as payment guarantee (also known as collateral ).

On paper, it's a reasonable transaction. Who would not lend euros or dollars to an owner of a Picasso painting who, moreover, is going to leave his work of art in your home? The only problem is that, in the case of NFTs, the value of these objects is even more difficult to calculate than in the conventional art world. The price of an NFT is dictated by the market, and in the case of cryptocurrencies, we speak of an extremely volatile market.

What Is BendDAO Doing To Prevent The Crisis?

The people responsible for BendDAO have opened a poll to modify the way your NFT settlement system works (among other parameters of your platform). They seek to cover their backs in this situation of a bearish NFT market, something that they say they had not foreseen when initially creating their loan system.

In the event that a NFT liquidation sell-off is finally unleashed on BendDAO without any further action, the market for the NFTs touch the ground (or, directly, make a hole downwards). Already at lows, the last thing the NFT world needs is for overnight among a large flow of non-fungible tokens at clear market prices.

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