On Monday, developers of decentralized non-fungible tokens (NFTs) Borrowing and Lending Protocol Bend Dao proposed new emergency measures in an effort to stabilize the ecosystem. On the same day, it was revealed that the project had at least 15 spins of ether (wETH) worth $23,715 to pay off the lenders. Almost 15,000 ETH was loaned using the mechanism. To rescue the protocol from the credit crunch, the Bend Dao dev team suggested that the liquidation threshold for collateral would be limited to 70% of the loan amount, down from 85%.

After that, the auction period for NFTs on its platform will be reduced from 48 hours to four hours. Then, the minimum bid price requirement for NFTs on Bend DAO to be pegged to 95% of the minimum price on popular digital collectibles trading platform OpenSea will be removed. Loan interest rates should be reset from the current 100% to 20%. Finally, BendDAO’s treasury will be enabled to cover bad debts and use the proceeds.

The collapse of minimum prices for NFTs in a bear market, even among reputable groups, has put many NFTs at risk of liquidation as interest rates are pushed to abnormal levels. With interest rates on “debt-secured” NFTs soaring close to 100%, some users may find it more economical to give away their digital holdings (which are also declining in value) than to pay down the debt, resulting in bad loans. Third, NFT markets are not as liquid as the coin or token markets, which means that there may be no offerings during the NFT liquidation process, adding to the death spiral.

Bend DAO was considered as an NFT lending and lending platform before the credit issuances started. Voting on the current proposal will last 24 hours and it has passed the required quorum of 47 million veBend with 99.23% in favour.

Source: CoinTelegraph