BendDAO Seeks to Overcome Liquidity Crisis with New Proposal
BendDAO, a platform that makes NFTs as collateral for loans to borrowers, appears to be in trouble.
“They ran out of ETH,” wrote a Twitter account called @punk9059. “People who lend money to others through BendDAO to buy leveraged NFTs cannot withdraw their money.”
According to Etherscan data, the DAO project wallet now has very little funds and only stores around 425 ETH. One of the founders of BendDAO who uses the username CodeInCoffee.eth, submitted a new proposal containing solutions to the community to restore financial stability and community confidence in the project. And as of Monday, August 22, 2022, more than 99% quorum has been reached with the result that BendDAO members support the proposal put forward by the BendDao co-founder.
How does BendDAO work?
BendDAO requires holders to deposit their high value NFT into BendDAO. Holders are entitled to receive loans of up to 40% of the floor-price value of the NFT. On the other hand, holders who deposit or lend their ETH will earn interest on the borrower’s deposit. Unfortunately, the interest earned is not commensurate with the value they lend, the imbalance in the amount between borrowers and lenders also causes many debts to be unpaid.
Loan protocols such as BendDAO aim to provide options for NFT holders who need liquidity without having to sell NFTs. However, these loan services are actually also vulnerable to liquidity problems.