- As Ether denominated loans increased in dollar terms, the value of NFT collateral pledged to secure such loans continued to depreciate triggering BendDAO to liquidate collateral through auctions.
- BendDAO, one of the most popular lending platforms for holders of NFTs such as Bored Apes to borrow against their collections, is revising its terms after a drop in prices threatened to trigger the liquidation of much of the collateral backing many of its loans.
The recent rise in Ether prices despite the bear market has contributed to large-scale liquidations on BendDAO, an NFT lender last week.
Although cryptocurrency prices have given up most of their gains in July, Ether has remained surprisingly resilient, due in large part over optimism surrounding the upcoming software upgrade known as the Merge.
The Merge will see Ethereum, the blockchain that powers Ether, move from the more energy-intensive Proof-of-Work to a Proof-of-Stake system to securing transactions.
But as Ether denominated loans increased in dollar terms, the value of NFT collateral pledged to secure such loans continued to depreciate triggering BendDAO to liquidate collateral through auctions.
As users started rushing to withdraw deposits from the BendDAO amid concern about a potential liquidity crunch on Friday, the total value of assets locked in BendDAO’s protocol dropped by about 50% to around US$41 million over the weekend.
BendDAO, one of the most popular lending platforms for holders of NFTs such as Bored Apes to borrow against their collections, is revising its terms after a drop in prices threatened to trigger the liquidation of much of the collateral backing many of its loans.
NFTs from the Bored Ape Yacht Club collection make up about 68% of assets that serve as collateral on BendDAO, while another 16% is from Mutant Ape Yacht Club NFTs.
BendDAO warned that the bidding price or the liquidation threshold for many of its Ether-denominated NFT loans had to be at least 95% of the NFTs’ floor price and gave borrowers 48 hours to pay down loans before liquidation.
Unlike centralized crypto lenders such as Celsius Network and BlockFi, BendDAO is a decentralized autonomous organization, meaning that stakeholders can collectively vote for changes in the protocol’s code.
