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- BendDAO recently went through a liquidation crisis during last week.
- People can collateralize their NFTs to borrow funds from the platform.
- BendDAO supports NFTs like CryptoPunks, BAYC etc.
BendDAO, a platform offering collateralized cryptocurrency loans, recently came into the light after going almost through the liquidity crisis during last week. A scenario which made people aware of downfalls of borrowing crypto funds against the Bored Ape Yacht Club (BAYC) NFT collection.
When people analyze the platform closely, BendDAO appears like a traditional bank following the traditional system. Folks deposit the funds in the platform to borrow loans, offering interest payment cuts to the depositors. The loans are supported by collateral: BAYC, CryptoPunks and other NFT collections.
Over the past few days, investors are afraid that the lender would fail in the asset withdrawal in large quantities, creating a bank run which wiped out BendDAO reserves, from 5 ETH to 10,000 wETH. This occurred following the dozens of loans getting into the danger zone of the platform during the previous week’s end. This translates into the collateralized NFTs almost getting liquidated.
But there was a sigh of relief for the platform as few depositors came back and other borrowers repaid the loans. This short relief offered the community of BendDAO a chance to make up with the faulty liquidation process which gave birth to this risky event.
The organization is now making efforts to shield themselves from default borrowers by making auctions of their NFT collateral for Ethereum. Nikolai Yakovenko, who operates a price website, said that ‘it is hard coded to accept the bids helping the DAO make whole. Following this path will allow the platform to pay the depositors back.
Andrew is a blockchain developer who developed his interest in cryptocurrencies while pursuing his post-graduation major in blockchain development. He is a keen observer of details and shares his passion for writing, along with coding. His backend knowledge about blockchain helps him give a unique perspective to his writing skills, and a reliable craft at explaining the concepts such as blockchain programming, languages and token minting. He also frequently shares technical details and performance indicators of ICOs and IDOs.
