BendDAO fixing NFT liquidations could lead to Bored Apes selling at a discount

Quick Take

  • BendDAO’s new liquidation mechanism could see popular NFTs like Bored Apes available for sale at discount prices.
  • The new liquidation process was approved by community members in a vote today.
 
 
 

The BendDAO community has voted to change its liquidation protocol for NFT auctions, in a move that could see items from popular collections like Bored Apes being sold at highly discounted prices.

BendDAO itself is a non-fungible token (NFT) finance platform. The protocol enables NFT owners to deposit their NFTs as collateral to borrow ether (ETH). Lenders can deposit ETH to earn interest from the platform.

Data from Snapshot show the vote ended with a 97% approval from participants who pooled 60,000 veBEND tokens in support of the proposed changes. BendDAO’s native token is BEND and veBEND is the staked version of the coin that offers voting privileges to holders.

The vote will reduce the current requirements for liquidating NFTs when loans have become undercollateralized. It will slowly lower the requirements, encouraging liquidators to liquidate the loans and help the platform work as it's supposed to — and avoid building up too much bad debt.

What's changing?

This just-concluded vote was in response to the platform's liquidity issues. Some BendDAO lenders carried out a bank run on the platform last week amid fears of rising bad debt within the platform. Some borrowers had begun to default on their loans as the rapidly falling floor prices of their NFT collateral and the high-interest rate for borrowing made repayments difficult.

When borrowers default on their loan positions on BendDAO, their NFT collateral goes up for a liquidation auction. Liquidators bid on the NFTs to service the debt.

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