After Monday’s revelation that Bend DAO, a NFT lending and borrowing protocol, only had 15 wrapped Ether (wETH), the protocol is now facing a credit crisis. The protocol has about $23,715 in wETH to pay its lenders. It has lent 15,000 ETH so far.

To avert the crisis, the project’s developers have proposed new emergency measures aimed at stabilizing Bend DAO’s ecosystem.

The emergency measures are proposed

The development team suggested that the liquidation threshold of collateral should be limited to 70% of the loan value. It was previously 85%.

Second, the auction period of NFTs will be reduced to 48 hours. The minimum bid price for NFTs must be 95% off the OpenSea floor price.

The third factor is that interest rates for loans will be reduced from the current 100% rate to 20%.

Finally, the Bend DAO Treasurer shall be empowered with the power to cover all bad debts through revenue.

What caused the Bend DAO to exist?

Many NFTs are at risk of being liquidated due to the falling floor prices of NFTs on the market, even among the most popular NFT collections. The interest rates on “debt-secured” NFTs are skyrocketing and it has almost hit 100% making some users prefer letting go of their NFTs rather than paying back the debt and this is resulting in a lot of bad loans. The NFT markets aren’t as liquid as the coin markets, so there might not be one bid at liquidation. This complicates matters.

The community is currently voting for Bend DAO’s proposal. Although the voting process will take 24 hours, it has already passed the 47 million veBend requirement with 99.23% support.