BendDAO Proposes Emergency Changes During Liquidity Crisis

The NFT lending protocol is running out of ether

article-image

Blockworks exclusive art by Axel Rangel

share

key takeaways

  • A proposal with emergency changes has passed quorum with 97.13% votes.
  • “We are sorry that we underestimated how illiquid NFTs could be in a bear market when setting the initial parameters,” DendDAO co-founder CodeInCoffee wrote.

The NFT lending protocol BendDAO is in trouble. 

The blue-chip non-fungible token (NFT) lender with a relatively low loan-to-value ratio (LTV) had its Ethereum reserves drained, forcing its community members into crisis mode as the entity attempts to navigate its way out of insolvency.

BendDAO lets borrowers deposit NFT collectibles, including Bored Ape Yacht Club and Mutant Ape Yacht Club to receive up to 40% of the asset’s value/floor price as a loan denominated in ether (ETH). Depositors who lend out their ETH earn interest. 

But a misalignment between borrowers and lenders has led BendDAO astray. BendDAO lenders can no longer withdraw their money, and NFT borrowers will need to pay 100% on any ETH they have borrowed.  

Following the liquidation crisis, pseudonymous BendDAO co-founder CodeInCoffee wrote in a governance proposal “we are sorry that we underestimated how illiquid NFTs could be in a bear market when setting the initial parameters.” 

The proposal, which has now passed quorum with 97.13% votes (60M veBEND) in favor of changes at the time of publication, will see the liquidation threshold for collateral drop from 85% to 70%— meaning that if a collateral position reaches 70%, it is defined as undercollateralized.

The proposal also plans to shorten auction period from 48 hours to 4 hours and remove the bid limitation of 95% of the floor price auctioned at OpenSea. 

Currently, to open a bid on BendDAO, liquidators must bid within 95% of an NFT’s current floor price and bid higher than the debt owed by a borrower. 

Borrowers have 48 hours to determine if they can repay their debt to claim their NFT with a 5% fee paid to bidders — but, with NFT floor prices dropping, liquidators do not want to place the risk of locking up their ETH for 48 hours. Shortening the auction period to four hours may allow timely liquidations to occur and prevent bad debt. 

The proposal plans to adjust interest base rate on loans from 100% to 20%, encouraging depositors to lend money by earning interest and prompting NFT holders to repay their ETH quickly. 

All decisions on bad debts will be brought forward to the BendDAO community, who can vote and determine where revenue will be allocated. 

As NFT floor prices remain unsteady during the bear market, DeFi protocols that have been reliant on them are also looking at ways to keep themselves afloat. How BendDAO handles its liquidation crisis will have implications for similar protocols. 


Get the news in your inbox. Explore Blockworks newsletters:

Tags

Upcoming Events

Old Billingsgate

Mon - Wed, October 13 - 15, 2025

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

Industry City | Brooklyn, NY

TUES - THURS, JUNE 24 - 26, 2025

Permissionless IV serves as the definitive gathering for crypto’s technical founders, developers, and builders to come together and create the future.If you’re ready to shape the future of crypto, Permissionless IV is where it happens.

Brooklyn, NY

SUN - MON, JUN. 22 - 23, 2025

Blockworks and Cracked Labs are teaming up for the third installment of the Permissionless Hackathon, happening June 22–23, 2025 in Brooklyn, NY. This is a 36-hour IRL builder sprint where developers, designers, and creatives ship real projects solving real problems across […]

recent research

Research Report Templates.png

Research

Ethena Labs is leaping from its flagship synthetic dollar, USDe, to a full product suite—USDtb, iUSDe, and the Arbitrum-based Converge Chain—designed to marry crypto-native yields with TradFi-grade compliance. Our analysis shows how expanding into CME, ETF options, and tokenized Treasuries could lift protocol revenue from sub-$500 million in a bear case to several billion dollars if favorable regulation and institutional adoption align.

article-image

The L1’s Interwoven Stack is the most opinionated tech stack yet

article-image

Bitcoin is still rising, 11 years after the documentary film The Rise and Rise of Bitcoin

article-image

Arch Labs CEO told Blockworks that the team plans to launch a native token, but declined to give details

article-image

CEO Mike Silagadze tells Blockworks that the US is “open for business” and why its DeFi bank offering is the first of many

article-image

Doing one thing well and leaving everything else out is often what disruptive technologies do best