BendDAO Passes BIP#9 To Address Liquidity Crisis

BendDAO Passes BIP#9 To Address Liquidity Crisis

BendDAO Proposal #9 (BIP#9), a proposal put forth by the DAO to "adjust (the) liquidation threshold auction period, and interest base rate & removing the first bid limitation," has passed as voting concluded at 8:00 a.m., ET this morning.

BendDAO is an NFT liquidity protocol that allows holders to place certain NFTs up for collateral in exchange for a loan, and this proposal was put forth to address a liquidity crisis that prevented lenders from pulling their money out of the platform.

The DAO's founders claim to have "underestimated how illiquid NFTs could be in a bear market when setting the initial parameters," which led to the liquidity issue. With the passing of BIP#9, several changes will take place:

  • The liquidation threshold will be lowered from 95% of the collection's floor price to 70% gradually over the next month, meaning liquidation auctions will kick off at a lower price point in an effort to make these collateralized NFTs more appealing to buyers.
  • The auction period will be lowered from 48 hours to 4 hours, meaning auctions will close more quickly
  • The Interest Base Rate will be adjusted to 20% in order to "help more ETH depositors earn more interest and prompt more NFT holders to repay ETH."

While recent auctions have defaulted with no bids, the hope is by making these rule changes, these liquidated NFTs will become more attractive to potential buyers. Twitter user Cirrus suggested "there's a high likelihood of 600+ liquidation auctions of BAYC, MAYC, Clone X, Azuki, and Doodles over the next month," if the proposal passes in a popular Twitter thread posted yesterday. Specifically, NFTs listed on the BendDAO website with a Health Factor rating under 1.4 are likely to come up for auction between now and September 20.

Interested parties can keep an eye on the "Loans in Auction" page as these NFTs enter the liquidation process. One potential worry is that these liquidation events will put more downward pressure on the floor prices of supported collections as these 4-hour auctions begin to kick off well below the current floor price.

97% of participating BendDAO members voted in favor of passing BIP#9, which required a 75% approval rate to pass.

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