A Twitter user, Cirrus, said in a tweet, “While you were asleep, the BendDAO bank run finally happened.”
NFTfi protocol, BendDAO has had its reserves briefly fall to 0.75 ETH early Monday, as many NFT community members feared last week.
BendDAO is a lending protocol that lets NFT holders deposit their assets as collateral to borrow Ethereum. It is also the most recent cryptocurrency project to experience a bank run.
The project is currently experiencing financial trouble as the protocol's Ethereum reserves were depleted over the weekend, making it impossible for ETH lenders to recover their deposits from the protocol's reserves.
A Twitter user, Cirrus, stated in a tweet,
“While you were asleep, the BendDAO bank run finally happened.”
Early on Monday, the Ethereum wallet of BendDAO contained only 0.75 WETH, according to Etherscan data. At the time of publication, it holds 486.5 WETH, down from about 18,000 WETH three days ago after receiving a 500 WETH deposit. The protocol had already lent around 15,000 WETH.
BendDAO’s primary value proposition is that it allows NFT holders to use their assets as collateral to borrow ETH. When an NFT is deposited into BendDAO, the user can borrow up to 40% of the collection's floor price in ETH.
However, those who deposited ETH into the protocol may lose if the protocol does not recoup enough funds to repay them in the same way NFT depositors may lose their NFTs if the value of their collection falls.
The ETH drain this weekend suggests that many depositors have already lost faith in the protocol's ability to remain solvent.
As fears of a "bank run" spread, BendDAO co-founder CodeInCoffee reassured the community in a Discord post that "the protocol is working as expected," echoing similar assurances shared by Terraform Labs before Terra's infamous bank run in May.
They've since shared a proposal to "assist ETH depositors in building confidence," which includes changes to the NFT liquidation threshold and auction period.
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