Curve founder proposes market-based recovery for $700K bad debt
- Michael Egorov suggests a recovery method for $700,000 in bad debt linked to LlamaLend’s CRV-long market.
- The proposal involves tokenizing affected lender positions and creating a dedicated Curve pool for trading.
- The Oct. 10 crash led to over $19 billion in leveraged liquidations, impacting LlamaLend significantly.
- Current deposits in the CRV-long market are about 70% backed due to rapid price declines during the crash.
- CRV is currently trading around $0.23, well below the levels needed for full recovery of distressed positions.
Egorov’s approach contrasts with recent industry bailouts, such as Aave’s response to its own $230 million bad debt issue following an exploit. By allowing buyers to determine the value of distressed claims, this model aims to provide trapped lenders with an exit strategy while potentially stabilizing the DeFi ecosystem.
Egorov’s proposal seeks to create a new market for distressed claims rather than relying on external bailouts, reflecting a shift in handling bad debt within DeFi. The initiative could serve as a model for future situations involving similar challenges across protocols.
