Curve's founder, Michael Egorov, has put forth a proposal to address the issue of approximately $700,000 in bad debt tied to LlamaLend, the platform's lending arm. The proposed solution involves packaging the affected lender positions into a tokenized vault, which would then be made available for purchase and sale through a dedicated Curve pool.
This approach would enable trapped lenders to exit their positions while allowing outside buyers to determine the value of the distressed claims. The tokenized vault would have an 'option-like' property, with its value potentially increasing if CRV recovers, but with some backing already in place.
The proposal is being presented as an alternative to a bailout, with Egorov suggesting that it could serve as a model for addressing similar situations in the future. The plan comes as the DeFi industry is grappling with the issue of bad debt, with Aave recently facing a significant shortfall following an exploit. Curve's proposal is seen as a market-driven solution, which would allow buyers to decide the price of the distressed claims, rather than relying on a coordinated bailout effort.