Curve founder Michael Egorov has put forth a market-based solution to address approximately $700,000 in bad debt associated with LlamaLend, Curve's lending platform. The proposed plan involves packaging affected lender positions into a tokenized vault, which would then be traded on a dedicated Curve pool, allowing trapped lenders to exit their positions while enabling outside buyers to determine the value of the distressed claims.
This approach is distinct from a recent industry-wide bailout effort for Aave, which faces a significant bad debt issue following an exploit. Egorov's plan aims to provide a market-driven fix, where the value of the distressed claims would be determined by buyers and sellers in the pool, rather than relying on a coordinated industry response.
The proposal includes the creation of a tokenized vault, which would hold the affected lender positions, and a dedicated Curve pool, where the tokenized claims would be traded. The goal is to give lenders a way out while allowing the market to determine the value of the distressed claims.
The plan is seen as an alternative to a traditional bailout, where the industry comes together to cover the losses. Instead, Curve's proposal relies on the market to find a solution, which could potentially be applied to similar situations in the future.