Curve's founder, Michael Egorov, has outlined a market-based approach to address approximately $700,000 in bad debt associated with LlamaLend, the platform's lending arm. The plan involves packaging affected lender positions into a tokenized vault, which would then be traded on a dedicated Curve pool, allowing traders to buy and sell these tokenized claims.
This approach aims to provide trapped lenders with a way out while enabling outside buyers to determine the value of the distressed claims. The proposed solution is in contrast to a bailout, as seen in the case of Aave, which is facing a significant amount of bad debt following an exploit. Egorov's proposal suggests that by creating a market for these distressed claims, Curve can provide a more sustainable and market-driven solution to the problem of bad debt in the DeFi space.