Curve founder Michael Egorov has unveiled a market-based plan to tackle approximately $700,000 in bad debt tied to LlamaLend, Curve's lending platform. The proposed solution involves packaging affected lender positions into a tokenized vault, enabling traders to buy and sell them through a dedicated Curve pool. This approach aims to provide trapped lenders with an exit strategy while allowing outside buyers to determine the value of the distressed claims. The bad debt stems from a crash on October 10, which resulted in over $19 billion in leveraged liquidations and saw CRV's value plummet.
Egorov's plan is in contrast to the recent Aave bailout, where the industry came together to raise funds to cover the bad debt. Instead, Curve's solution relies on market forces to resolve the issue, potentially providing a more sustainable and efficient way to address similar problems in the future.