Curve founder Michael Egorov has put forth a market-based solution to tackle approximately $700,000 in bad debt associated with LlamaLend, Curve's lending platform. Egorov's proposal involves creating a tokenized vault for affected lender positions, which would then be tradable through a dedicated Curve pool.
This approach would give lenders an opportunity to exit their positions while allowing outside buyers to determine the value of the distressed claims. The plan is in contrast to the recent bailout of Aave, where the industry came together to raise funds to cover bad debt. Instead, Curve's solution relies on market forces to resolve the issue, potentially providing a more sustainable and efficient way to address bad debt in the DeFi space.