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llamalend is an NFT-collateralized loan for long-tail markets, where users can deposit NFTs and borrow ETH for small, illiquid NFT collections that cannot access the main NFT lending markets.
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Curve Founder Proposes Market-Based Model to Recover DeFi Bad Debt
Curve founder Michael Egorov has proposed a method to recover bad debt in lending protocols by converting impaired positions into tradable investment products. The pilot for this solution is Curve's own CRV-long LlamaLend market, which generated approximately $700,000 in bad debt in October 2025. Michael Egorov has established a Curve Stableswap pool with approximately 71% solvency, allowing trading of impaired vault tokens. Traders can buy at a discount, liquidity providers can earn fees, and the DAO can accumulate impaired tokens through management fees. The community’s feedback on this proposal has been mixed, with some users questioning whether impaired positions lacking immediate returns can attract buyers.
The Curve team proposed restoring the bad debt in the CRV-long LlamaLend market via a special liquidity pool.
The Curve Team has proposed a recovery plan for the bad debt in the CRV-long LlamaLend market. This market incurred approximately 70% collateralization and a funding shortfall of roughly $700,000 following the incident on October 10, 2025. The proposal outlines establishing a special Curve stableswap pool that enables redemption of treasury tokens, thereby introducing market-driven capital into the recovery process—without requiring permission or off-chain agreements. According to the proposal, if CRV’s price rises, the bad debt positions can be gradually recovered through decentralized liquidation and hard liquidation; if CRV’s price falls, the collateralization level of treasury deposits will not deteriorate further. michwill has also requested that Curve DAO approve a gauge for this pool and retain protocol fees received in the form of treasury tokens.