A weekly roundup of interesting stuff in the fabulous and mysterious world of DAOs
A weekly roundup of interesting stuff in the fabulous and mysterious world of DAOs
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Welcome to (anon). Và rumpiti i cuoairna! [Translated: Go break a cooairna!]
Hoooeeeeyyy!!! As (anon) “reported” (i.e. lifted from Twitter wholesale) some weeks ago, TRIBE DAO, the gelatinous and morally indefensible spawn of the marriage of the “Fei” stablecoin protocol and Rari Capital, another DAO, recently suffered an $80m hack. Investors were frantic, desperate, wracked with fear and loathing, and swiftly voted to be made whole via the DAO’s purportedly democratic governance system.
The vote, however, was mysteriously ignored, and a second vote went through nullifying the decision to carry forward a repayment. In the face of intense opprobrium from victims, the DAO’s most influential stakeholders (you can possibly already see the problem here) chose to simply shut the DAO down altogether*, disbursing only a smidgen of the funds in its treasury to its members. But not even all of them! As noted by Sam Kazemian of FRAX, a stablecoin project which lost millions in the TRIBE hack, many of the DAO’s larger members have been utterly ignored, or compensated the bare minimum.
https://twitter.com/samkazemian/status/1560922661387001856?s=21
That means protocols like FRAX, as well others like Olympus, will walk away from the ordeal with losses in the vicinity of 95 percent—and totally unnecessarily. Kazemian, indeed, determined that the DAO could afford to make everyone 100 percent whole with still a good amount left in its treasury; why it hasn’t done this, he avers, amounts to “fraud.” (anon) is of course neither at liberty to confirm nor deny this neutral observation, deeply conflicted and entrenched as this newsletter is.
*This move will also “sunset” the Fei protocol itself—goodbye, stablecoin!
Panic spread across Twitter last Sunday as NFT-maxis discovered that BendDAO was experiencing a liquidity crisis. BendDAO is a protocol whose superpower is it allows users to take loans out against their NFTs. Borrowers on the platform can put their “blue-chip” NFTs down as collateral, and borrow the ETH equivalent up to 40% of the value of their NFT (determined by the floor price of the collection). Their NFTs remain safu unless the floor price of the NFT used as collateral drops below the “liquidation price.”
Cool concept, in theory. But on Sunday, something happened—BendDAO ran out of money.
https://twitter.com/punk9059/status/1561485091917877250
With the NFT market losing volume, and floor prices dropping faster than Anon’s pants for anyone in a fancier hat than his own, it’s been hard times for NFT-hodlers. Blue-chip NFTs listed on the site are being liquidated left and right—and the liquidations themselves are adding to the pressure that’s causing floor prices to drop.
But wait—there’s more! When someone gets liquidated on BendDAO, their NFT goes up for auction, at which point bidders can (in theory) get the NFTs for a discount. This is the incentive mechanism that was supposed to stop what’s currently happening, from happening. Unfortunately, with NFT floor prices dropping just as fast as Bored Apes, Doodles, and the like, the debt owed on these liquidated NFTs is often higher than the minimum bid to purchase them.
Basically, BendDAO has accidentally created a ton of bad debt. No one wants to buy the NFTs that are going up for auction when loans get liquidated because the debt owed is too high to make it a profitable purchase.
Which is scary, because some 600 “blue-chip” NFTs are approaching their liquidation points. You can check out current and upcoming liquidations using this nifty Dune Analytics dashboard.
In response, BendDAO founders have proposed changes to the liquidation auction mechanic. One idea: changing the minimum bid requirements. Previously, the minimum bid on an NFT was 95% of the floor price; if the proposed change goes through, the minimum bid will be the total debt accrued on the NFT, making it more attractive for bidders.
https://twitter.com/CirrusNFT/status/1561698403368636418?s=20&t=1BVIYuoqP0Gs8YL1GBmEgg
The jury’s still out on whether the proposed changes can help stop the cascading liquidations from occurring, but I’ve got my great big bag of Jolly Time® ready.
--
Thanks for reading (anon), the not entirely unwelcome foreskin in your lunchbox.
——Tiny Schmancer
Welcome to (anon). Và rumpiti i cuoairna! [Translated: Go break a cooairna!]
Hoooeeeeyyy!!! As (anon) “reported” (i.e. lifted from Twitter wholesale) some weeks ago, TRIBE DAO, the gelatinous and morally indefensible spawn of the marriage of the “Fei” stablecoin protocol and Rari Capital, another DAO, recently suffered an $80m hack. Investors were frantic, desperate, wracked with fear and loathing, and swiftly voted to be made whole via the DAO’s purportedly democratic governance system.
The vote, however, was mysteriously ignored, and a second vote went through nullifying the decision to carry forward a repayment. In the face of intense opprobrium from victims, the DAO’s most influential stakeholders (you can possibly already see the problem here) chose to simply shut the DAO down altogether*, disbursing only a smidgen of the funds in its treasury to its members. But not even all of them! As noted by Sam Kazemian of FRAX, a stablecoin project which lost millions in the TRIBE hack, many of the DAO’s larger members have been utterly ignored, or compensated the bare minimum.
https://twitter.com/samkazemian/status/1560922661387001856?s=21
That means protocols like FRAX, as well others like Olympus, will walk away from the ordeal with losses in the vicinity of 95 percent—and totally unnecessarily. Kazemian, indeed, determined that the DAO could afford to make everyone 100 percent whole with still a good amount left in its treasury; why it hasn’t done this, he avers, amounts to “fraud.” (anon) is of course neither at liberty to confirm nor deny this neutral observation, deeply conflicted and entrenched as this newsletter is.
*This move will also “sunset” the Fei protocol itself—goodbye, stablecoin!
Panic spread across Twitter last Sunday as NFT-maxis discovered that BendDAO was experiencing a liquidity crisis. BendDAO is a protocol whose superpower is it allows users to take loans out against their NFTs. Borrowers on the platform can put their “blue-chip” NFTs down as collateral, and borrow the ETH equivalent up to 40% of the value of their NFT (determined by the floor price of the collection). Their NFTs remain safu unless the floor price of the NFT used as collateral drops below the “liquidation price.”
Cool concept, in theory. But on Sunday, something happened—BendDAO ran out of money.
https://twitter.com/punk9059/status/1561485091917877250
With the NFT market losing volume, and floor prices dropping faster than Anon’s pants for anyone in a fancier hat than his own, it’s been hard times for NFT-hodlers. Blue-chip NFTs listed on the site are being liquidated left and right—and the liquidations themselves are adding to the pressure that’s causing floor prices to drop.
But wait—there’s more! When someone gets liquidated on BendDAO, their NFT goes up for auction, at which point bidders can (in theory) get the NFTs for a discount. This is the incentive mechanism that was supposed to stop what’s currently happening, from happening. Unfortunately, with NFT floor prices dropping just as fast as Bored Apes, Doodles, and the like, the debt owed on these liquidated NFTs is often higher than the minimum bid to purchase them.
Basically, BendDAO has accidentally created a ton of bad debt. No one wants to buy the NFTs that are going up for auction when loans get liquidated because the debt owed is too high to make it a profitable purchase.
Which is scary, because some 600 “blue-chip” NFTs are approaching their liquidation points. You can check out current and upcoming liquidations using this nifty Dune Analytics dashboard.
In response, BendDAO founders have proposed changes to the liquidation auction mechanic. One idea: changing the minimum bid requirements. Previously, the minimum bid on an NFT was 95% of the floor price; if the proposed change goes through, the minimum bid will be the total debt accrued on the NFT, making it more attractive for bidders.
https://twitter.com/CirrusNFT/status/1561698403368636418?s=20&t=1BVIYuoqP0Gs8YL1GBmEgg
The jury’s still out on whether the proposed changes can help stop the cascading liquidations from occurring, but I’ve got my great big bag of Jolly Time® ready.
--
Thanks for reading (anon), the not entirely unwelcome foreskin in your lunchbox.
——Tiny Schmancer
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