Curve Proposes Recovery Mechanism for Bad Debt in CRV-long Market

Curve's team has introduced a proposal on their governance forum to address approximately $700,000 in bad debt from the CRV-long LlamaLend market. According to ChainCatcher, the proposed recovery mechanism leverages the option characteristics of CRV-long treasury assets. The value of these assets increases with a rise in CRV prices, while a price drop does not further diminish their value. The proposal suggests creating a Curve stable pool with a low amplification factor (A=2) and a high exchange fee (1%), concentrating the liquidity of treasury tokens around a 71% solvency level. Arbitrageurs can profit by purchasing treasury tokens through flash loans and partially liquidating them. Curve DAO is invited to approve incentives for this pool, with management fees collected in the form of treasury tokens retained in the fund. If successful, this mechanism could serve as a reference solution for similar situations in the future.