Abracadabra Finance has presented a proposal aimed at addressing the risk of bad debt arising from an $18 million loan to Curve Finance founder, Michael Egarov. The proposal suggests increasing the interest rates on the loan to 200% for two specific pools, known as “cauldrons,” which hold CRV tokens belonging to Egarov.
The current interest rate on Egarov’s $18 million loan stands at 18%. However, the proposed protocol aims to raise it significantly to 200%, thereby effectively displacing Egarov from his position. The objective is to reduce the exposure to CRV tokens to just $5 million. The proposed interest rate increase will not happen suddenly but rather gradually decrease as the loan is repaid through the automatic sale of CRV tokens.
Developers anticipate that this strategy will result in the loan being fully repaid within six months, with all proceeds going toward the Abracadabra treasury. According to the proposal, “The effect of collateral-based interest is such that all interest will be charged directly on the cauldron’s collateral and will immediately move into the protocol’s treasury to increase the reserve factor of the DAO.”
