According to Curve Finance, the protocol recently introduced a market-based bad debt recovery mechanism that allows affected CRV holders to choose from multiple strategies: sell debt claims to exit immediately, hold and wait for potential recovery, or provide liquidity to earn fees and incentives. The mechanism establishes a trading pool between crvUSD and the damaged debt token, enabling bad debt claims to be priced and traded on-chain, providing users with an immediate exit option rather than relying solely on final liquidation outcomes. Curve noted the mechanism does not eliminate losses or guarantee recovery, but rather reflects risk and recovery expectations through market dynamics.
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