At first glance, the basic protocol layer is working fine: most validators are continuing their work. But there is a problem — he is technically insolvent.

The reason is the design errors of savings and lending products that should not have been built at a basic level.

What went wrong?

These products took BTC and ETH as collateral, but converted them into $RUNE, effectively becoming “short” in relation to bitcoin and ether.

This model worked while $RUNE was growing. But now that BTC and ETH are ahead of the $RUNE, the situation has dramatically worsened. The products are currently disabled, but have left the protocol with a net commitment of $100 million.

Two ways of development of events:

1. Bankruptcy:
In this case, no one gets anything, and the project simply dies, despite its potential.

2. Debt restructuring:
Here, debt holders will receive tokens that pay% of the protocol's fees until the debt is fully repaid with interest.

Such tokens can be traded, and their value will increase if investors believe in the restoration of the protocol.

There are already precedents: in 2017/18, Bitfinex successfully applied a similar scheme after the hack, and all debt holders received compensation.

Why is the token price falling?

The market understands the scale of the problem and puts bankruptcy risks in the price. Investors are not sure if the protocol will be able to successfully restructure the debt.

What is the potential?

If the restructuring succeeds, the protocol will remain a profitable ecosystem, and those who take risks now can get significant growth.

However, the risk is very high: either the project will recover, or it will completely collapse.

At this stage, I'm just observing the situation and sharing what's going on. It's up to everyone to decide whether it's worth the risk.

We will see many more such stories ahead. Be careful when investing in altcoins. Learn what you know.