NFT Lending Crisis: Why Flow Network Outage Left Borrowers Stranded

When the Flow network went offline on December 27, it triggered a cascade of problems for the NFT loan ecosystem. Flowty’s data reveals the scale of the damage: 11 nft loan contracts reached maturity during the network shutdown, resulting in 8 direct defaults and 2 additional loans unable to settle due to account access restrictions. The incident forced the Flow Foundation to halt the Cadence execution environment, keeping the network in limited capacity until December 29 morning.

The Domino Effect on Borrowers

The core issue wasn’t just network downtime—it was the inability to execute critical functions. Even after Flow network came back online, essential features like token swaps remained severely restricted. This meant borrowers couldn’t access the liquidity needed to repay their nft loan positions, creating a perfect storm where defaults became inevitable rather than avoidable. Some borrowers found themselves unable to act through no fault of their own.

Current Status and Containment Measures

Recognizing the severity, Flowty implemented an emergency pause on all loan settlements starting December 30 at 14:15 UTC. This freeze prevents new defaults from occurring, as loans maturing during this period are neither being repaid nor officially defaulting—a temporary measure to prevent further damage. However, the 10 loans already affected remain problematic, and the limited functionality of the Flow network continues to create uncertainty.

FLOW’s price stands at approximately $0.10, down from earlier levels. Until core network functions fully restore and liquidity becomes accessible again, the nft loan market on Flow will remain under pressure, with borrowers facing questions about whether protocols can adequately protect them from infrastructure failures.