Network pause halts loan settlements, leaving NFT-backed borrowers and lenders stuck after December exploit
A recent exploit on the Flow blockchain has triggered widespread disruption across its ecosystem, with NFT-backed loan borrowers caught in limbo following a temporary network shutdown. The incident, which occurred on December 27, forced developers to pause key network functions, preventing users from completing time-sensitive transactions.
Although no user balances were reportedly compromised, the suspension of Flow’s smart contract execution environment meant borrowers could not repay loans as they matured. During the pause, 11 NFT-backed loans reached maturity on a major lending platform. While one loan settled automatically, eight defaulted without borrowers having the ability to repay, and two failed due to account restrictions tied to the exploit. This exposed a critical second-order risk of blockchain halts.
The platform has frozen new loan listings and removed active offers to limit exposure. Meanwhile, the FLOW token dropped roughly 40% following the exploit, extending losses in subsequent days.
Even after the network resumed operations on December 29, core services such as token swapping remain largely unavailable. As a result, many borrowers still cannot obtain the assets required to repay outstanding loans.
To prevent further forced defaults, loan settlements were fully paused on December 30. Loans maturing during this period will neither default nor settle, remaining outstanding until functionality stabilizes. No repayment timeline has yet been announced.
The situation underscores how network-level disruptions can cascade into financial uncertainty, particularly for NFT-backed lending markets reliant on uninterrupted blockchain access.
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