While the effects of the security breach in the Flow ecosystem on December 27th continue, one of the most serious problems emerged with NFT-backed loans. The temporary shutdown of the network led to the inability to repay maturing loans and the involuntary default of some debts. This incident once again demonstrated that technical disruptions in blockchain networks can create not only direct but also secondary and tertiary risks. The Flow Foundation stated that user balances were not affected during the attack. However, the suspension of the Cadence execution environment until the morning of December 29th effectively brought network transactions to a standstill. During this time, users were unable to transfer tokens, settle debts, or recover their collateralized NFTs. One of the platforms directly affected was Flowty, a Flow-based NFT lending platform. According to data shared by the platform, 11 loans matured during the network shutdown. Only one of these loans was repaid through its automated payment system. Eight loans defaulted, and two loans could not be settled technically due to account restrictions related to the attack.
Although the Flow network is technically back online, many core functions in the ecosystem are still operating with limitations. In particular, the widespread shutdown of token swaps makes it difficult for borrowers to acquire the assets they need to repay loans. Therefore, even though the network has reopened, users have not been able to effectively conduct transactions.
Following these developments, Flowty announced on December 30th, in the evening (Turkish time), that it was suspending settlement for all loan transactions. According to this decision, loans maturing during this period will neither be repaid nor defaulted. The platform stated that these loans will remain "on hold" and a specific repayment window will open when core functions in the ecosystem return to normal. However, there is no clear timeline for when this window will open at this stage.
The decision affects both sides of the market. Lenders will not be able to earn additional interest income on the suspended loans. Even if borrowers have the necessary funds, they cannot pay to recover their NFT collateral. Flowty stated that this approach aims to prevent forced defaults and potentially irreparable NFT losses that could occur due to network-wide technical limitations. The platform also completely stopped new loan listings and removed all existing listings from the marketplace. This step aims to prevent the creation of additional risks in an environment of uncertainty.
FLOW coin price experienced a drop
On the other hand, the developments were sharply reflected in market prices. FLOW, the native token of the Flow network, lost approximately 40% of its value immediately after the event. The downward trend continued in the following days, and the token price fell to around $0.085 at the time of writing.
