Blur has launched Blend, the expiry-less peer-to-peer perpetual lending protocol for NFTs, to increase liquidity for NFT holders.
Blend – a solution to post-purchase NFT liquidity
Blur, the self-proclaimed NFT Marketplace for pro traders, has rolled out a peer-to-peer perpetual ending protocol for NFTs. The project is a collaboration between Blur, Dan Robinson, and Transmissions11, a senior researcher and contributor to Paradigm and Seaport.
1/ Introducing Blend: the Peer-to-Peer Perpetual Lending Protocol for NFTs.— Blur (@blur_io) May 1, 2023
Built in collaboration with @danrobinson and @transmissions11 at @paradigm, Blend enables 10x higher yield opportunities than current DeFi protocols and unlocks greater liquidity for NFTs.
Here’s how 👇 pic.twitter.com/uOFC6i3LSq
The protocol, named Blend, short for Blur Lending, is a project to unlock NFT liquidity and spur the next level of growth in the token market.
Blend does not charge any fees to the borrowers and lenders, offering market-defined interest rates for unlimited borrowing positions until liquidated.
The platform avoids having oracle dependencies in the core protocol, and the lender’s terms determine the loan-to-value ratio and interest rates. Failure to honor the loan agreement will spur the liquidation of the collateralized NFT.
The loans offered on Blend do not have an expiration date. Instead, they accrue interest at set rates until the borrower clears the debt. Lenders offer loans on NFT collections, receiving interest and the ability to liquidate their loans through a 30-hour auction.
Benefits of Blend in NFT lending
Blend offers benefits over the previously established NFT-lending protocols with short expiry dates that put the collateral NFT at risk.
This new protocol increases access to liquidity for NFT holders, connecting borrowers with lenders.
The easy access to funds makes NFTs more attractive to buyers, who get more valuable NFTs to increase their accessible funds.
The Blur Lending Protocol creates better financial opportunities for lenders to get higher asset returns. Lenders can loan established NFT collections at low rates or more volatile ones at higher rates, depending on their risk appetite.
NFT collections have also reaped the benefits of this project, as they will not need to liquidate their digital assets as often. Holding onto collectives will lead to less trading pressure for established collections and more buyers for new collections.
Like any other financial product, Blend has a measurable risk for lenders and borrowers. For borrowers, the loan might not be paid, and the accrued interest has exceeded the value of the collateral NFT, leading to a possible loss.
If a loan auction is set off, borrowers have 24 hours to pay off the loan. If they do not clear their date, the loan’s interest rate is inflated to make it more attractive to other lenders. If another lender buys off the loan, the borrower might get caught up in a higher interest rate.
For lenders, there is a risk that the borrower might not offset their debt or no other lender is willing to buy off the inflated loan. In such a case, the lender receives the collateralized NFT 30 hours after triggering the auction.