Blur, a well-known NFT marketplace, has recently launched Blend, a peer-to-peer (P2P) lending platform that focuses on NFTs. Unlike other lending platforms that depend on external price oracles and have fixed expiration dates, Blend operates without either of these features.
4/ Every trillion dollar market relies on financialization to scale. NFTs are no different.
Instead of paying $1m for a house, buyers put $100k down and pay the rest through their mortgage. Without this mechanism, almost no one would be able to afford homes. pic.twitter.com/4J96G3pGnJ
— Blur (@blur_io) May 1, 2023
Blend, developed by Dan Robinson, a lawyer and researcher at Paradigm, a crypto investment firm, supports arbitrary collateral and employs a sophisticated off-chain offer protocol that matches users who want to borrow against their non-fungible collateral with the lender who is willing to offer the most competitive rate. The platform differs from traditional lending protocols as it allows borrowing positions to be open for an indefinite period, with market-based interest rates. This means that Blend loans have fixed interest rates and will never expire.
The borrower can repay the loan at any time, while lenders can exit their positions by triggering a Dutch auction to find a new lender at a new rate. In the event of a failed auction, the borrower is liquidated, and the lender takes possession of the collateral.
Unlocking Liquidity of NFTs
According to Robinson’s whitepaper, Blend is designed to unlock the liquidity of NFTs. The Blur team explained that NFT buyers face the same challenge as home buyers: few people can afford to pay the full price upfront. Therefore, NFT lending is an ideal solution.
Using Blend, investors can now use items from popular NFT collections such as Punks, Azukis, and Miladys as collateral to borrow ETH. They can also buy an item from one of the collections and pay it down later. The team has promised to add more collections soon.
The borrower has the flexibility to repay the loan at any time, which results in the full ownership of the NFT. Alternatively, they can sell the NFT at any time and keep any profit.
In conclusion, Blend is a peer-to-peer NFT lending platform that operates without expirations and with no external price oracles. It is designed to unlock the liquidity of NFTs by allowing borrowing positions to be open for an indefinite period, with market-based interest rates. With Blend, borrowers have the flexibility to repay the loan at any time, while lenders can exit their positions by triggering a Dutch auction to find a new lender at a new rate. The platform is a game-changer in the world of NFTs, offering a unique solution to buyers who cannot afford to pay the full price upfront.