This article comes fromUnchained Crypto & Paradigm, the original author:Rami Al-Sabeq & Galaga & Pacman & Toad & Dan Robinson & Transmissions 11 , compiled by Odaily translator Katie Koo.
, compiled by Odaily translator Katie Koo.
If you have a significant investment in blue-chip NFTs, your options for obtaining liquidity after purchase are limited. As Blur co-founder Tieshun Roquerre (aka Pacman) said, "Many times, NFT enthusiasts are so poor that only NFT is left." You can sell the NFT you have on hand, or you can use existing protocols to take NFT Pledged loans, but existing NFT loan agreements have very short repayment due dates, which puts the practical NFT pledged loan itself at immediate risk.To address these issues, Blur has launched a new product, Blend — a peer-to-peer perpetual lending protocol that supports arbitrary collateral, including NFTs.At present, Blend has lent 5708 ETH, and Huang Li, who had briefly "retired from the circle", became the largest lender.
Blend provides NFT holders with access to liquidity without a specific expiration date, avoiding putting NFTs at risk. Blend loans have no maturity date, but instead have a fixed amount and interest rate that accrues until the balance is repaid. Lenders make loans to the NFT series, earning yield and being able to liquidate loans through a 30-hour auction.
What are the advantages of Blend?
There is already a lot of practice in the field of supporting NFT for lending. Popular models include perpetual contract-like protocols (such as Floor Perps and papr), peer-to-pool mechanism lending protocols (such as BendDAO and Astaria), and peer-to-peer protocols (such as NFTfi and Backed). Blend is similar to the peer-to-peer model, but with some important differences that improve the borrower experience.
No Oracles: Blend avoids any reliance on oracles in the core protocol. The interest rate and loan-to-value ratio are determined by whatever terms the lender is willing to offer. Liquidation is only triggered when the Dutch auction fails;
No Maturity Date: Blend will automatically reopen a borrowing position as long as there is a lender willing to lend against the collateral. On-chain transactions are only required if interest rates change or one of the parties wants to exit a position;
Liquidable: In Blend, as long as the lender triggers the refinancing auction system, and no one is willing to take over the loan at any rate, the NFT may be liquidated;
Peer-to-peer: Blend adopts a peer-to-peer model, and each loan is matched individually. Instead of optimizing for ease of use in lending, Blend assumes that lenders can participate in complex on-chain and off-chain agreements, assess risk, and use their own capital.
Blend uses a sophisticated off-chain offer protocol to match users wanting to borrow against non-fungible collateral with any lender willing to offer the most competitive rate through a protocol that connects lenders and borrowers. Expanded access to liquidity for NFT holders. Make it easy for NFT collectors to obtain funds, and owning valuable NFTs (based on the value and popularity of NFTs) will have the opportunity to obtain better interest rates.
Additionally, Blend creates profitable opportunities for lenders to earn yield on their assets. Lenders can choose to lend to established NFT series at low interest rates or to more volatile NFT series at higher interest rates, depending on their risk profile.
Blend is also beneficial for NFT collections. NFT holders don’t need to “cash out” as often, ideally reducing selling pressure on existing collections and increasing buyers for new collections.
What are the risks of using Blend?
As with any financial agreement, on Blend both borrowers and lenders need to keep in mind that there is risk. For the borrower, if the loan is not repaid, the accrued interest will exceed the value of the NFT, which is a risk. If no action is taken, this will ultimately result in the loss of staked NFTs.
When a loan auction is triggered to repay the loan, the borrower has 24 hours to take action. If they don't make their loan repayments within that time, the interest rate on their loan rises quickly, making the auction more attractive to other lenders. This can result in the borrower being locked into a higher rate, or even facing up to 1,000% APY if someone else wins the auction.
"If interest rates go up and no one is taking loans, then that could mean that market conditions have changed," Pacman said.
For the lender, there is a risk that the borrower will not repay the balance, and no other lender would be interested in buying out the loan even at a higher rate. In this case, the lender will receive the secured NFT 30 hours after the auction is triggered. If things get to this point, liquidating NFTs will likely not cover the loan balance.
The Future of Blend
Blend is a flexible, permission-free floating rate loan protocol that can support arbitrary collateral, does not rely on oracles, and accepts any interest rate and loan-to-value ratio that the market can afford. Blend is live now and can be accessed through the Blur Marketplace. Certain NFT series are already Blend enabled. The protocol was created by the Blur team in collaboration with Dan Robinson and Paradigm's Transmissions 11.
Blend is part of Blur and is governed by the Blur DAO. There will be no platform fees for the first 180 days of operation. After 180 days, Blur DAO will decide whether to change platform fees for borrowers, lenders, or both. The DAO will also decide whether to change the 30-hour auction period, the maximum APY that can be achieved, and other provisions of the protocol.
Pacman said: “From day one, our goal has been to grow the NFT space by increasing the liquidity of NFTs. Of course, lending and financialization is a key aspect of this. When you decentralize the stack as a whole, It’s good to have some flexibility, and of course, try to increase the level of decentralization.”
Blend plans to expand in the near future, offering borrowers and lenders a variety of refinancing options. It is expected that Blend will become more decentralized over time. Current administrative access to the protocol resides in a multi-signature wallet that can both make DAO-specified updates and stop the protocol in an emergency.The Blend Protocol contract has been audited by CodeArena and ChainLight.
