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On May 1, the nonfungible tokens marketplace Blur introduced Blend, a peer-to-peer perpetual lending protocol that utilizes NFT collateral. Created in collaboration with the venture capital firm Paradigm, the developers describe Blend’s purpose as a method of “financialization to scale.”
4/ Every trillion-dollar market depends on financialization to expand. NFTs are no exception.
Rather than paying $1 million for a house, buyers typically put down $100,000 and finance the remainder through a mortgage. Without this system, very few individuals would be able to afford homes. pic.twitter.com/4J96G3pGnJ— Blur (@blur_io) May 1, 2023
Blend operates without oracle dependencies or expiration dates, enabling borrowing positions to remain open indefinitely until they are closed. The developers also assert that the protocol will impose no fees on either borrowers or lenders:
“Blend connects users seeking to borrow against their nonfungible collateral with lenders willing to provide the most favorable rates, utilizing an advanced off-chain offer protocol.”
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By design, Blend automatically “rolls over a borrowing position for as long as there is a lender willing to provide that amount against the collateral.” This process does not require on-chain transactions unless one party opts to exit the position or there is a shift in the interest rate.
As a perpetual lending protocol, borrowers and lenders extend the loan’s expiration time by a set period by default. If a lender intends to end the loan against the borrower’s preference, a refinancing interest-rate “Dutch auction” is conducted when the borrower has not settled the debt by the expiration date. The auction starts at a 0% refinance interest rate and gradually increases.
“In Blend, an NFT can be liquidated whenever a lender initiates a refinancing auction and no one is willing to assume the debt at any interest rate.”
However, the developers clarified that borrowers have the option to repay the loan at any moment on Blend. “If a borrower wishes to adjust the amount borrowed or secure a more favorable interest rate, they can instantly take out a new loan against the collateral and use the new principal to pay off the previous loan,” they stated.
Launched in the third quarter of 2022, Blur has incentivized users with “care packages,” which can be redeemed for BLUR tokens starting February 14 to boost trading activity. The platform has since outpaced OpenSea in trading volume.
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