NFT lending has emerged as a transformative force in decentralized finance (DeFi), enabling users to borrow cryptocurrencies using NFTs as collateral. This mechanism operates under predefined agreement terms, enhancing NFT utility and driving adoption. Blur, a leading NFT marketplace, has revolutionized this space with its groundbreaking Blend protocol.
What Is Blur?
Founded by Pacman (Tieshun Roquerre) in October 2022, Blur is an Ethereum-based NFT marketplace and aggregator known for its exceptional trading volume. According to DappRadar, Blur has surpassed $600M in trading volume over the past 30 days, outpacing established competitors.
Blur’s success stems from its innovative ecosystem, including the Blend protocol—a peer-to-peer (P2P) perpetual NFT lending system.
Understanding the Blend NFT Lending Protocol
Blend (Blur Lending) is a P2P perpetual lending protocol that allows users to borrow ETH using NFTs as collateral. Developed in collaboration with Paradigm, a prominent Web3 venture capital firm, Blend introduced two key products:
- Buy-Now-Pay-Later (BNPL)
- P2P Perpetual Lending
Buy-Now-Pay-Later (BNPL)
Blend’s BNPL model is a first in decentralized finance, enabling users to purchase high-value NFTs with a small down payment. Traders can capitalize on price appreciation by reselling the NFT later, retaining profits after settling the remaining loan.
Example:
- Purchase an Azuki NFT for 1.8 ETH (20% down payment).
- NFT appreciates to 3.5 ETH.
- Sell, repay the loan, and pocket 1.7 ETH profit.
P2P Perpetual NFT Lending
Blend’s flagship feature facilitates direct ETH loans from lenders, using NFTs as collateral. Since its May 2023 launch, Blend has processed 169,900 ETH in volume across 15,000+ loans, dominating 82% of the NFT lending market.
Initially supporting Azuki, CryptoPunks, and Milady Maker, Blend expanded collateral options to include DeGods and other collections.
What Makes Blend Unique?
Peer-to-Peer (P2P) Model
- No intermediaries—lenders and borrowers negotiate terms directly.
No Oracle Dependence
- Fair valuation—no reliance on external price feeds, ensuring mutual agreement on loan terms.
Off-Chain Matching
- Negotiations occur off-chain, while transactions settle on-chain.
Fixed Interest Rates
- Predictable costs—rates remain stable throughout the loan term.
Loan Perpetuity
- No expiration—loans auto-renew unless lenders opt out via refinancing auctions.
Liquid Debt Handling
- Insolvent loans result in NFT collateral transfer to lenders.
Zero Platform Fees
- No fees for the first six months, with future adjustments possible via DAO governance.
How Blend Works
- Lender submits an off-chain offer (loan amount, interest rate, collateral requirements).
- Borrower selects an offer and locks NFT collateral in a vault.
- ETH is disbursed to the borrower.
- Repayment closes the loan, or refinancing auctions facilitate lender transitions.
Refinancing Process:
- If a lender exits, a new lender may take over the loan.
- If no refinancing occurs, the NFT is transferred to the original lender.
Conclusion
Blur’s Blend protocol redefines NFT-backed lending with flexible terms, no oracles, and P2P efficiency. Its BNPL and perpetual lending models empower traders and lenders alike, solidifying Blur’s dominance in the NFT space.
👉 Explore Blend’s innovative lending solutions
FAQs
1. What NFTs can I use as collateral on Blend?
Supported collections include Azuki, CryptoPunks, Milady Maker, and DeGods, with plans for further expansions.
2. How does Blend ensure fair loan terms?
By eliminating oracles, Blend relies on mutual borrower-lender agreements for transparent valuation.
3. Are there fees for using Blend?
Currently, no platform fees apply, though DAO governance may introduce changes later.
4. What happens if I default on a Blend loan?
Lenders may trigger a refinancing auction or claim the NFT collateral if no new lender participates.