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On May 1, the non-fungible token market Blur launched Blend, a perpetual peer-to-peer lending protocol that supports NFT collateral. Developed with venture capital firm Paradigm, the developers cite Blend’s rationale as a means of “funding at scale.”
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 has no oracle dependencies or expiration dates, allowing leveraged positions to open indefinitely until terminated. The developers also claim that the protocol will charge zero fees to borrowers and lenders:
“Blend matches users who want to borrow against their non-fungible collateral with any lender that is willing to offer the most competitive rate using a sophisticated off-chain offer protocol.”
By design, Blend automatically “rolls over a loan position for as long as any lender is willing to collateralize that amount.” This does not require any transactions on the network, unless one of the parties decides to exit the position or there is a change in the interest rate.
Under the perpetual lending protocol, borrowers and lenders by default extend the term of the loan for a predetermined period. If a lender wishes to terminate a loan against the borrower’s wishes, an interest-bearing “Dutch auction” of refinancing occurs when the borrower has not repaid the debt at maturity. The auction starts at a 0% refinancing rate with an ever-increasing rate.
“In Blend, an NFT can be liquidated whenever a lender initiates a refinance auction, and no one wants to take on debt at any interest rate.”
At the same time, the developers explained that borrowers can repay the loan at any time on Blend. “If a borrower wants to change the amount he has borrowed or get a better interest rate, he can automatically take on a new secured loan and use the new principal to pay off the old loan,” they wrote.
Blur, which launched in the third quarter of 2022, has rewarded users with “help packages” that can be redeemed for BLUR tokens starting February 14 to increase trading activity. Since then, the platform has surpassed OpenSea in terms of trading volume.