Borrowing positions automatically roll their expiry and can be refinanced should one party unilaterally decide to terminate.
On May 1, nonfungible tokens (NFTs) marketplace Blur launched Blend, a peer-to-peer perpetual lending protocol that supports NFT collateral. Developed with venture capital firm Paradigm, developers cite Blend’s rationale as a means of “financialization to 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 neither oracle dependencies nor expiries, allowing borrowing positions to open indefinitely until terminated. Developers also claim that the protocol would collect zero fees from borrowers and lenders:
“Blend matches users who want to borrow against their nonfungible collateral with whatever lender is willing to offer the most competitive rate, using a sophisticated off-chain offer protocol.”
Per design, Blend automatically “rolls a borrowing position for as long as some lender is willing to lend that amount against the collateral.” For this, no on-chain transactions are required unless one party decides to exit the position or there is a change in interest rate.
By using a perpetual lending protocol, borrowers and lenders extend the loan expiration time by a predetermined period by default. If a lender wishes to terminate the loan against the borrower’s wishes, an interest-rate “Dutch auction” for refinancing is held when the borrower has not repaid the debt at expiration. The auction begins at 0% refinance interest with a steadily rising rate.
“In Blend, an NFT may be liquidated whenever a lender triggers a refinancing auction and nobody is willing to take over the debt at any interest rate.”
That said, developers explained that borrowers can repay the loan at any time on Blend. “If a borrower wants to change the amount they have borrowed or get a better interest rate, they can atomically take out a new loan against the collateral and use the new principal to repay the old loan,” they wrote.
Launched in the third quarter of 2022, Blur has rewarded users with “care packages,” redeemable for BLUR tokens since Feb. 14 to increase trading activity. The platform has since surpassed OpenSea in terms of trading volume.
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