On May 1, the NFT marketplace Blur launched Blend, a peer-to-peer perpetual lending protocol that supports NFT collateral. The project was developed in partnership with VC firm Paradigm, and the developers describe Blend’s goal as “financialisation to scale.”
Unlike other lending protocols, Blend does not rely on external oracles nor has a set expiry date, allowing borrowing positions to remain open indefinitely until the borrower or lender terminates the contract. The protocol charges zero fees from either party.
Blend uses an off-chain offer protocol to match borrowers borrowing against their NFT collateral, with lenders offering the most competitive rates. The protocol automatically rolls a borrowing position if a lender is willing to lend against the collateral. This process does not require any on-chain transactions unless one of the parties decides to exit the position or there is a change in interest rates.
Using a perpetual lending protocol, borrowers and lenders can extend the loan’s expiration time by default for a predetermined period. If a lender wishes to terminate the loan against the borrower’s wishes, an interest-rate “Dutch auction” for refinancing is held as the borrower has not repaid the debt at expiration. The auction starts at 0% refinance interest with a steadily rising rate.
The developers emphasise that borrowers can repay their loans anytime on Blend. They can also atomically take out a new loan against their collateral to change the amount they have borrowed or get a better interest rate, using the new principal to repay the old loan.
Blur, launched in Q3 2022, has rewarded users with “care packages” that can be redeemed for BLUR tokens since Feb. 14 to increase trading activity. Since then, the platform has surpassed OpenSea in terms of trading volume.