Blur launches NFT sustainable lending protocol Blend! A comprehensive guide on how to use it and its unique liquidation mechanism

The NFT trading platform Blur announced the launch of a P2P NFT perpetual lending protocol called Blend yesterday. Unlike traditional NFT lending markets, Blend does not require a set "loan period" or a rigid "liquidation mechanism," providing users with more flexibility in NFT lending. This article will fully introduce the features of Blend and explain how to use it.

1/ Blur Lending, aka Blend, is NOW LIVE.

If you have a Punk, you can now borrow up to 42 ETH within seconds.

If you want an Azuki, you can now buy one with just 2 ETH up front.

Points have been updated as well. Learn more 👇 pic.twitter.com/jRBwE8DYEo

— Blur (@blur_io) May 1, 2023

Introduction to the Blend Feature of Blur's Lending Protocol

According to Blur's Twitter, the Blend lending feature was launched with three projects, namely Azuki, CryptoPunks, and Milady.

The main functions of Blend include the following:

1. Collateralized Loans: Borrow a certain amount of ETH by collateralizing an NFT.
2. Buy Now, Pay Later: Purchase an NFT at a lower price and borrow the remaining amount in ETH.

However, it is important to note that by using these functions, you will lose ownership of the NFT until the repayment is completed. Additionally, projects eligible for lending will no longer receive airdrop points through listings but will obtain them through providing loans.

How to Use the Blend Lending Protocol of Blur?

Lending with Blend

As Blend is a peer-to-peer lending protocol, each user can act as an independent lender. In a specific project, simply click the "Create Loan Offer" button under "Loans" to start setting the parameters for providing loans.

In the loan parameter settings, the following three aspects can be adjusted:

• Max Borrow: The maximum borrowing amount accepted in ETH.
• APY: The interest rate that borrowers need to pay.
• Size: The number of NFTs the loan is provided for.

Using Azuki as an example, when the lowest price is 15.8 ETH, the loan parameter in the image below means "Providing up to 11 ETH in loans for one Azuki NFT at 10% APY." Each green dot in the image represents a different lender, showing the different funding conditions provided by lenders in the market.

Borrowing with Blend

For borrowing, borrowers only need to select an eligible NFT on their NFT page and click "Borrow ETH" to borrow, choosing a suitable lender from the market.

Mechanism Overview of the Blend Lending Protocol of Blur

The main difference between Blend and mainstream NFT lending protocols is that Blend does not require setting a "loan term" and does not have a strict "liquidation mechanism." After both parties complete the lending process, the lender can reclaim the loan at any time, giving the borrower 24 hours to repay.

If the borrower does not repay after 24 hours, the Blend "refinancing auction" mechanism will be triggered. Blend will select other suitable lenders in the market for the borrower. If successful, the new lender will assist the borrower in repaying the old lender, extending the borrower's borrowing status.

However, in this scenario, the borrower may need to pay higher interest to borrow due to the different lenders.

If there are no other suitable lenders in the market, after 30 hours of the lender deciding to reclaim the loan without repayment, the protocol will undergo liquidation, and the lender will receive the borrower's collateralized NFT. Therefore, when borrowing, it is advisable to ensure an adequate number of lenders for the project to avoid the dilemma of having to repay within a short period.

Current Status of the Blend Lending Protocol of Blur

The above is an overview of the Blend lending mechanism. Observing the current market conditions, it is found that most lenders do not charge interest, perhaps to gain more airdrop points as higher interest rates lead to lower points.

Furthermore, Blend will not charge any lending fees within 180 days of its launch. However, adjustments to fees can be made through governance proposals thereafter, and Blend will offer lending functions to more NFT projects in the future.

Sources: Paradigm Blend Whitepaper, UnChained Interview