Blur launches NFT Lending Protocol

Blend enables Peer-to-Peer lending and the Buy Now Pay Later feature

Blur, the leading NFT marketplace by trading volume, is diving into NFT lending with its new Blend protocol published today.

Traders now have a Buy Now Pay Later (BNPL), which allows them to buy NFTs without bearing the full cost upfront. Borrowers can either acquire the token in full when they have the funds to repay the loan, or look to sell the asset if it appreciates, thus taking out the difference.

Blur’s other product deals with peer-to-peer lending – users can borrow against their NFTs with specific amounts and interest rates offered by individual lenders.

The lending features initially support three NFT collections – CryptoPunks, Azuki and Milady – but the Blend protocol allows any asset to be pledged. The floor price of Milady is up 30% after a wave of leveraged buying.

The Blur team is releasing Blend under the same business license that Uniswap, the leading decentralized exchange in terms of trading volume, used for its influential V3 protocol.

Blur has been disrupting the NFT space since it launched last October. The NFT marketplace and aggregator has been engaged in an extended battle against OpenSea to be the best platform for trading. After OpenSea launched a more directly competitive “pro version” last month, Blur is once again entering new territory.

This time, Blur will face a new set of competitors in the NFT lending space – projects such as NFTfi, PWNDAO, BendDAO and ParaSpace offer all forms of NFT lending with collateral.

NFT influencer Cirrus thinking Blend will lead to a “leverage-fueled run in NFTs”, while another user pointed out that unwary traders may not fully understand what they are getting into.

The release of two new products built on a new protocol hasn’t shielded Blur’s token from a down day in the crypto markets – BLUR is down almost 9% in the last 24 hours, while BTC is down over 4% and ETH is down almost 3%.

Refinancing auctions

With Blend, lenders can trigger a refinancing auction at any time. They will usually do so if an NFT’s price falls, increasing the risk of the loan being sub-secured, or if they simply need the money back.

Refinancing auctions start at a low rate, and increase slowly until a new lender is found – in the case of a BNPL loan, the borrower will have 24 hours to either repay or refinance the loan if a new lender is not found within six hours.

P2P lending

Loans on Blur have no fixed maturity date – borrowers can close the loans at any time, while lenders can request a refinancing auction at any time, resulting in either another lender stepping in or liquidating the collateral.

Will Sheehanthe founder of Parsec Finance, a DeFi trading interface, told The Defiant that the new Blend protocol differs slightly from the designs of projects such as BendDAO and Paraspace, which have traditionally had an advantage in the NFT lending space.

“Both Bend and Paraspace use the peer-to-pool models,” he said. “Historically, these have been the most successful lending and trading chain models.” He cited Compound, a protocol that pools lenders’ fungible assets together for borrowers to use, as an example of the aggregated model in the broader DeFi space.

“Peer-to-pool has always beaten peer-to-peer in DeFi so far,” he said.

Pacman, the co-founder of Blur, pointed out to The Defiant that Blend allows users to borrow much higher amounts against their NFTs than the peer-to-pool model. He added that having a perpetual loan as standard is a better user experience for borrowers.

Unauthorized security

Sheehan also believes that Blend’s design has some advantages – the merged models of BendDAO and Paraswap necessitate checking which NFTs serve as sufficient collateral, potentially creating a gap in the market between potential borrowers and lenders. “[The] the back side is [Blend] is permissionless, so it can work immediately for any collection.”

Dan Robinson, head of research at venture firm Paradigm, which contributed to Blend’s development, highlighted that the protocol does not depend on any oracles. As oracles provide data that is not native to the blockchain, they introduce the risk of trusting a third party, which crypto-adherents generally try to avoid.

While the peer-to-peer model may not have become the dominant one in NFTs so far, Robinson has a notable track record in DeFi. The researcher was one of the main contributors to Uniswap V3, hailed as a key development in DeFi.

Paradigm led Blur’s $11M seed round in 2022 and is also an investor in Uniswap.