Blur Introduces New NFT Lending Platform, ‘Blend’

Obscurity — one of the best Ethereum NFT marketplaces — has launched its latest upgrade, Blend. The new NFT lending platform allows users to use non-fungible assets as loan collateral and earn interest by borrowing ETH backed by the digital tokens.

The team behind Blur recognize that many individuals are interested in acquiring collectibles, but may not have the funds to get involved. So this is where Blend’s new NFT lending platform comes into play.

Produced in collaboration with Dan Robinson, Transmissions 11 and Paradigm, Blend provides perpetual loans without fixed repayment plans that typical loan companies implement. Despite loans typically accumulating interest until repaid or refinanced by the lender, the protocol also enables NFT collectors to secure loans using non-fungible assets as collateral. Consequently, liquidity providers can earn interest by lending their ETH, backed by an NFT.

Even better, Blend improves NFT liquidity in the process. This is due to presenting 10 times higher return opportunities than other DeFi protocols floating around the Web3 sphere.

Blurred DAO’s contribution

The platform will not charge any fees for the first 180 days after launch. After this period, however, Blur’s DAO will determine what modifications will take place on the platform, including platform fees for both borrowers and lenders.

Despite Blur contracts previously being audited by ChainLight and CodeArena — having operated on the mainnet for several years — the Blur DAO will soon control all aspects of the project. The idea behind this is that the project will be completely decentralised, which means that no centralized authority can be at the centre.

Potential risks

As Blend becomes fully decentralized, users must be aware of the potential risks associated with borrowing and lending. Three important aspects include the loss of digital assets, unpaid loans and the need to liquidate assets to cover outstanding loan balances.

On Blend, borrowers currently have up to 24 hours to repay their loans when a loan auction is activated. Failure to do so will cause the loan’s interest to skyrocket, increasing the appeal of other lenders to buy out the loan. If another party takes over the loan, this can result in borrowers receiving interest of up to 1,000% APY.

On the other hand, for lenders, there is a risk that borrowers will not be able to repay their loans and that no other lenders are interested in taking it over, despite having an elevated interest rate. In this situation, the lender can obtain the secured digital asset 30 hours after the auction starts. Even if this process occurs, there is a chance that more than liquidating the NFT will be required to cover the outstanding loan balance.

Regardless of these risks, Blend still presents a promising advance in the NFT and DeFi sphere, paving the way for a more financially accessible and inclusive ecosystem. It is better to be aware of these possible risks than to be none the wiser.

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*All investment/financial opinions expressed by NFT Plazas are from personal research and experience of our site moderators and are intended as educational material only. Individuals are required to research all products before making any type of investment.