Blur Lending Protocol is Here!
The launch of Blur’s ‘Blend’ perpetual lending protocol for NFTs has stirred up mixed reactions. In collaboration with Paradigm, Blur introduced the peer-to-peer lending protocol on May 1, which enables NFT collateral. Blend’s creators believe it provides “financialization to scale.” Additionally, developers of Blend said that the protocol doesn’t depend on oracles or have any expiries. They also claim that no fees would be collected from borrowers or lenders. Let’s dive in!
Breaking Down the Blend Protocol
Blur, in collaboration with Paradigm, introduced the ‘Blend’ peer-to-peer lending protocol for NFT collateral on May 1. The launch of Blend, however, has stirred up mixed reactions. But, what actually is Blend?
Blend is a perpetual lending protocol, allowing borrowers and lenders to extend the loan expiration time by default, without requiring any on-chain transactions. When a lender wants to end the loan before the borrower pays it back, the protocol holds an auction to find a new lender who is willing to refinance the loan. This auction starts with no interest and gradually increases until someone agrees to take over the loan. The auction begins at 0% refinance interest with a steadily rising rate.
Developers have explained that Blend has no oracle dependencies or expiries, allowing borrowing positions to open indefinitely until terminated. They also claim that the protocol would collect zero fees from borrowers and lenders. According to Blur, 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.
Whenever a lender initiates a refinancing auction and no one is willing to take over the debt at any interest rate, Blend allows for the liquidation of an NFT.
Blur Marketplace is one of (if not) the fastest real-time NFT aggregators in the Ethereum ecosystem. But, Blur’s new lending platform has received a range of reactions from the community. However, it seems that the majority of these reactions are sarcastic and critical of the platform.
One user expressed concerns about how larger investors could use the platform to manipulate the market and take advantage of smaller investors. Their Tweet read: Wow?! So now whales who control large percentages of blue chips can now lend eth to small fish and the small fish can buy into said blue chip. THEN said whale can manipulate the fp and cause the small fish the become insolvent and the whale gets eth plus and nft back.
Another user has raised concerns about the impact of NFT price increases on loan repayments. The user voiced concerns about whether Blur will be require them to pay more if this happens. The community has also raised concerns about potential fraudulent activities like money laundering and wash-trading on the platform. Larger investors may take advantage of smaller investors, which some users have criticized. Ultimately, it is yet to be determined how well the platform will perform in the long run.