Blur, a marketplace for non-fungible tokens (NFTs), introduced Blend on May 1 as a peer-to-peer perpetual lending mechanism that accepts NFT collateral. The reasoning behind Blend, which was created in collaboration with venture capital firm Paradigm, is described as a method of “financialization to scale.”
Blend is designed without any dependencies on Oracles, and it does not have any expiration. This means that borrowing positions can be kept open for an indefinite period until they are eventually closed. According to the developers, the protocol is designed to collect no fees from either the borrowers or the lenders. The Blend platform matches individuals seeking to borrow against their non-fungible collateral with the lender who offers the most competitive rates.
The Blend protocol is designed to automatically maintain a borrowing position as long as there is a lender willing to offer the most competitive rate against the non-fungible collateral. The system does not require any on-chain transactions unless one of the parties decides to exit the position or if there is a modification in the interest rate.
By utilizing a protocol for perpetual lending, debtors and lenders prolong the loan maturity date by a predetermined amount of time. Suppose a lender wants to cancel a loan against the borrower’s wishes. If the borrower fails to repay the loan by the expiration date, a “Dutch auction” is initiated for refinancing based on the interest rate. This process is conducted to avoid any delays or issues in the repayment of the loan.
Blend’s auction starts with 0% interest and increases over time. If a lender wants to refinance, but no one wants to take over the debt at any interest rate, the NFT can be liquidated.
The developers clarified that borrowers have the option to repay the loan at any point in time on Blend. Borrowers have the option to adjust their borrowing amount or seek better interest rates by initiating a new loan against the collateral. They can then use the new principal to pay off the previous loan in an atomic transaction.
Blur, which was introduced in the third quarter of 2022, has given users “care packages” in exchange for BLUR tokens since February 14 in an effort to boost trade activity. In terms of trade volume, the platform has since overtaken OpenSea.