27 May 2023 08:37, UTC
Reading time: ~3 m
Users of NFT borrowing and lending protocol Blend have taken out loans totaling nearly a quarter of a billion dollars. And it’s only Blend’s first month. The market has taken note, and Binance has also moved into NFT lending. How worried should Blend’s competitors be?
Blend, the NFT borrowing and lending protocol developed by Blur in partnership with Paradigm, claims to have had an impressive first month. Since its launch on May 1, Blend has facilitated over 15,800 loans totaling 123,500 ETH ($224.4 million), according to a report by Nansen.
A Bumper First Month
Blend stands out from its competitors with its unique features. It charges no fees for borrowers and lenders, eliminates the need for oracles, and does not impose loan expiries. Borrowers can secure fixed-rate ETH loans against their NFTs without worrying about repayment deadlines or collateral liquidation. Its launch has been a huge contributor to the ongoing financialization of NFTs.
The protocol’s lending and borrowing functionality initially covers popular NFT collections like CryptoPunks, Azukis, and Mildays, with plans for expansion. Blend’s fixed-term lending approach simplifies the protocol by removing oracle dependencies and allowing lenders to gauge risk levels through loan-to-value (LTV) ratios and interest rates.
Blend’s elimination of loan expiries sets it apart from other peer-to-peer protocols. The protocol aims to offer increased flexibility. Lenders can exit positions anytime through refinancing auctions, curbing their risk exposure and fostering an efficient market. Loans on Blend remain active until borrowers trigger refinancing auctions or fully repay the amount owed.
Not everyone is sold. But Brent Xu, CEO and co-founder of borrowing and lending platform Umee, believes Blend is a step forward for the industry. “Lending for NFTs brings new yield generation opportunities on-chain that will create new markets for the DeFi ecosystem.”
Blend’s Success Should Worry Competitors
“One of the most prominent benefits of NFT technology is its potential to bring physical entities like deeds and bonds on-chain,” explained Xu. “As industry leaders deliver on this promise, we will see a much more diverse array of use cases.”
However, Charles Wayne, co-founder of Galxe, believes competitors should worry over Blend’s impressive liquidity and transaction volume.
“Liquidity for blue chip NFT holders is always an issue. The launch of Blend was expected and addresses the needs for big whales on the Blur market,” he said.
“Of course, the competitive advantages got boosted by the fact that it is for Blur, one of the largest NFT markets now. Adding more liquidity and flexibility to NFT assets has always been a demand for the NFT community, especially for whales “
However, this week exchange giant Binance announced it was also joining the NFT lending craze.
Currently, the exchange has limited the service to four collections: BAYC, MAYC, Azuki, and Doodles. Initially, the platform is keeping the annual interest rate at 3.36% and will later increase it to 11.20%. The loan-to-value ratio is 40% for Doodles, 50% for Azuki and MAYC, and 60% for BAYC collections.
Read the full article here