Blend: In-Depth Analysis of the Next Generation NFT Lending Protocol

Recently, a new P2P NFT lending protocol called Blend has emerged, which also supports the functionality of loans for purchasing NFTs. This article will analyze the core features and product advantages of Blend, the next-generation NFT lending protocol, in a straightforward manner.

Core Features of Blend

1. Peer-to-peer, perpetual lending model, no fixed maturity date, no need to rely on oracle
2. The lender can set the loan amount and annualized interest rate on their own and publish the lending offer.
3. The borrower can select suitable terms from the existing offers.
4. The lender can withdraw at any time, and the borrower must repay or refinance within 30 hours, otherwise they will face liquidation.
5. Borrowers can repay at any time without waiting for a fixed term.
6. Innovatively supports the "Buy Now, Pay Later" model, allowing users to purchase NFTs through a down payment plus a loan.

Product Advantages

The core advantage of Blend lies in unifying non-essential elements, reducing system complexity, and achieving flexible migration of lending relationships within the system. It prices risks and returns through market games, maximizing user satisfaction.

Compared to traditional peer-to-peer models, Blend unifies the term in the three elements of borrowing (collateral ratio, interest rate, term) into a perpetual flexible model, greatly improving the liquidity issues for lenders. At the same time, Blend also standardizes the exit and liquidation mechanisms for lenders, giving them the flexibility to handle exit options.

Although Blend appears to have fixed collateralization ratios and interest rates, its flexible exit mechanism allows the actual effective terms to generally follow the market average. This is because:

• If the terms are significantly below market levels, the borrower has the incentive to repay and choose other more favorable offers.
• If the terms are significantly above the market level, lenders will have the incentive to exit and issue a new offer to achieve higher returns.

For borrowers, Blend achieves complete flexibility in loan duration through a perpetual and anytime repayment setup. At the same time, the protocol guides the market by allocating incentive points to lenders; the higher the loan amount set and the lower the interest rate, the more points are earned.

For lenders, Blend retains the customization advantages of the peer-to-peer model while providing liquidity advantages close to the pool model. Lenders can set their own risk control standards and exit flexibly, significantly reducing risks.

Loan Purchase NFT Function

Blend innovatively integrates the functionality of loaning to purchase NFTs, similar to mortgage loans in the real estate market. Users can initiate collateralized borrowing while purchasing NFTs, gaining ownership of the NFTs with just a down payment. This feature not only enhances capital efficiency but also helps bring a large number of new users to Blend, promoting its rapid growth.

Other Design Details

In the early design documents, the exit of the lender would trigger a Dutch auction mechanism, with interest rates gradually increasing from 0% to 1000%. However, the current actual operation requires the borrower to repay or refinance within a specified timeframe. This adjustment takes into account two variables: the loan amount and the interest rate, making it more aligned with practical needs.

It is worth noting that Blend has not yet empowered its native token significantly. Token holders have governance rights to set various parameters and the authority to activate the fee switch after six months, but the specific implementation details remain uncertain.

Summary

Blend has achieved a significant improvement in lending efficiency by unifying non-essential elements. Its deep integration with the trading module has brought tremendous improvements at the product level. Although it is relatively conservative in terms of token empowerment, Blend undoubtedly brings new possibilities and vitality to the NFT lending market.