Blend is a peer-to-peer perpetual lending protocol that supports arbitrary collateral, including NFTs. Blend has no oracle or expiration dependency, allowing borrowed positions to remain open indefinitely until they are liquidated, with interest rates determined by the market.
Blend pairs users seeking to borrow against their non-fungible collateral with the lender that is willing to offer the most favorable rate, using a sophisticated off-chain offer protocol.
By default, Blend loans have fixed rates and never expire. Borrowers can repay the loan at any time, and lenders can exit the position by launching a Dutch auction to find a new lender with a new rate. If the auction fails, the borrower is liquidated and the lender takes the collateral.
Popular NFT collateralized lending models include pooled lending protocols (such as Astaria) and peer-to-peer protocols (such as NFTfi).
Blend is most similar to the peer-to-peer model, but has some important differences that improve the borrower experience.
Blend Benefits
No oracles
Some of the lending protocols require an oracle, either to determine when to liquidate a position or to determine the interest rate. But individual NFT prices are very difficult to objectively measure. Even floor prices are generally difficult to measure on the chain. Decisions are often either tied to a trusted party or can be manipulated by trading strategies.
Blend avoids relying on the oracle in the underlying protocol. Interest rates and loan-to-value ratios are determined by the terms that lenders are willing to offer. Liquidation occurs as a result of the failure of the Dutch auction.
No expiration
Some protocols only support expiring debt positions. This is inconvenient for borrowers who need to remember to close or roll their positions before expiration (or risk NFT confiscation). The process of manually rolling positions is also gas-intensive, which reduces the return on lending.
Blend automatically rolls a loan position as long as some lender is willing to lend that amount of money against the collateral. Chain operations are needed only when interest rates change or one party wants to exit a position.
Liquidation
Some protocols do not support liquidation before expiration. This is convenient for borrowers and makes sense for many usage scenarios. But because it effectively gives borrowers a put option, lenders have to require short expiration dates, high interest rates, and/or low loan-to-value ratios to offset the risk that the position could become insolvent.
In Blend, an NFT can be liquidated when the lender announces a refinancing auction and no one is willing to take on the debt at any interest rate.
