Blur quickly gained recognition in the NFT sector and its lending protocol, Blend, looks set to follow suit. Blend’s popularity has skyrocketed since its launch in May, eclipsing its competitors and also dramatically increasing the overall volume of NFT loans.
According to data from DappRadar, Blend has secured 169,900 ETH ($308 million) in trading volume in just 22 days. The trading volume on all NFT lending platforms? It reached approximately $375 million, meaning Blend secured a whopping 82 percent of the lending volume across all NFT lending protocols in less than a month.
In addition, Blend’s market share is likely to increase as its offerings continue to grow. Currently, it supports loans backed by four NFT collections: Miladys, Azukis, DeGods, and wrapped versions of CryptoPunks. However, Blur recently announced that it would be launching loans for Clone X, with other projects expected to be added in the near future.
1/ 🚨BLEND ANNOUNCEMENT🚨
Blur Lending (Blend) support will be available for Clone X soon. pic.twitter.com/oN2HR5hVTL
— Blur (@blur_io) May 25, 2023
Blend’s emergence in the NFT lending market follows Blur’s previous success. According to analyzes of Delphi digital, Blur gained 53% of the market share of the NFT marketplace just a few months after launch and quickly surpassed OpenSea to become the market leader. This was largely driven by Blur’s native token airdrop in Q1 2023, which resulted in a significant increase in Ethereum’s NFT trading volumes.
Despite Blend’s impressive market dominance, using NFTs as collateral for loans is not without risk.
What to know
With Blend, borrowers pledge their NFTs as security for a loan, set the terms of the loan, and receive Ethereum from a lender while keeping the NFT as collateral.
While it may seem like a dream come true to be able to purchase blue-chip NFTs – or other items – without having the necessary funds upfront, many have already experienced the drawbacks of such practices. For example, what happens if bottom prices suddenly fall?
A situation like this occurred in 2022, when Bored Ape Yacht Club (BAYC) NFT prices fell 80% in six weeks. Those who had overextended themselves by using their monkeys as collateral for loans faced margin calls, a situation in which lenders demand additional collateral to make up for the diminished value of the asset.
But despite the risks, Blur shows no signs of slowing down. The company announced a new feature on May 24 that allows users to “extend [their] loans by paying off only 0.1 ETH instead of paying back the full amount at once.
1/ 🚨FEATURE ANNOUNCEMENT🚨
You can now borrow ETH and repay your loan in small increments over time instead of all at once.
This works for NFTs purchased with BNPL and NFTs you borrow directly from. pic.twitter.com/GtUzAzDBwp
— Blur (@blur_io) May 24, 2023
This strategic move is likely to not only retain existing users, but also continue to attract new participants to the platform. While Blend’s meteoric rise to the NFT loan market is undoubtedly impressive, it is important for participants to understand and navigate the inherent risks associated with using NFTs as loan collateral.
Editor’s Note: This article was written by an nft now contributor in collaboration with OpenAI’s GPT-4.