After upstaging OpenSea as the world’s most active NFT marketplace - Blur isn’t done making big moves. The NFT platform partnered with venture capital firm Paradigm to launch its NFT lending protocol Blend.

Unsurprisingly, Blend took off after its early May launch to become the top dog among lending protocols.  But what exactly has it brought to the NFT community with its new platform? In this article, we’re going to look past the numbers to see everything you need to know about Blend, the good, the bad, and the ugly.

How Blend Presents NFT Lending

Blur did not pioneer the concept of NFT lending which involves letting people borrow money (in crypto) with their non-fungible tokens as collateral. With Blend, Blur takes the general concept of NFT lending and rolls it into two awesome offerings.

First, users have the regular option, that is you can use your NFTs as collateral to get some real Ethereum (ETH). It's like a traditional loan, but instead of giving your car or house as collateral, you use your non-fungible tokens.

Option two is kind of the reverse, Blend lets you get your hands on extremely valuable non-fungible tokens from top collections. Here’s the cincher, you get to have it even if you don't have all the money upfront. It's like a buy-now-pay-later deal but for NFTs. You put down a small down payment, and voila, you’ve got a non-fungible token that plays in the big leagues.

The Blend’s Lending Model

Usually, when you borrow money, there’s a due date by which you have to pay it back. However, Blend works differently. Blend loans have no expiration date, which means there's no specific deadline for you to repay the loan.

Instead, the platform keeps your borrowing position open for as long as there's a lender willing to lend you that amount of money against your NFT collateral. It's like a continuous arrangement and if a lender decides they want to end the loan before the borrower pays it back, they can auction it off. This way new lenders can take over the loan at an interest rate that suits them. But, if no one bids for the loan during the auction, the original lender gets to keep the collateral NFT.

It’s a very flexible loan model and it gives the borrower a lot of freedom. However, it’s important to know that the interest on the loan continues to pile up as it stays unpaid.  So, the longer you take to repay, the more interest you will accumulate.

The Positives of Blend

According to the Blur team, their platform will help unlock liquidity for NFTs. For starters, they have made the market more accessible. Their buy-now-pay-later offering lowers the threshold for potential NFT holders to enter the space.

That’s not all though, Blend allows existing NFT holders to leverage the value tied up in their tokens. Non-fungible tokens can be less liquid compared to assets like cash or stock because an NFT’s value can be subjective. So if the holder isn’t selling it, the token is usually just hanging in their wallet - nothing like a bored ape to brighten up the place.

Blend provides immediate access to liquidity without the need to sell. NFT owners can harness the value of their tokens while still retaining ownership. This makes for an interesting way to rejuvenate the NFT ecosystem. There’s more activity and that’s great considering the past few months have been sort of slow.

But is this enough?

The Unfavourable Side Of NFT Lending; How Blur Has Sparked Controversy

There’s a downside to most things, and many in the Web3 ecosystem seem to think Blur’s ups do not outweigh the downs. Here are some of the concerns people have shared online since Blend went live:

To begin with, larger investors have the upper hand in this arrangement and may exploit smaller investors in this dynamic. Critics argue that whales with influence could lend Ethereum to smaller investors, who then use the funds to purchase blue-chip tokens. However, if the whales purposely manipulate the market to drive down the NFT prices, these small-scale participants could lose their funds, while the whales profit from both the borrowed Ethereum and the reclaimed NFTs.

Another worry is that if the value of NFTs or cryptocurrencies drops, borrowers might struggle to repay their loans. In such a situation, their NFTs could be taken away and many new owners might opt to sell, flooding the market with more NFTs for sale. When there are more NFTs available than people interested in buying, it can bring down the prices and overall market value.

Additionally, there’s the question of what happens should prices go up. Will Blur come knocking, asking people to repay more than they originally borrowed? There is also the potential for fraudulent activities like wash trading which is where someone artificially trades with themselves to create the appearance of increased activity or value.

Blend’s ties to Blur are also problematic because the NFT platform has a user base that is actively involved in the NFT space. These participants may prefer to engage in NFT leasing rather than buy tokens at full price - a preference that could upset the market dynamics.

Final Thoughts

Blur’s latest move may stir the NFT market as a necessary disruption to reset and revitalize the space. Undoubtedly, new opportunities for profit and liquidity are major wins, but we cannot disregard the potential problems. Blur hit the ground running with Blend and is still going hard. Whether the platform will be the hero or chaotic wild card of the growing NFT ecosystem is something we’ll all become privy to with time.

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