Non-fungible token (NFT) marketplace, Blur, has launched a peer-to-peer lending platform known as Blend. Blend enables traders to lease out their NFT collections to collectors, offering an opportunity to buy blue-chip NFTs with a smaller upfront payment. The platform aims to introduce new buyers to the ecosystem by removing fiscal barriers to entry for popular NFT collections, thereby driving liquidity into the broader NFT ecosystem. Nevertheless, questions have been raised about the impact that Blend could have on NFT markets.
Since the launch of Blend on 1 May, the floor prices of popular NFT collections such as Bored Ape Yacht Club and Mutant Ape Yacht Club have reportedly increased. NFT lending platforms offer collectors the ability to purchase tokens with funds they do not have, raising concerns of liquidity risks in the event of collection floors or cryptocurrency prices falling. Founder of the NFT collection Sky Scooters, Carl_m101, shared a thread that explained some of the associated risks with Blend. He commented that we might have many inexperienced buyers fomo-ing into projects they could not afford before or taking loans on their PFPs to buy more.
While other platforms have introduced lending, Blend is raised as a product directly from Blur, a leading NFT marketplace in terms of volume, according to data from Dune analytics. The concern is that eager users may be more likely to opt into leasing NFTs rather than purchasing tokens at their full price, affecting the market. Moreover, as the NFT market becomes impacted by lenders on platforms like Blend, it may hurt people’s holdings in native tokens such as BLUR, or more negatively impact the greater crypto ecosystem.
According to PirateCode and Cryptobiosis, co-founders of peer-to-peer NFT lending platform BendDAO, while NFT lending generally helps to bolster liquidity and is beneficial for the market, some of Blend’s financing strategies raise questions over whether its “refinancing” process will actually keep lenders safe. Concerns have also been raised over Blend’s loan-to-value (LTV) incentives. They suggest that unchanged, the current incentive design could lead to bad outcomes for borrowers and much higher market volatility. Other peer-to-peer protocols tend to be more borrower-friendly and lead to healthier loan markets.
In conclusion, while the emergence of NFT lending platforms like Blend helps to increase market liquidity, care should be taken, and risks need to be considered. The process of taking out loans to purchase an NFT on the platform, risks drawing inexperienced buyers into high-risk loans for volatile digital assets. All in all, this exemplifies the challenge of practices such as NFT lending, which requires it to be done with caution.
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According to https://www.coindesk.com/web3/2023/05/05/nft-lending-platform-blend-sparks-concerns-over-ecosystem-liquidity/
The material in this article is written on the basis of another article.