The non-fungible token (NFT) loan market has experienced a significant surge, with transaction volume exceeding $67 million in the past week, according to Dune Analytics data. This marks a new high in the past six months. Blend, a recently launched lending protocol, accounted for almost 75% of the total loan volume. Blend is a product of NFT marketplace Blur, and was introduced on May 4, 2021. Since then, it has gained significant attention in the industry.
Blend is a unique peer-to-peer perpetual lending protocol that enables borrowers to use their NFTs as collateral without term limits. Developed by Paradigm in collaboration with Blur, the platform aims to match borrowers holding non-fungible collateral with lenders willing to offer the most competitive rates. Loans facilitated by Blend have fixed rates with no expiry dates and are governed by protocol fees controlled by Blur.
Blend differentiates itself from other protocols by matching each loan individually rather than pooling lenders’ funds. This approach supports long-tail collateral, allowing lenders to participate in the complex on- and off-chain protocols and evaluate risks. The platform also aims to provide lenders with the most competitive rates to attract borrowers.
Data from NFT marketplace OpenSea suggests that Blend’s introduction may have contributed to a short-term increase in the floor prices of some blue-chip NFT collections. For instance, since May 1, the floor price of the popular Bored Ape Yacht Club collection rose from 47 ETH (approximately $93,500) to about 50 ETH ($99,400). Similarly, the floor price of the Mutant Ape Yacht Club increased from roughly 10.5 ETH ($20,900) to 11 ETH ($21,900).
Despite the positive impact of NFT lending platforms like Blend on the NFT market, critics argue that they may create liquidity risks if collectors purchase tokens with funds they don’t possess. The potential for market fluctuations and the collapse of cryptocurrency prices add to these concerns.
While Blend has gained significant attention in the industry, it is not the only lending protocol in the NFT market. Other platforms include NFTfi, Niftex, and Nifty Gateway. These platforms also allow borrowers to use their NFTs as collateral for loans.
As the NFT market continues to grow, lending platforms like Blend will play a crucial role in providing liquidity to collectors and investors. However, it is important to note that these platforms come with risks and should be used with caution. It remains to be seen how the NFT loan market will evolve in the coming months and years.