As the popularity of non-fungible tokens (NFTs) continues to surge, NFT marketplace Blur has entered the NFT lending space with Blend, a new peer-to-peer lending platform that allows traders to lease their NFTs to collectors. Although it aims to drive liquidity into the NFT ecosystem, concerns have been raised about its impact on the broader NFT markets.

Lowering Barriers to Entry

By offering a way for buyers to acquire blue-chip NFTs with smaller upfront payments, Blend is designed to help introduce new buyers to the ecosystem while also driving liquidity by increasing the number of traders and transactions. Since its launch on May 1, Blend appears to have contributed to a short-term rise in the floor prices of some blue-chip NFT collections.

Risks of NFT Lending Platforms

While lending platforms like Blend can be beneficial to the market and help bolster liquidity, concerns have been raised over the potential liquidity risks down the line when collection floors or cryptocurrency prices crumble. Twitter user Carl_m101, founder of NFT collection Sky Scooters, shared a thread explaining some of the risks of Blend, where after a large price floor jump, a “margin call” event might follow where traders sell off their NFTs and, as a result, end up tanking the market.

Concerns Over Blend

The concern with Blend is that it’s a product directly from Blur, one of the leading NFT marketplaces in terms of trading volume. Its already-eager users may be more likely to opt into leasing NFTs rather than purchasing tokens at their full price, which may hurt the market and negatively impact the native BLUR token. The viability of the refinancing process introduced by Blend remains uncertain, and it incentivizes traders to take out loans at loan-to-value (LTV), which is troublesome for highly volatile digital assets.

Conclusion

Although Blend offers a way for buyers to acquire blue-chip NFTs with smaller upfront payments and aims to drive liquidity into the NFT ecosystem, concerns have been raised about its impact on the broader NFT markets. While lending platforms can be beneficial to the market and help bolster liquidity, traders should be aware of the potential risks involved and exercise caution when using these platforms. As the NFT market continues to evolve, it is important for market participants to stay informed and aware of potential risks and opportunities.