The NFT Lending market has shown rapid development over 2023. In particular, Blend (Blur Lending) has rapidly emerged as a dominant force in the NFT-Fi space, commanding over 95% of the NFT Lending market. Range is excited to announce the launch of our new NFT Finance vault on Blend which allow users to get exposure to new yield opportunities in the field of NFT Lending.
What is Blend?
Blend, also known as Blur Lending, is a Peer-to-Peer Perpetual Lending Protocol designed specifically for Non-Fungible Tokens (NFTs). Since its inception on May 1st, 2023, Blend has rapidly established itself as a prominent player in the emerging “NFT-Fi” space commanding over 90% of the NFT Lending market. Blend supports 13 diverse NFT collections, with Azuki and Beanz gaining popularity.
Blend simplifies NFT lending through a transparent process:
- Deposit funds and signs an off-chain offer that specifies expiration time, interest rate, and preferred collateral NFTs.
- Choose a loan amongst offers from Lenders.
- Execute a single on-chain transaction to secure the loan against their NFT.
3. Risk Mitigation:
- Blend introduces Dutch auctions for refinancing, allowing lenders to liquidate positions at any time in case of NFT value fluctuations.
- Perpetual expiration times and P2P settlement enhance flexibility.
The potential of the NFT Lending market is still relatively untapped. Range has actively researched this market and the avenues to generate alpha yield: engaging in refinancing loan offers on the Blend platform.
Range’s Blend Vault
Range Protocol strategically engages in Blend’s lending market, recognizing opportunities for substantial returns through loan refinancing.
Offering loans or refinancing on Blend involves risk, primarily tied to NFT collateral value. Our strategy provider “Tokka Labs” employs a meticulous risk-monitoring strategy, including a Dutch auction exit plan for active loans. The introduction of a rigorous model based on NFT price dynamics enhances risk assessment for loan initiation and refinancing.
Liquidity Providers (LPs)
Mint (Deposit ETH)
“Mint” occurs when an LP deposits ETH into the vault contract, which, in turn, mints vault shares representing their ownership in the vault. The number of shares minted depends on the ratio between the user’s ETH deposit and the vault’s underlying balance, converted to ETH.
The deposited ETH remains idle in the vault contract until the strategist uses them for refinancing loans on Blend.
Burn (Withdraw ETH)
LPs can “Burn” vault shares to redeem their share of the ETH balance in the vault. At any time, the vault’s assets would be 3 states -
- Passive ETH — Blur Pool ETH Balance of the vault, available for instant withdrawal
- ETH in Active Loans — ETH lent against NFTs on Blend in active loans.
- NFTs in Possession — NFTs in possession where no one refinanced the Blend loan after the vault put the active loan to auction.
Vault Manager tries to maintain 10% of the vault holdings as passive balance for LPs to withdraw. You can withdraw more assets later when the vault is rebalanced.
Conclusion: Navigating the NFT Market Effectively
Range Protocol, as a pioneer in defi liquidity provisioning strategies, brings innovation to the NFT lending landscape with its vault on top of Blend. Through data-driven models and robust risk management, Range Protocol aims to navigate the volatile NFT market successfully and make this asset segment more liquid.
Stay tuned for more updates as we drop more alpha soon with a detailed research article for the strategy.