Introduction

The launch of Blend has brought unprecedented liquidity to the NFT lending market, further expanding Blur's NFT territory. How did Blur get to the present step by step, and where will it go?

Since its launch in October last year, Blur has surpassed OpenSea, the leading NFT exchange that has been in operation for five years, in less than two months. In terms of volume, it has always maintained an overwhelming advantage. If only comparing aggregated trading platforms, Blur's victory is even more obvious.

Although OpenSea has an endless stream of challengers, Blur is the only dark horse that makes OpenSea feel the crisis. It can be seen from OpenSea’s announcement of free transaction fees for a limited time and the acquisition of Gem to launch a new product opensea.pro, this time OpenSea is real It hurts.

Blur's growth strategy

As for why Blur can quickly seize the top spot in the NFT exchange, there have been many interpretation articles in the market. The core aspects are the optimization of product design and marketing mechanisms.

The founder of Blur, Tieshun Roquerre, disclosed his real identity and resume in February. He studied at the Massachusetts Institute of Technology and has a successful entrepreneurial experience. In his blog, Tieshun once conducted an in-depth analysis of Douyin’s operating methods, and summarized his own set of methodologies:

• 1. Conduct extensive global competitive product research before designing applications.

• 2. Pick a niche community to focus on first;

• 3. Recruit content creators from existing competitors and other social/physical networks;

• 4. Treat them like royalty and let them create content Until the consumer end itself is big enough;

• 5. Manually highlight and reward good content you want to see more;

• 6. Use remixing and shared meme to increase content creation;

• 7. Use existing social networks to distribute content and look for opportunities to create

• 8. Then, drive the flywheel by improving personalization and vertical scaling.

The shadow of the founder’s methodology can also be seen everywhere in Blur’s growth path. Tieshun Roquerre also mentioned in the interview that his token economics and growth strategy were inspired by Uniswap and Taobao. Blur's rapid success is inseparable from this Internet growth strategy, which is the result of full preparation:

First, maximize the trading experience in product design. The transaction fee and transaction speed issues that NFT traders are most concerned about have been optimized, and optional royalties and 0 handling fees have been introduced. In terms of UI and product function design, the easy-to-view views, indicators, and indicators, the customizable interface, the settings of small tools such as gas fees and floor sweeping, have won the hearts of senior traders everywhere. This should be based on sufficient research on competing products and analysis of user needs.

In addition, in terms of Tieshun's most experienced marketing, Blur first accurately locates the user group, takes the top blue-chip NFT as the preferred community, and attracts senior blue-chip NFT players from mainstream trading platforms such as OpenSea. It can be seen from Blur’s three airdrop rules: First, 12% of tokens are airdropped to NFT active users in the first phase, with more than 70,000 wallet addresses, with an average of 5,000 tokens per wallet. By creating a rich effect, more NFT traders will eyes attracted. Then start to solve the core pain point of NFT transactions - the liquidity problem. The second round of airdrop rules is to encourage pending orders. The closer the pending order price is to the floor price, and the higher the points for pending orders for blue-chip projects, it attracts a large number of blue-chip NFT traders. The third round of airdrop rules is to encourage bids. The closer the bid is to the floor price, the higher the bid The more projects you have, the higher the 24-hour transaction volume of the project, and the higher the points. In addition, the aura of investors also adds a lot to the expectation of token airdrops.

Obviously, Blur encourages users to make markets through the setting of airdrop rules, which provides blue-chip NFT with depth and liquidity higher than other NFT exchanges.

Blend's Leverage Utility

On May 1, Blur launched the NFT peer-to-peer perpetual lending agreement Blend. Looking back at every step of Blur, the launch of Blend is not without trace. As we all know, in addition to liquidity issues, low capital utilization is also a major pain point for NFT holders. The blue-chip NFT is also the type of NFT that all kinds of NFT lending agreements will support due to its stronger consensus. Therefore, launching a lending function for blue-chip NFT holders has become a reasonable choice for Blur.

Most of the existing NFT lending agreements choose the Peer To Peer (Peer To Peer) model or the Peer To Pool (Peer To Pool) model. The funds are collected into the fund pool of the platform, and the borrower borrows money from the fund pool. Both have their own advantages and disadvantages. Compared with the peer-to-pool model, the peer-to-peer model has the advantages that the valuation and loan ratio of NFT can be more flexible and fair, and does not require oracles to feed prices, and the platform does not need to bear the risk of liquidation, but the disadvantage is that it often It takes a long time to wait for a match. The point-to-pool model has the advantage of instant lending, but the disadvantage is that the platform needs to bear the risk of liquidation, and it is difficult to give each NFT a personalized valuation.

Blend chose the peer-to-peer model, because the biggest pain point of the peer-to-peer model is how to solve the problem of matching efficiency, while Blur is good at incentivizing liquidity through the airdrop mechanism.

Blend guides the behavior of lenders through airdrop rules to improve matching efficiency: Lending points have been added to the latest airdrop rules. The higher the loanable amount and the lower the loan interest rate set by the lender, the more points will be awarded. And the funds stored in Blur by the lender can participate in bidding and lending at the same time, which improves the capital efficiency of the lender. As can be seen from the Blur website, there are currently no shortage of lender offers with zero interest rates and high LTVs.

In addition, in the traditional peer-to-peer lending model, the lender lacks an exit mechanism, and is relatively passive and at a disadvantage. Blend has innovated the traditional peer-to-peer lending rules. Blend uses perpetual loans with no maturity date. How do the borrower and the lender withdraw from a loan contract? For the borrower, the NFT loan contract can be terminated by repayment at any time. For the lender, Blend provides a convenient exit mechanism: the lender can trigger the Dutch auction at any time, and the system will find a new lender at a new interest rate. When a new lender is matched, the lender can exit; the lender can also An offer from another lender can be made directly to the vault to skip the auction and exit immediately. If the auction fails, it means that no one in the market is willing to take over the NFT loan, and it will enter the liquidation process. If the borrower does not repay the loan or refinance within 30 hours, the NFT collateral will belong to the lender.

The exit mechanism and airdrop rules make lenders willing to set the loan amount close to the floor price and lower the loan interest rate. Sufficient lender offers make it easier for lenders to exit, and lenders are more willing to provide offers, thus entering a positive cycle of liquidity. In turn, the borrower's capital utilization rate in Blend is much higher than in other lending markets, and sufficient offers can also reduce the risk of NFT being liquidated, thereby attracting more blue-chip NFT holders with borrowing needs to enter Blend.

Of course, this positive cycle is based on the relatively stable or rising price of NFT. When the price of NFT drops rapidly, the positive cycle is likely to accelerate its failure, and the last lender will become the victim.

In order to maintain this set of lending mechanisms, Blend is relatively cautious in choosing blue-chip NFTs. Currently, it only supports 6 blue-chip NFT series with strong consensus, including Cryptopunks, Azuki, Milady, and MutantApeYachtClub, and will gradually increase in the future. NFT series. Blend's lending mechanism improves the utilization rate of funds, which is equivalent to enhancing the leverage of NFT lending, and brings incremental funds to the NFT market to a certain extent. In addition, Blend also includes a down payment purchase function (BNPL) on its lending map, which allows buyers to purchase NFTs in installments, lowering the entry threshold for blue-chip NFTs and further increasing leverage.

At present, the structure of Blur's highly liquid NFT system has gradually become clear. The bottom layer is the basic NFT Listing-Bidding market-making module, which provides NFT pricing and basic liquidity; the upper layer is the NFTfi module built on it, which provides leverage and injects fuel into the market. By solving the pain points of liquidity and integrating the needs of NFT traders, create a one-stop NFT platform that provides users with the best experience, increases user stickiness, gradually builds a moat for it, and injects some into the current sluggish NFT market Vitality helps to make the cake of the NFT market bigger. With the development of the NFT market, it is not ruled out that Blur will add other NFT derivative functions in the future.

Data

At present, Blend has been running for nearly a month, let's take a look at the data:

ccording to the Kanban made by @goyem and @beetle on Dune, since the launch of Blur’s Blend, its trading volume has been overwhelmingly higher than that of other NFT lending platforms.

And as the number of NFT series supported by Blend increases, the trading volume increases significantly. However, the loan transaction volume of a single NFT tends to be stable, the growth rate is not obvious, and the growth rate of new users is also slowing down.

It can be seen that after the launch of Blend, as expected, the liquidity of the NFT lending market has been greatly increased, and as more NFTs are supported, there is still room for growth in the scale of the lending market in the future.

Blur's worry

Although, Blur's airdrop mechanism has successfully attracted blue-chip NFT users in a short period of time, and the transaction volume has been overwhelming. However, the airdrop mechanism is not a long-term solution. After the airdrop rewards are reduced, it is unknown how many loyal users will remain. Under fierce competition, other NFT platforms will also optimize their own products. When Blur's liquidity decreases, its attractiveness compared to other NFT products will also decrease.

Although higher liquidity provides more adequate market pricing, the overall volume of blue-chip NFTs and pro-level players are still limited. When Brother Maji was sniped before, dozens of BAYCs could smash through the Bid wall. Airdrop rewards also provide arbitrage opportunities for robots and market makers. With the market's extensive understanding of the airdrop mechanism and real market-making conditions, more real users may be unwilling to participate in liquidity provision because they are worried about being harvested.

When NFT prices plummeted, greater leverage faced larger-scale liquidation than other lending platforms. It is likely to cause greater volatility in the market, resulting in large-scale losses for Blend lenders.

Compared with Opensea, although Blur has an advantage in transaction volume, it does not support long-tail assets and multi-chains enough. The limited number of blue-chip NFTs also limits the scale expansion of the NFT lending market. However, compared to the construction of liquidity, the expansion of multi-chain and multi-NFT is relatively easy.

In addition, the price of $BLUR tokens has always been a point of complaint from the community. The price of $BLUR is directly related to the enthusiasm of users to participate in liquidity provision. How to adjust the token economy of $BLUR so that it can effectively stimulate liquidity for a longer period of time, maintain the trading activity after the airdrop expectation weakens, and enable it to capture the value of the entire network is a major issue that needs to be studied by the team and the community question.

In short, there is always an end to token airdrops. In the limited airdrop cycle, whether Blur can seize the window period, cultivate user stickiness, attract more mature traders, and successfully build a moat requires continuous attention. But in any case, Blur's innovative liquidity solution has indeed opened up more room for imagination to the sluggish NFT market.