Liquidity is an essential factor that cannot be ignored when determining the value and value of non-fungible tokens (NFTs). Concerns to address this issue have caused startups to venture into the industry with innovative liquidity products. As such, the BendDAO (BEND) NFT liquidity algorithm falls into the category of a notable initiative that has entered the NFT space to address liquidity concerns. BendDAO provides an NFT liquidity mechanism that seeks to meet the needs of NFT users and help resolve liquidity issues.

Summary of BendDAO

BendDAO is the first decentralized peer-to-pool liquidity protocol for non-fungible tokens. The protocol allows NFT owners to deposit their assets as collateral on its platform. In exchange, they have the opportunity to borrow in Ethereum (ETH).

Investors and users who have valuable NFTs in their wallets but are in financial trouble can easily use BEND’s proposed lending services while depositing their NFTs as collateral. Basically, the BendDAO crypto protocol supports instant NFT collateral-backed loans, NFT down payments, and collateral listing. BendDAO is committed to offering a comprehensive solution for NFT liquidity to users within a closed loop. This can be attributed to the flexibility to use listing, down payment and loan services. The BendDAO cryptographic protocol is known and widely adopted to support fast NFT collateral-backed loans, NFT down payments, and collateral listing.

Origin of BendDAO

After significant support from reputable investments and credible personalities and institutions, BendDAO (BEND) was launched in Q3 2021. Some of the notable supporters of the project include Peter Thiel, Founders Fund, Bybit, Pantera, Spartan Fund, Sushiswap, Polygon, Dragonfly. Capital, and many others.

After the launch of BendDAO on August 3, 2021, the DAO began to pursue the mission of building an entire economy of decentralized assets, technologies, and organizations. In its eagerness to achieve the objective that has been proposed, the DAO has been seen collaborating with specialized regional entities. BendDAO integrates with existing projects via token swaps and tends to avoid decision bottlenecks by limiting governance to mandate and funding approval.

BendDAO Key Features

BendDAO has become a go-to platform for NFT holders looking for effective means to address liquidity issues. Some of the main features of BendDAO include the following:

• Quick loans backed by NFT. NFT holders can use NFTs as collateral to borrow ETH through a lending pool, while depositors provide ETH liquidity to earn interest. This is the main product of BendDAO that can help users to trade NFTs with leverage.
• List of guarantees. NFT owners or sellers can choose to receive up to 40% of the minimum price at the time of sale. This instant liquidity is supported by the NFT-backed instant lending feature. The buyer will repay the loan, including interest, after the deal.
• Support for initial payments in NFT. Buyers can purchase blue-chip NFTs on major NFT marketplaces with just a minimum 60% down payment based on actual price while initiating an AAVE Quick Loan to cover the rest. The amount borrowed from the flash loan will be repaid via the NFT-backed instant loan on BendDAO. The buyer then automatically becomes the borrower.

BendDAO Products

The effectiveness of BendDAO’s services can also be attributed to some of the products featured on DAO, which include BendETH, BoundNFT, and the interest rate model.

• doubleETH. The BendDAO (BEND) protocol is based on an interest model similar to that of aToken in AAVE. The BendETH on Bend protocol serves as an interest-bearing token that can be minted and burned for deposits and withdrawals. The value of the BendETH token corresponds to the deposited asset in a 1:1 ratio while ensuring safe storage, transfer and trading.
• BoundNFT. The next crucial highlight in the BendDAO decentralized or peer-to-pool p2p lending application working is bindNFT. It is NFT debt minted on BendDAO when borrowers deposit an NFT on the platform. The BendDAO protocol can use boundNFT to access vault functionality along with comprehensive security without compromising the digital appearance of NFTs. BoundNFTs feature similar token identification and metadata as the original NFT, which implies ease of use as a social media PFP. Since BoundNFTs cannot be approved or transferred, you can rest assured that you are protected from theft. The bound NFT could have some interesting utilities, such as access to any airdrop and claimable or mineable assets for the NFT in question. Additionally, the enboundNFT fast claim feature allows owners to collect NFT rewards from different protocols. The interest rate model is also a fundamental aspect to understand “what is BendDAO” and its value advantages. It has been calibrated to manage liquidity risks along with optimizing utilization. BendDAO determines loan interest rates based on the availability of capital in the loan pool.
• Interest rate model. The interest rate model is also a fundamental aspect to understand “what is BendDAO” and its value advantages. It has been calibrated to manage liquidity risks along with optimizing utilization. BendDAO determines loan interest rates based on the availability of capital in the loan pool. The interest rate model offers effective results in liquidity risk management by taking advantage of user incentives as sources of liquidity. BendDAO’s interest rate model offers lower interest rates to incentivize borrowing due to the availability of capital. In the face of capital shortages, the protocol imposes higher interest rates that would require faster loan repayments along with interest deposits.

Advantages of BendDAO

The advantages of BendDAO for NFT users are huge, some of them are highlighted below.

1. The DAO guarantees a 24-hour protection service for settlement within its ecosystem.
2. BendDAO users do not have to worry about the dangers of theft or manipulation operations that could put their wealth at risk.
3. It guarantees the same airdrop rights for borrowers.
4. BEND token holders enjoy the right to vote and decide which NFT can act as collateral.
5. Its token holders are also entitled to a 100% share of the revenue generated in the protocol.

BendDAO Challenges

BendDAO in its effort to provide optimal liquidity services for users faces certain challenges that tend to affect its efficiency. One notable problem with the operation of the DAO system is that it encounters situations where borrowers refuse to repay their loans. Meanwhile, NFTs that are auctioned off as collateral are not being bought due to the high prices that have been set. If it is sold for lesser amounts, the value may not be able to cover the outstanding loan.

Furthermore, there are five main key risk factors for the availability of NFTs in the BendDAO system. They include:

1. Lots of NFT income or trading volumes.
2. Value of the asset, also known as average sale value of the asset.
3. Numerous distinctive wallets are interacting with NFTs in dApps from the NFT platform.
4. Customer retention, or the proportion of days within the particular time of active status.
5. NFT-related interactions include counting dApp activities with offers and other NFT-related usage.

BEND tab

BEND is the governance token of the BendDAO protocol. It has a circulating supply of 382,458,902 BEND Coins and a maximum supply of 10,000,000,000 BEND Coins. The distribution of BEND tokens is assigned as follows:

• Developer team: 21%.
• Initial fair launch offer: 10%.
• Treasury Reserve – 21%.
• Airdrops – 5%.
• Uniswap LP incentives through governance: 3%.
• Incentives to lend or borrow – 40%.

conclusion

The BendDAO NFT liquidity solution protocol has arguably played a very important role in the NFT sector as it has effectively addressed the problem of NFT liquidity without causing NFTs to crash. Interestingly, BendDAO (BEND) has achieved this despite still being in its early development stage.

It has become the preferred choice for non-fungible token holders as they do not need to split up their holdings to benefit from the expected liquidity. Therefore, it is believed that the BendDAO protocol is capable of producing positive results for the evolution of NFT liquidity. This is accompanied by the certainty of a robust governance structure and even a threat assessment methodology.