Beginners Guide on BendDAO (BEND): Protocol for Web3 Data Liquidity

UTC by John Caroline · 7 min read
Beginners Guide on BendDAO (BEND): Protocol for Web3 Data Liquidity
Photo: Unsplash

The industry is stormed with unique projects that are seeking to provide users with top-notch liquidity services for NFT users, BendDAO is one such project. Here’s a detailed guide to the protocol.

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

BendDAO Overview

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 return, they have the opportunity to take loans in Ethereum (ETH).

Investors and users who have valuable NFTs in their wallets but are financially challenged can easily utilize the lending services proposed by BEND while they deposit their NFTs as collateral. Basically, the BendDAO crypto protocol supports instant loans backed by NFT collateral, NFT down payments, and collateral listing. BendDAO is committed to offering a one-stop solution for NFT liquidity to users within a closed loop. This can be attributed to the flexibility for using the services of listing, down payment, and borrowing. The BendDAO crypto protocol is known and widely adopted for supporting NFT collateral-backed quick loans, NFT down payments, and collateral listing.

BendDAO’s Origin

After significant support from renowned investment and credible personalities and institutions, BendDAO (BEND) was launched in the third quarter of 2021. Some of the project’s notable supporters 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 to build an entire economy of decentralized assets, technologies, and organizations. In a bid to achieve its determined goal, the DAO has been seen making collaborations with specialized autonomous entities. BendDAO integrates with existing projects through token swaps and tends to avoid bottlenecking of decisions by limiting governance to mandate and funding approval.

BendDAO’s Key Features

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

  • NFT-backed quick loans. NFT holders can use NFT 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 leverages.
  • Collateral listing. NFT owners or sellers can choose to receive up to 40% of the floor price upon listing for sale. This instant liquidity is supported by the Instant NFT-backed Loan feature. The buyer will pay off the loan including interest after the deal.
  • Support for down payments on NFTs. Buyers can purchase bluechip NFTs from major NFT marketplaces with only a minimum down payment of 60% depending on the actual price while initiating a flash loan from AAVE to cover the remainder. The borrowed amount of the flash loan will be repaid through the instant NFT-backed loan on BendDAO. The buyer then automatically becomes the borrower.

BendDAO Products

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

  • BendETH. BendDAO (BEND) protocol relies on a similar interest model like the aToken on AAVE. BendETH on Bend protocol serves as the interest-bearing token, which can be minted and burned on the occasion of 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 working of BendDAO decentralized p2p or peer-to-pool lending application is boundNFT. It is the debt NFT minted on BendDAO when borrowers deposit an NFT on the platform. The BendDAO protocol can use boundNFT for accessing vault functionality alongside comprehensive security without compromising on the digital appearance of NFTs. BoundNFTs feature similar token ID and metadata as the original NFT, thereby implying ease of use as social media PFP. Since BoundNFTs are non-approvable and non-transferable, you can have the assurance of safety from theft. The boundNFT could serve some interesting utilities, such as access to any airdrop and claimable or mintable assets for the concerned NFT. In addition, the flash claim facility in boundNFT allows owners to collect NFT rewards from different protocols.The interest rate model is also a critical highlight for understanding ‘what is BendDAO’ and its value advantages. It has been calibrated for managing liquidity risks alongside optimizing utilization. BendDAO determines the borrow interest rates based on the availability of capital in the lending pool.
  • Interest rate model. The interest rate model is also a critical highlight for understanding ‘what is BendDAO’ and its value advantages. It has been calibrated for managing liquidity risks alongside optimizing utilization. BendDAO determines the borrow interest rates based on the availability of capital in the lending pool. The interest rate model serves effective results in managing liquidity risks by leveraging user incentives as sources of liquidity. The interest rate model of BendDAO offers lower interest rates for encouraging loans due to the availability of capital. In the scarcity of capital, the protocol imposes higher interest rates which would call for faster loan repayments alongside interest deposits.

Advantages of BendDAO

The advantages of BendDAO to NFT users are enormous, a few of them are highlighted below.

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

Challenges of BendDAO

BendDAO in its effort to provide optimum liquidity services for users is faced with certain challenges which tend to affect its efficiency. One notable issue with the DAO’s system operation is that it encounters situations where the borrowers refuse to pay back their loans. Meanwhile, the NFTs being auctioned off as collateral aren’t being bought because of the high prices that have been set. If sold for lesser amounts, the value may not be able to cover the loan outstanding.

Also, there are five primary key risk factors for the availability of NFT on the BendDAO system. They include:

  1. Many NFT revenue or trading volumes.
  2. Asset value, also known as the asset’s mean sales value.
  3. Numerous distinctive wallets are engaging with NFT 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 bidding and other NFT-related uses.

BEND Token

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 the BEND tokens is allocated as follows:

  • Developer team – 21%.
  • Initial fair-launch offering – 10%.
  • Treasury Reserve – 21%.
  • Airdrops – 5%.
  • Uniswap LP incentives through governance – 3%.
  • Incentives for lending or borrowing – 40%.

Conclusion

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

It has become a preferred choice for holders of non-fungible tokens as they do not need to fractionalize their holdings to benefit from intended liquidity. Hence, 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.

Share:

FAQ

What is BendDAO?

BendDAO is the first decentralized peer-to-pool liquidity protocol for non-fungible tokens.

How does BendDAO work?

BendDAO allows NFT owners to deposit their assets as collateral on its platform while in return, it offers them the opportunity to borrow loans in ETH.

What are the products offered by BendDAO?

Some of the notable products featured on the protocol include NFT-backed quick loans, collateral listing, and down payments on NFTs.

Why is BendDAO a concern for NFT projects?

BendDAO is a concern for NFT projects because these projects have their values tied to the NFT auctions featured on the protocol.

How does BendDAO stay secure?

BendDAO adopts a mechanism that allows users to repay their loans within 48 hours to avoid losses. This way it guarantees adequate protection for its liquidity.

What is BEND token?

BEND is the governance token of the BendDAO protocol.

guides
Complete Guide On Nexo Coin (NEXO) February 1st, 2023

Yet to know about the well-performing platform Nexo and its native token (NEXO)? Here's a guide to help you learn about its featur...

Ultimate Guide to Blockchain Security January 29th, 2023

The consistent surge in cyber-attacks has triggered concerns for blockchain security. Here is all you need to know about blockchai...