Gondi, a decentralized Peer-to-Peer NFT lending protocol, just completed a $5.35 million seed round of funding. Both are NFT P2P lending platforms, the lending models of Gondi and Blend are very different, let us take a look at the design features of their lending models.

1. Lending Model Design

1.1 Blend's Lending Model

Since Blend currently only supports the lending of a few blue-chip NFTs, the lender will give offers for these specific NFTs, and NFT holders can observe the quotations of different lenders in the market

At the same time, Blend removes the maturity setting in traditional P2P lending. Only when the lender recovers the loan, initiates a refinancing auction, or the borrower closes the position, will the transaction on the chain occur. Due to the setup of the refinancing auction, the loan can be taken over by a new lender because the borrowing has virtually no maturity date.

After the lender and borrow complete the loan process, the lender can withdraw the loan at any time, and the borrower will have 24 hours to repay. If the borrower does not complete the repayment within 24 hours, a "refinancing auction" will be triggered, and Blend will help the borrower find a suitable lender through the auction in the market:

• "Refinancing " is a Dutch-style interest rate auction, which means that the interest rate will gradually increase from 0% to 1000% over time, and the new lender can offer at any time. The winner of the auction is the new lender, and the new lender will help the borrower repay the old lender, thereby continuing the borrower's borrowing status. But the borrower will be forced to accept the terms of the new lender (pay higher interest on the loan).

• If the borrower is liquidated without a new lender taking over by 1000% (within 30 hours of loan recovery), the lender will obtain the NFT collateralized by the borrower.

1.2 Gondi's Lending Model

The NFT holder in Gondi will receive a quote from the lender for this specific NFT on the platform. The quote needs to contain three key terms:

• principal

• APY

• Duartion The same lender can issue different offers for the same NFT. Borrowers can choose the offer that suits them best, get a loan, and the collateral will be automatically transferred to the Gondi protocol. Borrowers in Gondi can make early repayments at any time, and only need to pay the corresponding accrued interest.

In Gondi, any potential lender can take over the loan by initiating a "refinance", whereas in Blend, the "refinance" is initiated by the original lender. A Gondi "refinance" can be a refinance of a portion of the loan or a refinance of the entire loan, and the potential lender must "refinance" the proposed terms strictly better than the original loan terms, means that none of the following is worse than the existing terms, and at least one of them is better:

• Reduced annual interest rate: A lower annual interest rate can reduce interest costs during the loan term

• Duration extension: The extension of the loan duration provides borrowers with greater flexibility in repayment timing

• Principal adjustment: the principal amount can be increased, provided that the daily interest is reduced proportionally

Here we use an example of the instant refinance to illustrate the refinancing process: First, Chris listed his own NFT on the platform, got different offers from three people, and chose Bob’s quotation from them. The terms are as follows:

• Principle： 10 wETH

• Durantion：30 days

• APR： 22% （daily interest rate 0.0602%） After accepting the offer, Bob transfers 10 wETH to Chris, while Chris’s NFT is transferred to the Gondi smart contract, and he has no right to use it until the loan is repaid

After 10 days, Alice refinances the loan with better terms, and the new loan is:

• Principle： 10 wETH

• Duration: 20 days（same due date as previous terms）

• APR： 17% （daily interest rate 0.0465%） Alice needs to transfer 10 wETH and accrued interest 0.0602wETH （0.0602%1010） to Bob to take over the loan

Ten days later, Mandy refinances the loan with new terms of:

• Principle： 11 wETH

• Durantion：30 days

• APR： 10% （daily interest rate 0.0301%）

In order to take ownership of this loan, Mandy needs to pay the previous creditor Alice :

10 wETH + 0.0602 wETH(interest for Bob) + 0.0465 wETH (0.0465%1010: interest for Alice)= 10.1068 wETH

At the same time, 1wETH needs to be paid to the borrower Chris as the principal of growth (Chris can choose to repay the 1wETH immediately if he does not need the excess principal)

After ten days, if Chris chooses to repay the loan early, he needs to repay:

Principle: 11 wETH 0.0602 wETH accured interest（for Bob）

0.0465 wETH accured interest（for Alice）

0.0301 wETH accured interest（for Mandy）

After repayment, he will regain his NFT

In addition to the refinancing initiated by the potential lender, everyone including the borrower can initiate a "renegotiation". Unlike the "refinancing" terms that must be strictly superior to the original terms, the "renegotiation" terms are not restricted, and the "renegotiation" offer is initiated. The party initiating a "renegotiation" offer can choose to pay a negotiation fee as an incentive for the other party to accept the new terms.

2. Handling of breach of contract

In Gondi, if the principal and accrued interest are not repaid on the due date, it is considered a default and the ownership of the collateral will be lost.

If there is only one creditor for this NFT, then the NFT will automatically be attributed to that creditor.

If the NFT has multiple creditors (partial refinancing was previously initiated), a 72-hour English auction will be launched for the NFT: participants bid openly, and each bid requires 5% higher than the previous one. If a new bid is made when less than 10 minutes remain, the auction time will be extended by 10 minutes. The highest bidder wins the NFT at the end of the auction.

After the auction, the proceeds of the auction will be distributed among the creditors. Three important variables need to be considered in the distribution:

• Principal loan->net loan to the borrower

• Interest cost->the amount paid by the lender for the previously accrued interest

• Pending interest -> Amount of accrued interest owed and not paid by the due date

Distribution of Auction Proceeds:

• If proceeds < (Principal + Interest Cost + All Pending Interest) , then proceeds from the NFT auction will be distributed to lenders proportionally based on (Principal + Interest Cost)

• If proceeds ≥ (Principal + Interest Cost + All Pending Interest), then each lender gets the amount owed, including pending interest. The remainder is prorated based on (Principal + Interest Cost)

3. Conclusion

Compared with the overall design of Blend, which is biased towards the lender, Gondi's lending model is relatively inclined to the borrower.

Through "refinancing", the borrower can continue to enjoy better loan terms, while the lender lacks some initiative. As long as someone uses the instant refinancing, then loan will be transferred immediately. Since this model does not use oracle quotes to liquidate collateral, the lender needs to face a high risk of default. Once the price of NFT falls, the borrower's willingness to default increases, and the lender will suffer asset losses.