Blur’s liquidity heist on OpenSea continues as each project competes in royalties, fees and decentralized governance.
The nonfungible token (NFT) marketplace Blur has seen its trading volumes and total sell-side liquidity skyrocket since conducting an airdrop on Feb. 14. The reason for the spike could be the start of Season 2 of its airdrops, where 10% of the BLUR token’s total supply will be distributed to certain users based on their activity. The team allocated 12% toward an early user airdrop in the first season that ran from the marketplace’s gated launch in March 2022 through February 2023.
Blur trading volumes (in ETH). Source: Dune
Blur has made a significant dent in OpenSea’s position as the leading marketplace. Analytics from data scientist Hildobby show that Blur is eating into the market share of OpenSea and other aggregators like X2Y2. Blur’s incentive program and advanced NFT trading features are causing users to shift to the platform.
The share of NFT marketplaces by trading volume. Source: Dune
OpenSea feels the heat
Following Blur’s example, OpenSea discontinued its marketplace fee of 2.5% per sale. The fact that OpenSea was willing to let go a significant chunk of its earnings — around $336.8 million for one year — suggests that Blur’s growth threatens it.
The two NFT giants also recently locked horns on the critical issue recently of creator royalties. By restricting the ability to earn full creator royalties on both platforms, creators have to choose between Blur and OpenSea to list collections.
Pacman, the founder of Blur, recently told Cointelegraph’s Hashing It Out podcast that OpenSea started the spat first and that Blur was forced to retaliate with restrictive features like limited royalties on Blur if a collection is also listed on OpenSea. However, Pacman said he ideally wants creators to be able to earn royalties on both platforms. It appears that he wants OpenSea to succumb to the competition and accommodate the aggregator progressively instead of fighting it.
Blur has also incentivized creators and users through its BLUR token, which was also used a way to compensate creators for the missed earnings they would have made from royalties on the platform back when it didn’t support them. NFT traders, on the other hand, receive token rewards for adding liquidity to the platform by listing NFTs. So far, the plan has worked successfully, as Blur’s liquidity has skyrocketed since the token launch.
Blur has also earned the reputation of being a “marketplace for pro traders” thanks to its innovative features for experienced NFT traders, including sweep optimization, near-instant update of aggregate price, filtering based on rarity score and gas optimization.
Blur’s success is contingent on governance and upgrades
There are two paths that the BLUR token can take from here: either stay a non-yielding token with governance features like Uniswap’s UNI
or shift to allocate value accrual methods to tokenholders.
In its current state, BLUR is similar to UNI, which puts it at a disadvantage because the market has moved on to concepts of real yields — for example, GMX and SUSHI
— or other innovative value accrual methods — like Curve’s voting escrow model — that encourage buying.
UNI token’s underperformance relative to Bitcoin in the recent January–February crypto rally is a testament to the fact that the market is discounting non-yielding tokens. UNI rose by 40% in 2023 to the top against Bitcoin’s 50% rise.
BTC/USD and UNI/USD price action. Source: TradingView
Since its inception, Blur has charged zero fees on its platform. Pacman also discussed the potential value accrual to BLUR holders by flipping the “fee switch” and directing rewards toward holders.
Staking is also a widely implemented feature that protocols use to deter selling by providing inflationary rewards. While this strategy helps retain investors to some extent, without real yields it would likely do more harm in the long run through inflation.
BLUR’s performance will be highly contingent on the decisions voted on by the BlueDAO. Until then, Blur’s growth in the NFT marketplace will likely influence BLUR’s price because investors may not want to give up the opportunity of exposure to the niche market leader. However, the overall trajectory could remain on the downside, similar to what DYDX experienced in 2022.
DYDX price chart. Source: CoinGecko
The decentralized derivatives exchange is close to implementing significant changes to its platform, including improved value accrual to DYDX holders. However, while the dYdX team is working toward its v4 launch, platforms like GMX and Gains Network are benefiting from the Ethereum layer-2 liquidity and LP-focused rewards and incentives.
Since the Feb. 14. airdrop, BLUR’s selling pressure has subsided considerably. Dune data scientist Panda Jackson’s Blur analytics page shows that 76.7% of BLUR airdrop receivers have sold their tokens.
This suggests that selling pressure from airdrop receivers should end soon. However, the token’s vesting schedule risks dilution from investor and team token unlocks starting in June 2023 and the distribution of Season 2 rewards sometime later this year.
BLUR token release schedule. Source: Blur Foundation
Blur is well-positioned to capture a huge market upside, especially considering OpenSea’s last raise in January 2022 valued the company at $13.3 billion. The fully diluted market capitalization of Blur is currently 5x less at $2.7 billion. The project can generate significant buying demand for its token by improving the value accrual.