The Web3 landscape is changing. With the explosive rise of the NFT market and Blur aggregator in recent weeks and months, OpenSea now finds itself in an unfamiliar and uncomfortable position: it now has a legitimate contender for the title of NFT market leader.
If Blur’s ever-growing presence since its launch last year wasn’t indicative of this change, the past month certainly has been. In the last 30 days alone, the platform has made $1.24 billion in trading volume. And OpenSea? Almost $383 million. Following the Blur token launch on February 14, activity on the platform skyrocketed. Every day since then, the market has surpassed OpenSea in trading volume for as little as $35 million and as much as $100 million.
Given OpenSea’s historical supremacy, those numbers feel as if they were backwards. So how did a platform that has dominated the NFT ecosystem for the last five years by a significant margin find itself in this position? And what does Blur’s success mean for the broader Web3 ecosystem?
Up in a blur
It is crucial to note the important ways in which OpenSea and Blur differ. The former is intended to appeal to as broad a Web3 demographic as possible. While it provides tools for professional NFT traders (whose focus is trading digital assets for profit), it primarily appeals to retail buyers. Retail buyers are more interested in buying NFTs for their art or are more likely to buy individual digital tokens here and there, but not in significantly high volumes or frequencies.
Blur has made a name for itself by exclusively appealing to that professional demographic. The founder of the platform, Pacman, admitted it in an interview in early January with token terminal, and it’s a strategy the company has become almost absurdly good at executing. If it sounds strange that a platform with a narrower demographic is leaving Amazon behind from NFTs, keep in mind that this niche group has considerable financial influence in the ecosystem.
Remember the insanely high levels of trading volume that Blur has been seeing lately? Ecosystem observers have noticed that 50 percent of that volume comes from less than 300 wallets. On February 21, for example, just eight wallets on the platform traded 4000 ETH or more on Blur, which rivals volume levels the entirety of OpenSea he saw during his worst performing days.
The high volume coming out of the platform tends to center around a handful of coveted, high profile NFT projects whose names will not surprise you: Bored Ape Yacht Club, Azuki, Mutant Ape Yacht Club, Pudgy Penguins, Moonbirds, Doodles and the like.
How Blur encourages loyalty
One of the main reasons professional traders flock to Blur is its promise to users that it will reward them handsomely with future airdrops of the $BLUR token, totaling some $300 million during their next giving “season”. At the time of writing, the token it has a fully diluted market cap of $2.5 billion, and the Blur team is more than willing to throw its financial weight to entice NFT traders to stick with them.
Loyalty points are one of Blur’s methods of doing this. While the platform allows users to list their NFTs on other marketplaces, those that are explicitly listed on Blur will receive a 100 percent loyalty score. More loyalty equals more rewards in the future.
It’s not just Blur’s innovations that have attracted users. Collector frustration with OpenSea has always been prevalent in the NFT space, if only by virtue of the platform being the biggest name in the game. More legitimately, Web3 enthusiasts have been annoyed by the market’s ever-changing stance on creator royalties.
Until last October, OpenSea was the platform that had paid the highest amount of royalties to creators by a wide margin, but a controversial November announcement from the company sparked what essentially amounted to the unionization movement for Web3. Beyond the royalty debate, it’s no exaggeration to say that almost no one has been satisfied with the platform’s stolen items policy, the marketplace’s reputation for not performing well in times of high traffic, and its seemingly centralized approach to, well, basically everything.
So it didn’t help when Blur swooped in with surgical precision to seduce merchants looking for a marketplace that could give them what they were looking for without all that baggage (and reward them handsomely for making the switch). And, once the Blur token launched and sent it into the stratosphere, OpenSea responded by cutting royalties and temporarily waiving its platform’s transaction fees for certain collections, further frustrating the creatives who helped build the space.
Blur’s defenders have been quick to point out how the platform is paying out more royalties to creators than anyone else in recent weeks. While this is true, it is partly because the market absorbed a significant portion of the trading volume with which its competitors would have facilitated those royalty payments.
OpenSea cannot lead the industry in royalties (as it once did) if its volume is diverted to other platforms. what a blur has done better than OpenSea is incentivizing people to pay full royalties on their NFT purchases through token rewards. It’s an interesting model for “enforcing” royalties on Web3 that comes with its own set of serious concerns, one of which is that those payments depend on a platform waving a shiny financial toy in front of a small group of influential users. It’s simply too early to say that Blur’s approach to royalties works better than others simply because the numbers are running well right now.
The problem with the numbers game.
Blur’s far-reaching effects in the Web3 space are manifold, but they may not all be positive. While high volumes and high royalty payments are great for Web3, especially in a bear market, many in the space have been disturbed by the residual effect Blur’s success has had on the ecosystem.
Artist Bryan Brinkman highlighted a surreal moment on Blur last week when he witnessed Michael Kozlowski’s recent NFT falling art blocksMetropolis, trading on the platform even when the art images were not uploading to the site due to the delay.
While the images were eventually uploaded, the point remains: Seeing creatives’ digital assets treated as fodder for financial gain is more than a little unsettling for many in the NFT space. However, some They have suggested that this dynamic is simply Blur capitalizing on what the Web3 market is really about, stripped of any rhetorical semblance of community or culture.
Regardless, Blur strides forward in strident fashion. Dropping all pretense, the platform told its users to block OpenSea in a February 15 blog post. The reason? The way OpenSea and Blur have set up their infrastructure means creators can’t get full royalties on both platforms – users have to choose.
Where do we go from here?
Blur has to be careful about how it manages its user base and how it perceives their loyalty. It is not the first NFT market to attract professional traders with token farming. And it would be wrong for the platform to assume that the wallets driving its phenomenal rise right now will do anything but jump ship if someone else offers them a better financial incentive to do so. Blur’s unabashed leaning towards pro-trader demographics and clever airdrop mechanisms mean he’s likely to hold the interest of this demographic for some time, but the challenge will be building loyalty in the long run.
We will continue to see the same ~500 accounts rotating their capital between each market that offers them free money.
Farmed LooksRare
they cultivated x2y2
Now they’re farming Blur pic.twitter.com/gN0XIWtroJ
— Kofi (@0xKofi) February 24, 2023
More important than what Blur does next is what its ripple effects do in the rest of the space. The monumental rise of the market is not necessarily a bad thing; the NFT world should celebrate the fact that there is such a thoughtful and inventive platform dedicated to meeting the needs of professional traders.
But big problems could start to rear their heads when the prosperity of one market or demographic comes at the direct or secondhand expense of another, be it in a zero-sum market showdown or eroding royalty rights for artists. who built the space from scratch. above. Blur claims that OpenSea is a centralized antagonist in the NFT ecosystem, but doing the royalty payments and debt market dominance to a pool of just a few hundred NFT whales isn’t exactly the most decentralized system, either.
Neither platform is responsible for putting pressure on the royalty dynamics in the NFT space. Still, Blur and OpenSea are at least somewhat to blame for pushing it towards what many now see as a headlong race to the bottom. The creators, as always, are caught in the middle.
Beyond this, Web3 needs to ensure that it is innovating and catering to the needs of every demographic in the space, not just professional traders. One group that would be great to start with is the creators that helped make the NFT ecosystem what it is today.
Instead of leaving them wondering which platform will pay royalties on their work and in what way, there needs to be a decentralized way for artists and project managers to control them. You don’t have to be on Web3 for art, but shaking its foundations in a mad scramble to get to the top of the numbers game will ultimately result in a win not worth having.
