Feb 28, 2023

Blur Airdrop Sparks Trading Volumes, Challenges OpenSea’s Market Share

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The nonfungible token (NFT) marketplace Blur has seen a dramatic spike in trading volumes and sell-side liquidity since its second season of airdrops began on February 14th. This season, 10% of the total BLUR token supply will be distributed to certain users based on their activity, with 12% allocated to an early user airdrop in the first season, from the marketplace’s gated launch in March 2022 through February 2023.

Data from data scientist Hildobby shows 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 reflects this shift.

OpenSea has taken notice of Blur’s growth, and has responded by discontinuing its marketplace fee of 2.5% per sale, a significant chunk of its earnings, estimated at around $336.8 million for one year. This suggests that Blur’s growth is threatening OpenSea’s position as the leading marketplace.

The two NFT giants have also recently locked horns on the issue of creator royalties, with Blur restricting the ability to earn full creator royalties on both platforms. Blur founder Pacman recently told Cointelegraph’s Hashing It Out podcast that OpenSea started the spat first, and that Blur was forced to retaliate. He added that he ideally wants creators to be able to earn royalties on both platforms.

In addition to its incentive program, Blur has earned the reputation of being a “marketplace for pro traders” thanks to its innovative features, including sweep optimization, near-instant update of aggregate price, filtering based on rarity score and gas optimization.

The BLUR token can either stay a non-yielding token with governance features like Uniswap’s UNI (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 (SUSHI) — or other innovative value accrual methods — like Curve’s voting escrow model — that encourage buying.

Since its inception, Blur has charged zero fees on its platform. Pacman has 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, but without real yields it would likely do more harm in the long run through inflation.

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.

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.

The NFT space is growing rapidly, and with Blur’s innovative features, incentive program, and zero-fee trading, it is well-positioned to become a leader in the space. The success of Blur will be contingent on the decisions voted on by the BlueDAO, and whether or not it is able to implement value accrual methods to its tokenholders. It will also be interesting to see how the project fares against competitors like OpenSea, GMX, and Gains Network, who are all offering innovative solutions for NFT traders and creators.