Is Blur Backing Itself into a Corner?

The NFT ecosystem is bracing for impression. In just a few brief weeks, the wildly profitable and controversial NFT market and aggregator Blur will finish its Season 2 factors incomes season, with massive payouts of its native token, $BLUR, anticipated to land within the fingers of its most loyal and lively customers. 

Rewarding customers for participation is an effective factor in principle, an idea that actually aligns with Web3 rules of all boats rising within the tide. However Blur’s technique of leaning into the NFT pro-trader demographic by alluring them with staggered token rewards may backfire spectacularly for the platform — and have a profound ripple impact on the remainder of the NFT sphere as nicely. Is Blur backing itself right into a nook? 

Success in jeopardy 

When Blur got here onto the scene in October 2022, it quickly grew to become the highest NFT market by quantity, dethroning OpenSea, the reigning market champion of the previous six years. That success solely grew to become extra acute after Blur launched $BLUR, its native ERC-20 governance token, on February 14, whose worth on the time of writing is hovering round $0.80. 

The token launch marked the tip of Season 1 of Blur’s token reward system for its customers. The airdrop payouts had been substantial; in accordance with some estimates, 34 wallets obtained over 500,000 tokens, with one other 23 incomes over 1,000,000 $BLUR. 

Giant Recipients:

The $BLUR airdrop was primarily based upon Blur buying and selling quantity, and due to this fact giant NFT merchants benefitted enormously from migrating over from Opensea.

34 wallets obtained over 500K $BLUR, and 23 obtained over 1M!

(h/t @pandajackson42, take a look at @jconorgrogan‘s put up too!) https://t.co/kTsXcDAoSR

— Arkham (@ArkhamIntel) February 15, 2023

The aftermath of $BLUR’s launch noticed exercise on {the marketplace} surge much more than it had executed beforehand; by way of weekly buying and selling quantity, the platform has outperformed OpenSea by as a lot as $417 million and as little as $97 million between February 20 and April 10, in accordance with Dune Analytics. February 14 additionally marked the start of Season 2’s token reward period, which was scheduled to finish on April 1 however was delayed till the start of Might. 

Whereas saying the delay, Blur additionally revealed that it might lengthen its double-points rewarding system for customers who bid on NFTs on the platform till Season 2 concluded, additional incentivizing customers to maintain its quantity numbers nicely above that of its greatest rivals. Customers who bid extra usually accumulate higher factors, resulting in a much bigger airdrop on the finish of the season.

However cracks in Blur’s high-performing armor have begun to disclose themselves. Ever for the reason that market’s rise to dominance, important swaths of the NFT group have pointed to the uncomfortable proven fact that only a handful of Blur’s greatest merchants can sway the ground costs of total NFT collections as they stumble over one another to token farm. Initiatives starting from the most important PFP collections in existence to some extremely sought-after nice artwork NFTs similar to Artwork Blocks tasks, instantly discovered their pricing more and more tied to large-scale and lightning-fast buying and selling motion by the hands of some versus Web3 group sentiment and natural value motion. 

Pacman (Tieshun Roquerre), Blur’s co-founder, has argued that this type of exercise is typical of conventional finance and that the motion of the NFT ecosystem’s greatest market makers — like Franklin and Machi Large Brother, two legends within the NFT pro-trader sphere — is simply essentially going to look completely different than what Web3 is used to.

In the end, Roquerre claims Blur’s success is sweet for the NFT area. However not everyone seems to be satisfied of that declare’s legitimacy, together with among the group’s greatest and most well-known and revered names, nor of the premise that Web3 must be a spot that replicates each facet of conventional finance. 

Other than the controversy surrounding Blur’s technique is the potential for the platform’s token farming-supported quantity motion to drop on Might 1, when Blur’s double factors reward system involves an finish. Whereas the platform has not revealed what it is going to do past this date to proceed incentivizing exercise on its platform, some are speculating that Blur is unlikely to proceed doubling its level reward system for bidders or enhance it past the present fee. This might result in a sudden drop in exercise on the platform, leading to ground costs which have been influenced by {the marketplace}’s buying and selling motion to likewise take a success. 

This floor-supporting dynamic is bolstered by Blur’s factors reward mechanism: bids positioned on the platform which can be nearer to a set’s ground value end in the next quantity of rewards for the consumer. Take away (or decrease) the inducement for Blur’s market-influencing professional merchants to proceed to prop up that ground, and the outcome may spell a fall for these collections. 

Blur’s massive merchants bow out

Some of the worrying indicators for Blur (and for the collections whose ground costs are being propped up by this type of buying and selling) is that its most outstanding gamers have bowed out after realizing hundreds of ETH in losses whereas token farming on the platform. 

Franklin (who has now deactivated his Twitter) and Machi Large Brother not too long ago pulled again from the platform and NFT buying and selling basically in a considerably dramatic trend and at the least partly for the losses incurred. Franklin’s losses from his exercise on Blur complete within the above 500 ETH vary, whereas Machi Large Brother has reportedly misplaced roughly 5,000 ETH from his trades. Blur merchants hope {that a} future token airdrop will help offset the losses they’ve incurred by buying and selling on the platform, however doing so would require a large payout from {the marketplace}. In Machi’s unlucky case, he’d have to earn tens of millions of $BLUR tokens to offset his losses.

Franklin’s departure (and Machi’s present ambiguous angle towards NFT buying and selling) has already been felt available in the market. Bored Ape Yacht Membership’s ground value fell from roughly 58 to 52 ETH after Franklin hurriedly bought dozens of Apes to repay loans from BendDAO, a service that lets customers put up NFTs as collateral for ETH loans, and to recuperate from hundreds of ETHs value of losses from a rug pull rip-off. However that market impact may very well be a tiny drop within the bucket in comparison with what may occur if Blur’s merchants don’t really feel the necessity to stick round. 

Bracing for impression

All advised, each Blur merchants and the NFT ecosystem at giant are tensing up as they strategy the platform’s Might 1 deadline. Assuming that Blur can not preserve the present state of its double-rewards factors incomes system, there seem like few constructive outcomes for both the platform or its customers who’ve incurred any important losses by buying and selling on it. 

Even when Blur’s reward system results in its merchants having the ability to cowl their losses sufficient to deem continued use of the platform value their whereas, severe questions concerning this method’s sustainability nonetheless loom giant. A lot relies on what Blur decides to do concerning incentivization strategies for its merchants after Might 1. If issues don’t change, it seems to be like Blur’s daring experiment may find yourself shaking itself aside, ratting the whole Web3 group within the course of. 

Editor’s notice: A earlier model of this text acknowledged that Blur would have a token airdrop on Might 1. It has since then been corrected. Nonetheless, the bidding and itemizing factors for Blur’s Season 2 Airdrop will stay doubled till Might 1.