The emergence of NFT exchange Blur
The new NFT exchange Blur has been a hot topic as of late. On February 15, Blur became the world’s largest NFT marketplace, overtaking OpenSea with a daily trading volume of 6,602 ETH. According to Nansen data from March 15, Blur’s daily trading volume has been maintaining the top spot and staying ahead of OpenSea for more than a month.
While other exchanges, such as Rarible, also entered the market, Blur is the first to make OpenSea sweat. Conscious of this threat, OpenSea has responded by temporarily lowering its NFT transaction fee, which is its main source of income, to 0%, while lowering the creator fee for all collections to 0.5%. Previously, OpenSea had been charging a transaction fee of 2.5% and a creator fee of up to 7.5%. Temporarily eliminating transaction fees and thereby removing its main source of revenue is certainly an extreme move.
Blur is a new platform that was launched last October. The reason it has been able to expand its market share so quickly is its 0% fee policy and its governance token, which has a total supply of 3 billion, with 51% allocated to the community. Recently, about 12% was distributed as an airdrop to attract new users and promote the platform.
With the airdrop, gamification was also introduced as a distribution method. The platform paid BLUR as a reward to users who uploaded NFT collections on its exchange and to users who participated in NFT bidding through Blur. The exchange used a differentiated reward structure that determines the reward level through a loyalty score based on factors like Twitter retweets, non-use of other exchanges, etc. The aim is to create a virtuous cycle for users, where those showing active trading activities are rewarded, and are then rewarded again for bidding a high price for NFTs with their earned tokens. This strategy has led to OpenSea rapidly losing market share.
Institutions and convenience further reasons for Blur’s growth
Blur also improved user convenience in a way not seen with other NFT exchanges. First, it is an exchange aggregator. Blur was designed to allow users to check their NFTs registered on OpenSea or other exchanges at once. This function is very convenient for users, as it lets them gather and manage their NFTs that are scattered across different exchanges for each NFT project.
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Second, it offers portfolio analysis. Almost like a stock trading app, the platform shows users the profits of their NFTs since purchase at a glance. This feature has been well received by whales (high net worth investors) who buy and sell NFTs as an investment.
Third, Blur does not need coin wrapping. OpenSea requires coins purchased from the exchange to be wrapped before purchasing a specific NFT on the exchange. Blur, on the other hand, supports direct purchase of Ethereum, which simplifies the purchasing process and lowers cost. Further, Blur also allows users to purchase NFTs based only on their price and features, without looking at the image, underscoring its strategy of focusing on trading rather than collecting NFT.
Issues around creator benefits and wash trading pose limits
However, it is still too early to conclude that Blur has the upper hand in its contest with OpenSea. Some are voicing concern that the fee competition between the two exchanges could damage creators whose main source of income is fees.
And wash trading is another issue. On February 25, it was reported that $577 million in ‘wash trading’ had been observed on Blur over the previous ten days. Wash trading is a market manipulation method that artificially raises prices by repeatedly buying and selling the same asset to falsely inflate the trading volume. According to the Hong Kong-based online news outlet Forkast, NFT data platform CryptoSlam “has recorded more than $588 million in wash trades related to Blur since Valentine’s Day”.
On March 14, Blur announced plans to airdrop more of its own token, BLUR, to loyal users through April. This structure allows the users to convert BLUR tokens to cash by selling them on the exchange. Scott Hawkins, a Cryptoslam data engineer, said “Blur has no creator royalties and exchange fees. […] There is no factor to suppress cross-trading other than the rise in ETH (Ether) gas prices”. He further pointed out that “the wash trading that takes place on Blur is artificially boosting the sales volume of the entire NFT market”.
NFT outlook: Yuga Labs and Bitcoin
Along with Blur, Bitcoin and Yuga Labs have been attracting attention. Recently, a new type of NFT that uses the Bitcoin network as the mainnet for issuing, saving, and storing NFTs has been in the spotlight. Ordinals, a Bitcoin-based NFT issuance protocol was recently launched, which has led to a slew of Bitcoin-based NFT issued and traded over the protocol.
The market has been expanding further with the entry of Yuga Labs, the world’s largest NFT company. Yuga Labs’ Bitcoin NFT ‘TwelveFold’, is sold via auction with a limited 300-piece run. The highest bid reached a whopping 7.1159 BTC. Since Yuga Labs is supporting Bitcoin NFT, it is highly likely that Bitcoin NFT based on Ordinals will also receive attention for a while.
However, there is an ongoing debate on whether Bitcoin is suitable as an NFT mainnet. Bitcoin only provides 4MB of storage space, so even one slightly higher-volume NFT would consume one block. This is somewhat inconsistent with the original purpose of NFT as something designed to be transferred between individuals. However, because greater difficulty means greater scarcity, it is possible that a Bitcoin NFT exchange will appear in the future. And so, the NFT market continues to become more segmented.
