The NFT ecosystem is bracing for impression. In a number of quick weeks, the wildly profitable and controversial NFT market and aggregator Blur will finish its supply of doubling loyalty factors for customers who bid and listing on its platform — with large payouts of its native token, $BLUR, anticipated to land within the palms of its most lively customers.
Rewarding customers for participation is an efficient factor in concept, an idea that definitely aligns with Web3 ideas 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 might backfire spectacularly for the platform — and have a profound ripple impact on the remainder of the NFT sphere as properly. 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 to some estimates, 34 wallets acquired over 500,000 tokens, with one other 23 incomes over 1,000,000 $BLUR.
Massive Recipients:
The $BLUR airdrop was primarily based upon Blur buying and selling quantity, and due to this fact giant NFT merchants benefitted drastically from migrating over from Opensea.
34 wallets acquired over 500K $BLUR, and 23 acquired over 1M!
(h/t @pandajackson42, try @jconorgrogan‘s submit 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; when it comes to 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 response to Dune Analytics. February 14 additionally marked the start of Season 2’s token reward period, whose double points-earning window was initially scheduled to finish on April 1 however was delayed till the start of Might.
That is additional incentivization to maintain customers engaged and assist uphold the platform’s quantity numbers properly above that of its largest rivals. Customers who bid extra typically accumulate larger factors, resulting in a much bigger airdrop on the finish of the season. Whereas Blur has but to announce precisely when Season 2 will wrap, the corporate has alluded to “one thing new” when its double factors reward scheme ends.
However cracks in Blur’s high-performing armor have begun to disclose themselves. Ever because the market’s rise to dominance, important swaths of the NFT neighborhood have pointed to the uncomfortable incontrovertible fact that simply a handful of Blur’s largest merchants can sway the ground costs of complete NFT collections as they stumble over one another to token farm. Tasks starting from the largest PFP collections in existence to some extremely sought-after fantastic artwork NFTs resembling Artwork Blocks initiatives, all of the sudden discovered their pricing more and more tied to large-scale and lightning-fast buying and selling motion by the hands of some versus Web3 neighborhood sentiment and natural worth motion.
Pacman (Tieshun Roquerre), Blur’s co-founder, has argued that this sort of exercise is typical of conventional finance and that the motion of the NFT ecosystem’s largest market makers — like Franklin and Machi Massive Brother, two legends within the NFT pro-trader sphere — is simply basically going to look totally different than what Web3 is used to.
Finally, 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 a number of the neighborhood’s largest and most well-known and revered names, nor of the premise that Web3 must be a spot that replicates each side 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’s 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 improve it past the present charge. This might result in a sudden drop in exercise on the platform, leading to flooring 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 might be nearer to a group’s flooring worth end in a better quantity of rewards for the consumer. Take away (or decrease) the motivation for Blur’s market-influencing professional merchants to proceed to prop up that flooring, and the consequence might spell a fall for these collections.
Blur’s large merchants bow out
Some of the worrying indicators for Blur (and for the collections whose flooring costs are being propped up by this sort 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 Massive Brother lately pulled again from the platform and NFT buying and selling usually in a considerably dramatic style and at the very least partly for the losses incurred. Franklin’s losses from his exercise on Blur whole within the above 500 ETH vary, whereas Machi Massive Brother has reportedly misplaced roughly 5,000 ETH from his trades. Blur merchants hope {that a} future token airdrop may also 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 hundreds of thousands of $BLUR tokens to offset his losses.
Franklin’s departure (and Machi’s present ambiguous perspective towards NFT buying and selling) has already been felt out there. Bored Ape Yacht Membership’s flooring worth 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 get well from hundreds of ETHs price 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 instructed, each Blur merchants and the NFT ecosystem at giant are tensing up as they method the platform’s Might 1 deadline. Assuming that Blur can not keep 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 with the ability to cowl their losses sufficient to deem continued use of the platform price their whereas, critical questions concerning this technique’s sustainability nonetheless loom giant. A lot is dependent upon what Blur decides to do concerning incentivization strategies for its merchants after Might 1. If issues don’t change, it seems like Blur’s daring experiment might find yourself shaking itself aside, ratting your complete Web3 neighborhood within the course of.
Editor’s be aware: A earlier model of this text said 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.