The NFT ecosystem is bracing for impression. In a couple of 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 arms of its most loyal and energetic customers.
Rewarding customers for participation is an effective factor in principle, an idea that actually 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 effectively. 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 top of Season 1 of Blur’s token reward system for its customers. The airdrop payouts have 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 based mostly upon Blur buying and selling quantity, and subsequently massive NFT merchants benefitted enormously from migrating over from Opensea.
34 wallets acquired over 500K $BLUR, and 23 acquired over 1M!
(h/t @pandajackson42, try @jconorgrogan‘s publish 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 carried out 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, which was scheduled to finish on April 1 however was delayed till the start of Could.
Whereas saying the delay, Blur additionally revealed that it could prolong 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 effectively above that of its largest opponents. Customers who bid extra typically 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 neighborhood have pointed to the uncomfortable undeniable fact that simply a handful of Blur’s biggest traders can sway the ground costs of total NFT collections as they stumble over one another to token farm. Initiatives starting from the biggest PFP collections in existence to some extremely sought-after fine art NFTs similar to Artwork Blocks tasks, immediately 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 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 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.
In the end, Roquerre claims Blur’s success is nice for the NFT house. 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 respected names, nor of the premise that Web3 must be a spot that replicates each side of conventional finance.
Aside from the controversy surrounding Blur’s technique is the potential for the platform’s token farming-supported quantity motion to drop on Could 1, when Blur’s double factors reward system involves an finish. Whereas the platform has not revealed what it can 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 fee. This might result in a sudden drop in exercise on the platform, leading to flooring costs which were influenced by {the marketplace}’s buying and selling motion to likewise take a success.
This floor-supporting dynamic is strengthened by Blur’s factors reward mechanism: bids positioned on the platform which can be nearer to a set’s flooring value lead to a better 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 flooring, and the consequence might spell a fall for these collections.
Blur’s massive merchants bow out
Some of the worrying alerts for Blur (and for the collections whose flooring costs are being propped up by this type of buying and selling) is that its most distinguished gamers have bowed out after realizing 1000’s of ETH in losses whereas token farming on the platform.
Franklin (who has now deactivated his Twitter) and Machi Big Brother not too long ago pulled back from the platform and NFT trading generally in a considerably dramatic vogue and no less than 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 can assist offset the losses they’ve incurred by buying and selling on the platform, however doing so would require a huge payout from {the marketplace}. In Machi’s unlucky case, he’d must 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 out there. Bored Ape Yacht Membership’s flooring value fell from roughly 58 to 52 ETH after Franklin hurriedly offered dozens of Apes to repay loans from BendDAO, a service that lets customers put up NFTs as collateral for ETH loans, and to get better from 1000’s of ETHs value of losses from a rug pull rip-off. However that market impact could possibly 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 massive are tensing up as they method the platform’s Could 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, critical questions concerning this technique’s sustainability nonetheless loom massive. A lot depends upon what Blur decides to do concerning incentivization strategies for its merchants after Could 1. If issues don’t change, it seems like Blur’s daring experiment might find yourself shaking itself aside, ratting your entire 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 Could 1. It has since then been corrected. Nevertheless, the bidding and itemizing factors for Blur’s Season 2 Airdrop will stay doubled till Could 1.