NFT Marketplace Wars Heat Up As Blur’s Airdrop Drives It To The Top Spot

What Happened

On February 14th, NFT trading platform and aggregator Blur rewarded its users with its highly anticipated token airdrop. Spread across three phases for its first season, the airdrop capped a multi-month process to simultaneously reward users and bootstrap the growth and liquidity of a new marketplace. BLUR is the ticker for the token associated with the Blur NFT trading platform, and it will serve as the platform’s native governance token moving forward.

The airdrop released 360 million tokens, comprising about 12% of the total supply of the project. At its current price, Blur has a market capitalization of $414 million and a fully diluted market capitalization of $3.2 billion.

Instead of offering tokens directly to users, Blur implemented a gamified approach by issuing Care Packages tied to users’ “loyalty score.” Care packages had four levels of rarity: Uncommon, Rare, Legendary, and Mythical. The rarity of Care Packages distinguished actions across the three airdrop phases determining the number of tokens users would eventually receive, such as listing a common NFT versus a blue chip NFT or the amount of volume a particular user traded on the platform.

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Broader Context

Blur caters towards pro traders, offering sophisticated trading tools and features such as zero marketplace fees, optional royalty payments, portfolio analysis, sweeping and sniping tools for NFT purchases, collection depth charts, real-time data updates, and more.

These key features courting pro traders combined with the token incentive drove Blur to achieve a significant milestone, claiming the top spot as the largest NFT marketplace by user count and trading volume.

Blur had been outperforming OpenSea in terms of trading volume since December, but over the past few days, Blur accelerated its lead in comparative volume and overtook OpenSea’s user count for the first time. Blur’s user count lead is arguably more important than volume, as it could be the case that pro traders on Blur were engaged in wash trading to boost their allocation of the token airdrop, resulting in fake volume. Wash trading is the practice of a user serving as both the buyer and seller in a transaction.

Blur overtook OpenSea achieving user market share of 45% compared to OpenSea’s 43%, and trading volume market share of 85% compared to OpenSea’s 10%.

Prior to the Blur token launch, the airdrop had three phases with different qualifying criteria:

1. The first phase was announced in May 2022 when the platform was in its closed private beta and rewarded users who referred others to sign up for the platform.
2. The second phase was announced in October 2022 and rewarded users who had been active in trading Ethereum NFTs over the past six months, regardless of the marketplace used. Additionally, this phase further rewarded users who actively listed NFTs on the platform, increasing the supply of assets users could purchase on Blur. To be eligible for this airdrop, users needed to also list an NFT on Blur within 14 days.
3. Whereas the second phase focused on building the supply side, the third phase spurred the demand side. Announced in December 2022, this phase rewarded users bidding on NFTs. This phase also enabled the platform to offer the most competitive bid-ask spreads, by rewarding traders with better bids with more tokens.

By applying this playbook, Blur effectively used a gamified approach (via Care Packages) to build out the marketplace in stages, first focusing on supply and then demand. It also enabled Blur to deliver new features along the way such as the bid contract, and encouraged organic growth of users by incentivizing virality and social sharing (via invite referrals).

Key Stat

Over 115,000 recipients were eligible to claim $BLUR tokens. The average airdrop was worth $2,943 and the median was $295 at the current token market price of $1.

Outlook and Implications

The Blur airdrop signals that tokens, if implemented properly, can be a useful incentivization mechanism to encourage users to engage in certain activities and bootstrap the growth of a new platform.

Token playbooks employed by protocols previously involved one-time retroactive airdrops to promote early usage and build a base of new users (i.e. Uniswap and ENS), or ongoing liquidity mining programs that continuously reward users for performing particular tasks (i.e. LooksRare and Compound). Blur leveraged a more sophisticated token distribution schema that offered rewards in phases to bolster marketplace liquidity and user growth.

LooksRare is a competing NFT marketplace that was the first to launch a token incentivizing users to trade on the platform. Similar to Blur, LooksRare allocated 12% of its token supply for its airdrop, requiring users to list an NFT to claim the $LOOKS token. Whereas Blur took a surgical multi-phase approach to its airdrop strategy, LooksRare rewarded traders directly based on trading volume, enabling traders to reliably calculate how many tokens they would receive based on their trading volume. This led to little sticky usage and inorganic volume, with reportedly ~95% of historical volume attributed to wash trading.

Shortly after the token’s launch in January 2022, LOOKS reached its all-time high of $7 a few days later, but has since lost 97% of its value and currently trades at $0.22 with a market capitalization of $105 million.

Conversely, BLUR closed its first day of trading on February 14th at $0.65 and is up 54% currently trading at $1. Since its launch on February 14th, the token has been volatile over its first few days of trading, closing its first day of trading at $0.60 and surging to its high of $1.40 on February 19th. However, it is too early to make any big predictions about its price.

The NFT marketplace wars have heated up as a result of the aggressive tactics Blur used to attain market share. Unlike OpenSea, Blur charges zero trading fees and does not strictly enforce creator royalties. Blur brazenly announced that any collections that blocked sales on OpenSea could collect their full royalty fees on Blur. Notably, OpenSea responded by dropping its trading fee from 2.5% to 0% for what it says is a limited time.

Decision Points

Details around the token’s utility are nebulous, and it remains to be seen how BLUR will accrue value over time. As it is currently structured, BLUR is a governance token, however, Blur is a centralized company that will need to progressively relinquish its control over the platform to token holders of a newly formed DAO. Likely for this reason U.S. users were geoblocked from the airdrop, although the token is available on major exchanges in the U.S. such as Coinbase.

The Blur DAO will govern key parameters of the platform, setting the protocol’s value accrual and distribution. These parameters may include the protocol fee rate after 180 days (up to 2.5%) and the issuance of treasury grants to support further development of the marketplace. These decisions will be critical in shaping the future growth of the platform and determining Blur’s success in the face of competition.

Although season one of the airdrop has been completed, the second season has already started and promises to offer more token rewards to users of the platform. An additional 300 million tokens will be rewarded to users who list and bid on NFTs. Season two will have a unique focus on loyalty, meaning users will achieve higher scores and more tokens if their activity comes from wallets that perform the majority of actions on Blur as opposed to competing marketplaces.

Blur has demonstrated it is leaning into token incentives to drive user behavior and growth of its platform. To date, this strategy has paid dividends, but whether its market penetration can last over the long term has yet to be determined.