Blur is chasing OpenSea market share, but its success depends on upcoming governance proposals

Blur, an NFT marketplace, has seen its trading volumes and total sell-side liquidity skyrocket since it went on an airdrop on February 14, 2023. The reason for the increase could be the start of airdrops from Season 2 airs, where 10% of the total BLUR token supply will be distributed to certain users based on their activity. The team allocated 12% to a user airdrop early in the first season that ran from the closed market launch in March 2022 to February 2023.

Blur of trading volumes (in ETH). Source: dune

Blur has made a significant dent in OpenSea’s position as a leading market. Analysis by data scientist Hildobby shows that Blur is eating up market share from OpenSea and other aggregators like X2Y2. Blur’s incentive program and NFT’s advanced trading features are causing users to switch from OpenSea to Blur.

The share of NFT markets by trading volume. Source: dune

OpenSea feels the heat

Following Blur’s lead, OpenSea discontinued its 2.5% market fee per sale. The fact that OpenSea LLC was willing to give up a significant portion of its profits (about $336.8 million for one year) suggests that Blur’s growth threatens it.

The two NFT giants also clashed recently over the critical issue of creator royalties. By restricting the ability to earn full creator royalties on both platforms, creators must choose between Blur and OpenSea to list collections.

Pacman, the founder of Blur, told Cointelegraph on Feb. 23 that OpenSea started the dispute first. They were forced to retaliate with restrictive features like limited royalties on Blur if a collection is also listed on OpenSea. Ideally though, both creators would be able to earn their royalties on both platforms without having to choose. It seems that Pacman wants OpenSea to succumb to the competition and instead of fighting Blur, it should adapt to the aggregator progressively.

Blur has also incentivized creators and users through the Blur token. It was also a way to make up for the gains creators would have made in lost royalties on the platform when it didn’t support them sooner. NFT traders, on the other hand, receive token rewards for adding liquidity to the platform by listing NFTs. So far, the plan has worked successfully, as Blur’s liquidity skyrocketed after the token’s launch.

Blur has also earned a reputation as a “marketplace for professional traders” thanks to its innovative features for experienced NFT traders, such as sweep optimization, near-instant aggregate price updating, rarity score-based filtering, and optimization. of the gas.

Blur’s success depends on governance and updates

There are two paths the BLUR token can take from here, remain a non-yielding token with governance functions like Uniswap (UNI) or change to assign methods of value accumulation to token holders.

In its current state, the BLUR token is similar to UNI, which puts it at a disadvantage because the market has moved to real-yield concepts (for example, GMX and SUSHI) or other innovative methods of value accumulation (such as the Curve voting escrow) that encourage purchase.

The underperformance of the UNI token relative to Bitcoin in the recent January-February 2023 crypto rally is a testament to the fact that the market is discounting tokens that do not generate returns. UNI rose 40% in 2023 to the top against Bitcoin’s 50% rise.

BTC/USD and UNI/USD price action. Source: TradingView

Since its inception, Blur has charged zero fees on its platform. Pacman also discussed the potential value buildup for BLUR holders by activating the “fee switch” and directing rewards to holders.

Staking is also a widely implemented feature that protocols use to deter selling by providing inflationary rewards. While this strategy helps retain investors to some degree, without real returns it would probably do more damage in the long run through inflation.

The performance of the Blur token will largely depend on the decisions voted by BlueDAO. Until then, Blur’s growth in the NFT market will likely influence BLUR’s price because investors may not want to forego the opportunity to gain exposure to the niche market leader. However, the overall trajectory could remain to the downside, similar to what DYDX experienced in 2022.

DYDX price chart. Source: CoinGecko

The decentralized derivatives exchange is close to implementing significant changes to its platform, including better value accumulation for DYDX holders. However, while the dYdX team is working towards its V4 release, platforms like GMX and Gains Network are taking advantage of Ethereum’s Layer 2 liquidity and LP-focused rewards and incentives.

Since the airdrop on February 14, the selling pressure for BLUR has eased considerably. Dune data scientist PandaJackson42’s Blur analytics page shows that 76.7% of BLUR airdrop recipients sold their tokens.

This suggests that the selling pressure on airdrop receivers should end soon. However, the token award schedule is at risk of being watered down due to investor and team token unlocks starting in June 2023 and distribution of Season 2 rewards sometime later this year.

BLUR token release schedule. Source: Blur Foundation

Blur is well positioned to capture a huge lead in the market, especially considering that OpenSea’s latest raise in January 2022 valued the company at $13.3 billion. Blur’s fully diluted market capitalization is currently five times less at $2.7 billion. The project can generate significant buying demand for its token by enhancing value accumulation.