NFT Marketplace Wars heat up as Blur’s Airdrop takes it to the top

What happened

On February 14, NFT trading platform and aggregator Blur rewarded its users with its long-awaited token airdrop. Spread over three phases for the first season, the airdrop capped a multi-month process to simultaneously reward users and jump-start 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 going forward.

The airdrop released 360 million tokens, which is 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 value of $3.2 billion.

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

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Broader context

Aimed at professional traders, Blur offers sophisticated trading tools and features such as zero marketplace fees, optional royalty payments, portfolio analysis, swipe and stealth tools for NFT purchases, fund depth charts, real-time data updates and more.

These key features that appeal to professional traders combined with the token incentive propelled Blur to achieve a significant milestone, claiming the top spot as the largest NFT marketplace by number of users and trading volume.

Blur had been outpacing OpenSea in terms of trading volume since December, but in recent days Blur has accelerated its lead in comparative volume, surpassing OpenSea’s user count for the first time. Blur’s user count link is arguably more important than volume, as it could be the case that pro-traders on Blur were engaged in wash trading to increase token airdrop allocations, resulting in false volume. Laundry trading is the practice of a user acting as both buyer and seller in a transaction.

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

Before the Blur token launch, the airdrop had three phases with different eligibility 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 NFT over the past six months, regardless of the marketplace used. In addition, this phase further rewarded users who actively listed NFTs on the platform and increased access to assets users could purchase on Blur. To be eligible for this airdrop, users also had to maintain an NFT on Blur within 14 days.
3. While the second phase focused on building the supply side, the third phase spurred the demand side. This phase was announced in December 2022 and rewarded users who bid on NFTs. This phase also enabled the platform to offer the most competitive bid spreads, by rewarding traders with better bids with more tokens.

Using 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 allowed Blur to deliver new features along the way like the bid contract, and encouraged organic user growth by driving virality and social sharing (via invite referrals).

Key statistics

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.

Prospects and implications

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

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

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

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

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

Decision points

The details of the token’s utility are hazy, and it remains to be seen how BLUR will accumulate value over time. As currently structured, BLUR is a governance token, but Blur is a centralized company that must gradually relinquish its control over the platform to token holders of a newly created DAO. Probably for this reason, US users were geoblocked from the airdrop, although the token is available on major exchanges in the US such as Coinbase.

Blur DAO will govern key parameters for the platform, and set the protocol’s value build-up and distribution. These parameters may include the protocol fee rate after 180 days (up to 2.5%) and the issuance of government 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 earn higher scores and more tokens if their activity comes from wallets that perform most of the actions on Blur as opposed to competing marketplaces.

Blur has shown that it leans on token incentives to drive user behavior and growth of the platform. To date, this strategy has paid dividends, but whether the market penetration can last in the long term is yet to be determined.