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Upstart marketplace Blur has rose to the top of the NFT world in recent weeks, jumped ahead of longtime leader OpenSea through tokenized trading rewards. The reason for the increasing trading volume has divided opinion NFT place, and asks a remarkable Web3 research firm to discount much of the latest trading data from the Blur market.

CryptoSlama leading platform for tracking NFT sales, announced Friday that it would remove $577 million worth of Blur trades from its data due to “market manipulation.” The platform also said it will filter future Blur trades on its platform through an updated algorithm that rules out what it sees as suspicious sales.

On-chain data shows that Blur’s sudden increase in NFT trading volume is primarily driven by whales– that is, traders with significant holdings of a given asset –which constantly buys and sells NFTs via the marketplace’s bid pools in an attempt to “farm” token rewards for the next airdrop. But there is quite a bit of disagreement in the room about that sort of thing DeFi-as token flipping actually constitutes wash trading.

Blur, for its part, points to data collected on Dune Analytics that shows a much smaller percentage of laundry trading on the platform, and CryptoSlam confirmed to Decrypt that it has expanded its methodology to denote alleged laundry trades. But is this just a disagreement about semantics or a disagreement about how to interpret what is really happening right now in the rapidly changing NFT space?

A changing room

In an email to subscribers on Friday, CryptoSlam explained the decision to filter out a large portion of the recent Blur trading data. The platform said that about 1% of high-value NFT traders drive the majority of trading volume on Blur lately, flipping NFTs at a rapid pace in an effort to generate trading rewards in the market.

“This misrepresents the current NFT market,” CryptoSlam wrote in the email, “and puts traders at risk who often chase projects’ rising action.”

That number increased to nearly $824 million on Monday morning, representing over 80% of Blur’s total NFT trading volume ($1.02 billion) that CryptoSlam had recorded since the marketplace launched its BLUR token airdrop on February 14th. CryptoSlam has yet to analyze all of Blur’s trading data from its launch in October 2022 until the airdrop.

By contrast, CryptoSlam says that rival marketplace OpenSea had facilitated $6.6 million worth of “wash trades” between February 14 and early Monday, out of over $249 million in total volume – which equates to around 2.5% of total trading volume. In other words, by CryptoSlam’s criteria, OpenSea still handles more organic NFT trading volume than Blur.

Wash trading in the NFT space, as it has most often been described, occurs when a trader buys and sells NFTs between their own wallets, often at inflated sums, or when multiple traders do the same in a coordinated manner. It is usually done to manipulate trading volume calculations or game token reward modelsas seen with previous NFT marketplaces such as LooksRare and X2Y2.

Randy Wasinger, CryptoSlam’s founder and CEO, said Decrypt that unfiltered trading data paints what the company believes is an inaccurate picture of trading trends. CryptoSlam has a duty to distinguish “genuine sales from laundering, farming or otherwise artificial chain trading,” he said.

“These flagged transactions are the byproduct of token farming incentives recently introduced by Blur in their war with OpenSea and other marketplaces,” Wasinger said. “They are not arm’s length transactions between an unrelated buyer and seller.”

As Decrypt reported last week, Blur step ahead of OpenSea in terms of total trading volume after airdrop of its own Ethereum token February 14. Blur launched free BLUR tokens worth about $290 million to traders, based on the current value of the token, and promised another similar airdrop in the future with its “Season 2” campaign.

Blur’s gamified rewards model dangles free tokens in front of traders who exclusively use the platform – meaning they don’t use rivals like OpenSea or X2Y2 – and who trade through their bidding pools. The marketplace has generated around $487 million in total NFT trades in the past week alone, per data from DappRadar.

In practice, the marketplace’s heaviest users are constantly buying and selling assets, with some NFTs being turned over several times a day. According to public blockchain data surfaced last week, roughly 50% of Blur’s trading volume is NFT generated by only 300 walletswhile 1% of traders (565 wallets) make up 74% of the total asset value locked in Blur’s bid pools.

In other words, a relatively small amount of users trading NFTs en masse as fungible tokens greatly skews the data. But while Blur takes the lead in terms of raw NFT trading volume, OpenSea has still several daily wallets do trades.

Blurred terms

On Friday, when asked about CryptoSlam’s claim that it had handled $577 million worth of “wash trades” from the air on February 14 up until that point, a Blur representative pointed to another resource—a Dune dashboard based on public blockchain data, compiled by the pseudonymous Web3 data analyst Hildobby.

His Dune dashboard points to about $345 million in wash trade through Monday since Blur’s launch in October, or nearly 14% of total recorded volume. He also earlier declared Blur’s trading volume “legit” in early February, albeit ahead of the recent surge, and have detailed their methodology for tracking laundry trades on NFT marketplaces.

Hildobby’s methodology for categorizing laundry trades comes down to four key elements. He flags trades if: the buyer and seller used the same wallet, an NFT is traded back and forth repeatedly between multiple wallets, if a wallet has purchased the same NFT three or more times (only for NFTs using the ERC-721 token standard ), or if the buyer’s and seller’s wallets were initially funded by the same wallet.

“We usually like to refer to analysts who have a history of doing thorough research using well-documented methods, rather than taking bold claims at face value,” the Blur representative said of CryptoSlam’s announcement. “Intellectual rigor is required to develop an understanding of what’s going on so we can improve the space.”

CryptoSlam’s Wasinger told Decrypt that its previous methodology for singling out laundromats was very similar to Hildobby’s, but that it has since broadened the criteria to “identify a new class of laundromats”. In short, it targets sales by traders who provide liquidity to NFT trading pools without much regard for their status as collectibles or unique assets.

“This new class of wash trading is more difficult to detect and involves a key provision — that in a small period of time, a particular wallet’s trading activity signals that it is not paying attention to the metadata of a particular collection,” Wasinger said. “So we assume it’s an asset that has a similar risk profile and is ‘substantially identical’ to other assets that were recently traded.”

CryptoSlam, which raised a seed round of $9 million in 2022 and supported by Mark Cuban, has previously taken measures to exclude suspicious or manipulated data from reporting. By early 2022, the company said it had removed more than $8 billion worth of trade data from upstart marketplace LooksRare, which likewise incentivized traders with token rewards.

On LooksRare, traders priced the NFTs at exaggerated values ​​and sold them among their own controlled wallets to create the illusion of organic trades. It can be some coordination occurs with Blur handlers too, but much of the volume appears to come from NFT whales rapidly trading assets back and forth within the platform’s bid pools.

The Blur representative said the startup had “been extremely careful” in developing a token incentive model that didn’t reward trades based solely on huge sums of NFT trading volume, saying it was “lucky enough to learn from [LooksRare’s] error and focus on rewarding liquidity.”

“A lot of analysts have misconstrued the volume on Blur and compared it to LooksRare,” added the Blur representative, “which is understandable [because] the details are nuanced and good research is difficult to do in space.”

Is it a laundromat?

Both CryptoSlam and Hildobby talk about wash trading, but they are not exactly saying the same thing. CryptoSlam has specifically expanded its own criteria to handle what many in the NFT space call airdrop farming – trading huge amounts of NFTs with the apparent extrinsic motivator of increasing the amount of reward tokens they will receive as a result.

It is a debate that has raged throughout the NFT community in recent weeks. Some NFT creators and collectors have decried Blur’s gamification tactics and how flippers are seemingly forcing major market-wide changes. OpenSea, long the market leader, recently cut some of the royalty protections for the creator as it attempted to adjust to Blur’s sudden market dominance.

Others in the room see it as a natural progression for NFTs. After all, financial gain has long been a key motivator for NFT traders. The idea of ​​unique NFTs trading hands over and over and being flipped as fungible tokens isn’t for everyone – but if it’s possible on the blockchain, traders will find a way to maximize the opportunity.

Wasinger admitted that “laundering” might not be the best description for what’s going on at Blur. He said “inorganic commerce” is a better fit, and it’s a broader term that encompasses what he called “some judgment in the code” beyond Hildobby’s own stated methodology.

But at the moment on CryptoSlam’s website, it’s all categorized as wash trading. CryptoSlam’s primary goal with the move, Wasinger said, was to clean up the data on the platform, which showed suddenly skyrocketing Ethereum NFT trading volumes without context on the impact of Blur’s mechanics. In his view, it gave the wrong impression of the market.

“The overall volume we are now reporting is significantly cleaner than it was before,” he said.

It seems the entire NFT market is anticipating Blur’s sudden impact, from creators to rival marketplaces and even data sources. The surge in trading has confounded previously reliable metrics, and it has forced players in the space to rethink their perception of NFTs and how they are used.