- The Ground Floor
- Bad News For Blur?
Bad News For Blur?
Breaking down the bad news for Blur...
In today’s edition of The Ground Floor we are breaking down the problematic position Blur currently finds itself in…
Incentives Rule The World
Blur is in a problematic position.
The NFT marketplace that looked likely to become the most popular NFT marketplace has fallen out of favor due to its incentivized bidding program.
Blurs wants to build the best platform for NFT traders.
Yes, Blur have made improvements in this area, however, of late, the power users using Blur have expressed strong frustration with the platform's unwillingness to confirm when Season 2 of its incentive program will end.
What is season 2?
To become the #1 NFT marketplace by transaction volume, Blur introduced incentives that lasted from October 2022 to February 2023 whereby the people that bought and listed NFTs on Blur were rewarded with Blurs native token $Blur.
During this period Blur quickly caught up with OpenSea, and collectors proclaimed their appreciation for Blurs unexpectedly large airdrop.
On the back of Blur airdropping 360 million $Blur tokens to the people that used its platform during season 1 ~ there was no shortage of people interested in participating in Season 2.
When will season 2 end?
Season 2 does not have a confirmed end date, and unlike Season 1, Season 2 incentives participants to make collection & trait bids on popular NFT collections.
This incentivized bidding initially seemed to serve a purpose ~ making it easier for people to exit positions at once vs having to list these NFTs at the floor price, and waiting for willing buyers.
The Problematic Position
NFTs are a relatively new asset class, and incentivizing people to bid on popular NFT collections in return for receiving a token worth millions of dollars has had a net negative impact on the NFT market.
The illusion of liquidity Blur provides whereby collectors can sell a large number of NFTs at once only serves to obscure the available supply of NFTs for sale as these tokens will be reduced in price on Blur until real buyers acquire them.
Blurs approach has also diminished the appreciation held for the aesthetics of digital collectibles, with a much larger pool of traits available at floor prices.
Selling At A Loss
To have more ETH available to bid on NFTs, Blur airdrop farmers are willing to sell the NFTs they acquire from bids being accepted at losses under the assumption that Blurs token will provide them enough value to cover their losses.
As the price of Blurs token declines, so does the strength of the incentive to participate in Season 2 of Blurs bidding program.
What Happens Next?
Blur needs a new game plan.
Slowly, and in recent times suddenly, the people participating in Blurs season 2 bidding program have declared defeat, calling an end to their participation in Blurs incentivized bidding program as the losses they are accumulating are no longer thought to be sufficient compensation relative to their ongoing losses.
Nonetheless, despite having frustrated each of the participants in Web3 today ~ airdrop farmers, traders, creators and collectors ~ Blur still has an opportunity.
This week, OpenSea announced they are planning on eliminating creator royalty fees while introducing a 0.5% marketplace fee to OpenSea Pro ~ an announcement that has been met with strong criticism.
Blur wanted to become the #1 NFT marketplace by transaction volume.
They are winning this competition, however, it’s very unclear how much transaction volume will remain once they end season 2.
This will be the most important obstacle Blur will have to overcome to remain relevant in the years to come as they cannot continue to issue $Blur in perpetuity to cover the cost of people participating in its incentivised bidding program.
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See you next time! — Matt O’Brien 👋
This newsletter is for informational purposes only and does not constitute financial or business advice to any person or entity