Can Blur really bring about a transformation in NFT trading platforms?

Author: Xi Angxiang, ChainCatcher

The exponential growth of the NFT sector has been one of the most remarkable phenomena in the cryptocurrency space over the past few years. Some value its cultural attributes, others believe its essence leans more towards financial products, and many believe that its emergence and prosperity may eventually allow us to map real-world assets onto the blockchain in some way.

This article will delve into one of the most certain and substantial opportunities in the NFT sector—NFT trading platforms—starting from its current competitive landscape and moats, analyzing the development of the most talked-about emerging platform in the past year—Blur—and the achievements and concerns behind its airdrop strategy.

Competitive Landscape of NFT Trading Platforms

Due to the supply side's pursuit of transaction volume and the extremely low switching costs, there are many NFT trading platforms. They can be simply divided into two categories—comprehensive trading platforms and vertical trading platforms. Comprehensive platforms cover a wide range of NFT categories; vertical platforms focus on specific categories or industries, such as games or curated NFT collections.

The most popular comprehensive NFT trading platform is OpenSea, with challengers like Rarible, Mintable, and Coinbase. The differences among various comprehensive NFT trading platforms mainly lie in:

1) Convenience of Discovering New Projects: Currently, Twitter and Discord are the mainstream platforms for discovering new NFT projects. By improving display interfaces and search functionalities, trading platforms are expected to enhance the discoverability of new (high-quality) projects, thereby increasing user retention.

2) Integration of SaaS Tools and Completeness of Features: Currently, OpenSea and its competitors resemble relatively user-friendly front-end products that are not yet fully mature. If additional features are added, such as NFT portfolio management tools, simpler minting tools for creators, and richer social functionalities, trading platforms will further lock in users and increase their switching costs.

3) Reputation and Recognition: In the crypto space, "trustworthy" platforms are extremely scarce. Currently, OpenSea's most significant advantage over other competitors stems from this. Therefore, project teams regularly post their OpenSea links in Discord channels and Twitter profiles, undoubtedly creating a "reputation" moat for OpenSea.

Vertical trading platforms are represented by Foundation, SuperRare, and Immutable, among others. They focus on specific vertical fields, such as Immutable focusing on GameFi and SuperRare focusing on works by renowned artists.

The characteristic of vertical platforms is that they help buyers eliminate the interference of complex information and more conveniently find what they truly want. Therefore, they place greater emphasis on user needs and experience. To find signals amid the noise, "curation" has become the strategy for these platforms to recommend high-quality projects. For example, Nifty Gateway, under Gemini, regularly organizes such events to highlight unique NFT series.

The landscape of NFT trading platforms is far from mature. Because this asset class is very trendy and platform functionalities still have vast room for innovation, we might draw insights from comprehensive and vertical trading platforms in traditional Web2 industries to understand the potential transformations of NFT trading platforms.

Specifically, comprehensive platforms like OpenSea hope to profit from a single product experience within a large user base, with the ultimate goal of maximizing user acquisition and traffic; while vertical platforms can customize personalized experiences based on the needs of core high-value users, securing a place by providing long-term services to a smaller, more refined clientele. This is why high-value NFTs are more favored by vertical trading platforms.

Five Moats of NFT Trading Platforms

Since the dawn of human society, trading platforms have existed in some form (only the trading mediums have continuously changed). They exist across different industries, groups, and classes, but some key characteristics are common.

1) Transaction Volume

A good trading platform must attract attention and provide participants with sufficient transaction volume. This usually occurs in categories with high-frequency trading behaviors, such as people's daily necessities. In the crypto world, many trading activities are driven by speculative purposes, making high-frequency trading quite normal.

2) Discoverability

The ability to effectively search for products can bring higher transaction volumes to trading platforms. This not only increases the lifetime value of customers but also smooth search functionalities and purchasing experiences help reduce user churn. Currently, comprehensive NFT trading platforms are focusing on this aspect.

3) User Experience

For users of NFT trading platforms, the entire trading process can be broken down into multiple steps: searching, decision-making, placing orders, transaction success rates, trading frequency, transaction costs, etc. The best trading platforms can reasonably optimize each step for both supply and demand sides, including friendly payment methods, the ability to resolve unexpected issues, and interfaces and interactions that can attract a wide user base.

So far, the user experience of comprehensive NFT trading platforms has been somewhat mediocre. OpenSea has long been more like a simple front-end product, and if it wants to focus on actual trading issues, the trading platform needs to make bold innovations. The following sections will specifically elaborate on Blur's various "trader-friendly" features to demonstrate how it is more refreshing compared to OpenSea.

4) Economic Incentives

Successful trading platforms can bring economic value to buyers or sellers, and they should ideally offer more than existing methods, such as cost advantages or platform incentives. For sellers, this stimulates more demand, thereby increasing revenue; for buyers, it can effectively reduce costs.

NFT trading platforms have their uniqueness. Due to the innovations in ownership relationships and tokenization strategies in the Web3 space, NFT trading platforms can not only create original economic value for users but also further incentivize user engagement and retention through methods like issuing tokens.

5) Multi-Chain Aggregation

Users have long suffered from the fragmentation of trading platforms. For NFT trading platforms, a multi-chain ecosystem makes the market overly fragmented, making transactions less convenient. To this day, users still need different platforms, wallets, and even different currencies to purchase NFTs on Ethereum, Solana, Tezos, and Avalanche, which is detrimental to creating a quality user experience.

The Disruptor of the Industry—Blur

As a community-driven NFT trading platform designed specifically for traders, Blur has its unique features. It aggregates orders from platforms like OpenSea, LooksRare, and X2Y2, while allowing users to list their own NFT assets on Blur. Unlike other platforms that charge transaction fees, Blur currently maintains a 0% fee.

Before its official launch, the platform attracted significant attention through mechanisms like invite-only registration, referral reward programs, and waitlists. In summary, its early achievement of product-market fit (PMF) can be attributed to the following three factors:

1) Ease of Use

By default, NFTs are sorted by daily trading volume, and all key data (such as floor price, number of owners, and various volume-price indicators) can be easily viewed. Here, users can easily track and analyze an NFT's rarity, collectible value, and even rough investment returns.

Blur's interface is highly customizable. When browsing NFT collections, users can switch between multiple views according to their preferences. Unlike OpenSea, which requires complex tab switching to view sales history or other analytical indicators, Blur displays everything on a single page. Other small features, such as dark/light mode and gas fee trackers, are also unique details that surpass other platforms.

Of course, it must be acknowledged that the complex data on the Blur interface may intimidate newcomers. It easily evokes comparisons to Bloomberg terminals, and newcomers will need some time to adapt and explore. However, for those willing to spend time getting accustomed to Blur, the benefits compared to other NFT trading platforms are evident.

2) Functional Innovation

A good user experience is underpinned by sufficiently innovative yet not overly complex functionalities. According to Blur's promises, the speed of floor sweeping is ten times faster than other platforms, with lightning-fast pending transaction displays and near-instant data updates, making it hard for users not to be captivated.

Additionally, Blur can clearly display the rarity of NFTs with different traits within the same series, even allowing users to see the floor price for specific attributes. By finding the lowest price orders for each individual trait and presenting the data in an easily understandable way, this feature helps users accurately assess their assets and is very convenient for those looking to sweep NFTs with specific attributes.

Moreover, Blur's "floor sweeping" tool maximally meets the needs of professional traders. All NFTs have a floor price depth chart, showing how many NFTs are for sale at different intervals above the floor, helping users intuitively understand how their purchases will affect the floor price.

A shortcoming of Blur's functionalities is that it currently only supports Ethereum-based NFTs. However, the Blur team has plans to integrate other chains like Polygon in the future.

3) A Wide Network of Builders and Supporters

In March 2022, Blur raised $11 million in a seed round led by Paradigm. As one of the most successful venture capital firms in the crypto space, Paradigm's bet on Blur is not to be underestimated. The firm has previously supported many winners in the NFT space, such as OpenSea and Magic Eden.

This round of financing also attracted other participants from the NFT and crypto space, such as 0xMaki, Andy Chorlian, Santiago Roel Santos, Deeze, and Zeneca. The support from such KOLs indicates that Blur has a certain community foundation and dissemination capability, capable of aggregating a group of closely-knit industry enthusiasts.

In addition to having a reliable group of investors, the founding team of Blur is also quite outstanding. Recently, Blur founder Pacman publicly revealed his identity, stating that he was accepted into the well-known incubator Y Combinator at the age of 17 after starting his own business, later attended MIT, received the Peter Thiel Fellowship, and founded a company called Namebase, which he sold to Namecheap. Such a resume is undoubtedly impressive.

According to Blur's official information, its team members come from institutions, companies, and incubators such as MIT, Citadel, Twitch, Brex, Square, and Y Combinator, and this kind of founding team experience effectively ensures the project's reputation.

Achievements and Concerns of Blur's Airdrop Strategy

As mentioned earlier, for NFT trading platforms, a rich selection and friendly experience are the foundation for establishing a foothold in the industry and capturing more market share. Blur's speed advantage and unique features are also important moats. Because of these, 65% of Blur's early users came from OpenSea and Gem.

However, Blur did not stop there. It effectively utilized a powerful weapon in the crypto space—token airdrops—to further target OpenSea.

Launched in December 2017, OpenSea has maintained a leading position in the NFT industry for several years, accumulating considerable experience and resources. Faced with such a competitor, how did Blur quickly catch up with or even surpass OpenSea in transaction volume?

Blur is very clear that airdrops can help achieve this interim goal.

It chose a rather clever approach, dividing the airdrop into three rounds:

First Round: Users who traded NFTs in the past 6 months

Second Round: Users who actively listed NFTs on Blur

Third Round: Users who placed bids on Blur

Additionally, according to a blog post by Blur, users who respect and collect royalties rather than setting them to 0 will receive more airdrops, and user loyalty will also affect the number of airdrops. To maintain high loyalty, users need to list NFTs on Blur at prices equal to or lower than those on other trading platforms.

This ultimately led to tactical victories. Under Blur's fierce offensive, OpenSea has been steadily losing ground, with its market share dropping from a peak of 99% last year to between 50-30% at the beginning of this year.

However, the success brought by airdrops is only temporary, as the experiences of LooksRare and X2Y2 tell us, sustaining this is quite difficult.

LooksRare and X2Y2 also launched token incentives in early 2022. The excitement of airdrop distributions was followed by a dismal performance of token prices. They initially failed to effectively capture a place for OpenSea, and today, the same narrative still has a market, but it is no longer as enticing as before.

Therefore, Blur needs to abandon illusions and seize more tactical victories.

From the data, in the first two months of 2023, the number of unique buyers on OpenSea declined, and the average transaction frequency per user also decreased; meanwhile, various metrics for Blur were on the rise. This indicates that a group of NFT traders has begun to shift from OpenSea to Blur, and the current average transaction volume on Blur is higher than that on OpenSea. All of this is clearly benefiting from Blur's ongoing airdrop strategy.

It is worth noting that although Blur has shown significant growth in transaction volume and market share, the underlying details are not so optimistic. According to Dune data, over the past four months, about 15% of OpenSea's transaction volume came from 8 blue-chip collections (CryptoPunks, BAYC, Otherdeed, MAYC, Meebits, Moonbirds, CloneX, Doodles), while approximately 41% of Blur's transaction volume came from the same blue chips.

In other words, OpenSea's transaction volume distribution is healthier, with most transactions coming from mid-tier and lower-tier works; while Blur's transaction distribution is overly concentrated, relying heavily on top NFTs. This indicates that OpenSea still possesses significant advantages, with a large presence of long-tail supply and demand.

Final Thoughts

The story of Blur illustrates that even in a persistently sluggish crypto market, active teams with innovative products can emerge, prompting industry leaders to remain vigilant to avoid being toppled.

However, whether Blur can truly establish its position and even surpass OpenSea to bring a larger scale of users to the industry remains uncertain.

Web3 does not need more experiences of short-term PMF, chasing false dreams, and excessive speculation leading to chaos; it needs something that truly makes progress, can fulfill its promises, and restore the industry's reputation. Including Blur, we still have a long way to go.