Blur: Revenue Generator or Death Spiral?

Blur trading activity has continually shown strength relative to other players in the NFT infrastructure landscape throughout the course of 2023. It has maintained its dominance over OpenSea both as an aggregator and a marketplace, and has taken the NFT lending market by storm by becoming the dominant venue for borrowers and lenders in just over a month. The BLUR token is trading near all-time lows since launching in February 2023, with a circulating market cap just north of $150M and an FDV of ~$950M. OpenSea raised at a ~$13B valuation in April 2022, which begs the question of whether BLUR represents an asymmetric bet for investors who are bullish on NFT infrastructure despite the steep decline across nearly every KPI for NFTs.

The State of Decentralized NFT Marketplaces

Critics often attribute Blur’s success thus far to the ongoing token incentives to list and bid on collections, with higher amounts awarded to wallets that exclusively use Blur. While a reasonable take, nearly every dapp in crypto bootstraps its liquidity through a mechanism involving the distribution of native tokens. X2Y2 and LooksRare are prime examples of two decentralized marketplaces that incentivized activity on their platform, but have struggled to maintain competitive with Blur throughout 2023.

Blur’s primary advantage over X2Y2 and LooksRare ultimately boils down to token design. Blur launched a full year after the other two leading decentralized marketplaces and has a much longer vesting schedule. Native tokens are in part a marketing budget for decentralized NFT marketplaces, and BLUR stands out as the project with the longest runway to maintain its liquidity and ultimately establish strong network effects. Both X2Y2 and LOOKS will be fully vested by the beginning of 2024, whereas BLUR will not be fully vested until the beginning of 2027.

The above estimates are not perfect considering BLUR’s lower float and the inability to predict the price impact of token unlocks/reward distributions, but it is clear that Blur looks much healthier than either of its decentralized counterparts no matter how you slice it. The dwindling value of X2Y2 and LOOKS incentives has a definitive impact on each marketplace's respective trading volume. 300M BLUR tokens have been allocated towards Season 2 rewards. The 870M tokens that vest throughout 2027 will be allocated by the DAO via governance. However, it is quite possible that Blur faces the same decline as its predecessors if seasonal rewards are ultimately dumped and reduce the value of future incentives.