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GM frens,
In today’s edition of The Ground Floor we are breaking down Blur’s impact on NFTs since the platforms inception in October 2022…
Blur’s Impact On NFTs
Blur is 9 months old.
The impact the platform has had on the NFT market is back in focus on crypto Twitter, with many collectors offering commentary on Blur’s impact on NFTs.
As is commonly the case, much of this commentary focuses on the negative impact Blur has had on NFTs ~ today will be breaking down the good & the bad.
Building Blur
When everyone was making money buying and selling NFTs throughout 2021 and into 2022, collectors had no quarrel paying creator royalties.
As the floor prices of many projects began to fall in 2022, collectors began to reexamine these royalty payments which triggered the rise of marketplaces that focused on removing the need for collectors to pay creators royalties.
Platforms such as Lookrare & X2Y2 were the first movers, however, removing creator royalties proved insufficient for these platforms to gain meaningful market share from OpenSea ~ the then #1 NFT marketplace.
Having had the luxury of watching Lookrare & X2Y2 miss this opportunity to become the market leader, Blur took things several steps further.
First and foremost, Blur eliminated BOTH creator royalties and marketplace fees, a move that made Blur the most competitive marketplace by default ~ commonly offering collections floor prices for 7.5% less than OpenSea.
Most importantly:
Blur incentivised collectors to list NFTs on its platform & buyers to purchase NFTs on its platform with the allure of an airdrop that rewarded this participation.
The Good ✅
1) New Liquidity
The $Blur airdrop injected millions of dollars of new liquidity into NFTs as collectors received thousands of dollars for simply buying & selling NFTs on Blur.
This new liquidity temporarily pumped the prices of NFT collections as collectors sought to re-invest their new found riches back into NFTs.
2) Lower Marketplace Fees
Blur’s success in incentivizing sellers to list NFTs on its marketplace has resulted in a permanent reduction in transaction fees across marketplaces, with collectors now having the option to save 2.5% on transaction fees.
3) Easier To Exit Large Positions
One of the areas Blur has excelled in is making it as easy as possible for collectors to exit large positions in collections.
The very best example of this is Mando who successfully sold 72 Bored apes earlier this year in a single transaction for a cool $9.25 million
This is a fantastic feature for collectors seeking to sell large positions vs having to list all of these NFTs at the floor price only to be undercut by any other collector seeking to sell assets in the same collection.
The Bad ❌
1) Artificial Demand
Following the success of its first airdrop, Blur is now incentivizing people to place collection bids on NFTs in exchange for receiving points that will be exchanged for the $Blur token ($242 million market cap) when season II ends.
In this system, the people placing bids are rewarded for the bids placed closest to the floor price of a collection ~ this allows collectors to exit large positions by selling a large number of NFTs close to the floor price at the same time.
In the event that the people placing these bids have their bids accepted, they often seek to sell these assets to the next “bid farmers” and the cycle continues.
2) NFTs Into Fungible Tokens
Blur has significantly increased the number of NFTs available at a collections floor price, which has in turn significantly reduced the price differentiation that previously existed for NFTs that contained desirable traits.
While gold BAYC’s and Hoodie Punks continue to command premiums, Blur has brought about a change to the market whereby the majority of NFTs are priced as non-fungible tokens (non-unique) tokens vs being unique.
This commodification eliminates the excitement associated with ascetics, which in my experience does not help collections succeed.
3) Uncertain Supply Levels
Not knowing the number of NFTs available at the floor price discourages collectors from buying NFTs, something best explained by NFTStats:
“It's perception of supply.
No one would EVER buy a Chromie Squiggle if there were 100 listed at 8 ETH. But you would when there's just one listed at 10 ETH and next at 11 ETH.
The minute a farmer gets dumped in, NFTs are uninvestable and price is going lower. I have sold MANY NFTs I wanted to hold and liked because I knew the supply dynamics were too destroyed by incentivized bidders.”
To summarize:
Not knowing the number of NFTs available at the floor price discourages collectors from buying new NFTs, with certain collectors seeking to sell items they would otherwise hold in anticipation of floor prices falling further.
This is perhaps one of the biggest impacts Blur has had on the NFT market, with collectors previously having the ability to access a single source to evaluate the number of NFTs that were available (OpenSea).
Looking Forward
The tools Blur has created, and incentives they have put in place to accelerate the adoption of these tools ~ namely incentivizing people to place bids on NFTs that they have no desire to own has undoubtedly had a negative impact on NFTs.
Nonetheless, Blur is by no means the reason why the far majority of NFT projects floor prices have fallen in 2023, rather this is the result of the poor execution by the founders of these projects who made promises they simply couldn’t keep.
With over 70% market share, it’s also clear that Blur isn’t going away anytime soon, as they remain the best place to purchase an NFT for the lowest price.
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This newsletter is for informational purposes only and does not constitute financial or business advice to any person or entityIm
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