Decrypt’s Art, Fashion, and Entertainment Hub.
Following two straight months of sales growth, NFT trading rapidly accelerated over the past week as Ethereum NFT volume more than doubled during that span. It’s due to an evolving market in which upstart marketplace Blur has overtaken leader OpenSea, with traders rapidly flipping valuable NFTs like they’re DeFi tokens.
According to data from DappRadar, Blur has generated $460 million worth of Ethereum NFT trades over the past seven days—a 361% increase over the previous span. OpenSea, meanwhile, saw a 12% increase in trading volume to $107 million during that period. The third-place marketplace, X2Y2, tallied barely $11 million in trades in that time.
Overall, CryptoSlam points to a 155% week-over-week increase in Ethereum NFT trading volume. The surge in volume comes during a week in which Blur airdropped its BLUR governance token to NFT traders who earned rewards through the marketplace, and also by trading elsewhere ahead of Blur’s own launch last fall.
The BLUR token has a market cap of $466 million, at its current price of $1.20 per token, and it appears that at least some NFT collectors poured their airdropped funds back into buying NFTs. And they’re primarily using Blur to buy and sell NFTs, as the market data shows.
However, the surge in trading volume at Blur doesn’t appear to be primarily driven by traders simply selling off their BLUR tokens and buying and holding high-value NFTs. Instead, whale traders with significant NFT holdings appear to be flipping NFTs with even greater frequency than before, in an effort to boost potential future token reward allocations.
For example, the largest NFT project (market-wide) over the past week in terms of trading volume is Otherside, Yuga Labs’ upcoming metaverse game. The NFT land plots generated some $63 million in trades this past week, per CryptoSlam, marking a 318% week-over-week increase.
The largest seller during that span is the wallet of MachiBigBrother, a well-known pseudonymous NFT trader, who was involved with nearly 1,300 Otherside NFT trades yielding $4.3 million worth of sales in the process. A look at his trading activity shows a constant flood of inbound and outbound trades, and this is just one example of many.
It’s facilitated by Blur’s unique marketplace model, which not only broadly incentivizes heavy activity with the promise of token rewards, but specifically rewards traders for using bidding pools that enable bulk trading for NFTs.
Blur Bidding Pools have reached a new ATH of $132.65M TVL, or, around 2.4x Aptos TVL and 0.5x Solana TVL.
Blur also became the #1 protocol on Ethereum by gas usage as well, surpassing both Uniswap and Seaport.
— Blur (@blur_io) February 20, 2023
Blur is teasing its next “Season 2” token airdrop, and specifically notes that traders that “bid on top collections closer to the floor get more rewards.” In other words, traders that put in a bid close to the floor price—that is, the cheapest available NFT for a certain project—of a popular project will maximize their eventual rewards. They’re both buying and selling in bulk as a result.
That’s why projects like Otherside, the Mutant Ape Yacht Club, and Moonbirds are all flying this week, and why many of the NFTs in those projects are trading hands over and over again. And MachiBigBrother, the aforementioned whale trader, currently sits at the top of Blur’s Season 2 leaderboard for trading rewards.
DeFi, a catch-all term for non-custodial trading and lending services, took the Ethereum space by storm in 2020 and has played a significant role in the growth of the ecosystem since. Now, through token rewards and gamification techniques, Blur has incentivized traders to treat NFTs more like DeFi tokens, flipping frequently and attempting to maximize every potential benefit through liquidity mining. Some traders have even posted guides on how best to mine Blur’s token rewards without making potentially costly mistakes in the process.
DeFi and NFTs are merging. Ape and ape hard.
— Machi Big Brother (@machibigbrother) February 18, 2023
The NFT-meets-DeFi approach isn’t entirely new. We’ve seen DeFi-like implementations for NFTs in recent months, such as Sudoswap and Hadeswap embracing liquidity pools versus traditional marketplace listings, plus BendDAO using that kind of format for NFT-based loans. Other NFT-based loan protocols have risen in recent months and flourished.
Last August, amid earlier debates around NFT flipping and creator royalties, Crypto Twitter personality Cobie tweeted that NFTs are “altcoins with pictures.” It was a controversial take then, but Blur’s DeFi-like approach to NFT trading has executed that concept at a scale previously unseen—and the impact has been profound.
OpenSea, long the market leader in terms of trading volume, has been eclipsed by Blur’s trading frenzy—and as a result, OpenSea announced Friday that it has temporarily cut its own 2.5% marketplace fee, and will cut back on some creator royalty enforcement protections. This means OpenSea, in an attempt to remain competitive with Blur, is effectively going "zero fee," forgoing the fees that drive its own primary source of revenue as well the fees that finance most NFT projects.
As when OpenSea publicly considered changes to its creator royalties model last fall, many NFT artists and creators have vocally pushed back against the move. But Blur, which does not fully honor creator royalties across projects, apparently forced OpenSea’s hand last week as the longtime leader attempts to adjust to a new normal.
OpenSea still serves more unique wallets than Blur—about 106,000 for OpenSea over the past week, with about 66,000 for Blur. But Blur has shot ahead in terms of number of transactions, along with the widening gap in trading volume.
Like more exaggerated examples of wash trading, the flood of NFT flipping and rewards “farming” on Blur muddles the market data—and the surging trading volume from the past week doesn’t suggest that the NFT market is growing and onboarding scores of new collectors. It’s mostly whales trading among themselves.
“We aren’t growing the pie,” tweeted Web3 project founder Naveen Jain. “It’s the same folks circulating assets and ETH around and around.”
That apparently is true, but the entire market is still forced to grapple with the shifting tides—from Blur and OpenSea battling it out for market share to project creators watching their revenue streams dry up as platforms cater more to NFT flippers and pro traders.