What is Blur?

What is Blur?

Blur is an Ethereum-based NFT aggregator that consolidates market data from multiple mainstream NFT platforms such as OpenSea, LooksRare, X2Y2, and more. Through excellent visualization tools, user-friendly interfaces, and multi-platform listing and sales functions, Blur provides users with convenience in purchasing NFTs. Batch trading and deep market liquidity can also meet the needs of professional NFT traders. Additionally, Blur incentivizes users to pay higher NFT royalties to support creators through a token airdrop reward mechanism. In addition to achieving decentralization, users also become stakeholders in the platform, contributing to the development and sharing of benefits.

Due to its fair resource allocation and smooth user experience, Blur has attracted more and more users since its official launch in October 2022, accumulating over 400,000 trading users in just 4 months. The first-quarter token airdrop and listing in February 2023 further established Blur’s reputation, and many early adopters received substantial rewards. Many well-known NFT projects such as BAYC, Azuki, CloneX, Moonbirds, and Doodles are also trading actively on Blur.

Background on Blur

The creation of Blur was out of dissatisfaction with the current NFT market. Just as in 2008, Satoshi Nakamoto’s Bitcoin white paper denounced the incompetence of traditional financial institutions and governments, Pacman, the founder of Blur, mentioned in a Mirror article and personal Twitter: “We founded Blur because we wanted a faster and more user-friendly platform for trading NFTs, but there is currently no platform that can meet our desired functionality.” This implies that the leading NFT market OpenSea has disappointed people’s expectations, with its 2.5% commission, slow development pace, cumbersome operations, and market with insufficient liquidity, all of which have become obstacles to the popularization of NFT circulation.

Pacman’s own experience is very dramatic. He dropped out of high school at the age of 17 and entered Y Combinator’s startup incubator. He then went to MIT to study mathematics and computer science, and after receiving the Thiel Fellowship, he left MIT to found Namebase, which he later sold to Namecheap and made his first pot of gold.

As a lover of NFTs himself, Pacman understands what users want: low transaction fees, high liquidity, fast trading, market information aggregation, investment portfolio panels, royalty protection, advertising exposure, profit-sharing, etc. After weighing the needs of users, traders, and artists, he conceived a protocol architecture that could satisfy all groups and began developing Blur in early January 2021.

In addition to Pacman, most of the members of Blur remain anonymous. According to information revealed by Blur’s official blog, other members come from well-known companies such as Citadel, Five Rings Capital, Twitch, Brex, and Square. The project has already received a $14 million investment led by cryptocurrency and Web3 venture capital firm Paradigm, with Wintermute as the main market maker.

What Makes Blur Unique

Blur is well aware of the pain points of NFT platform users and has worked hard on user experience and economic models, such as:

1. Friendly and simple operation interface

Figure from Blur.io

At the top of the Blur marketplace page, you will only see project collections, personal asset allocation, airdrops, and a search bar. The operations are intuitive and the functions are clear, allowing users to easily navigate based on their personal needs, even if they are NFT novices with no experience.

In comparison, OpenSea’s homepage has more than twenty neatly arranged but infrequently used buttons, interspersed with several automatically changing project ads. It looks more like a traditional Web2 online shopping mall, with a huge difference in complexity and user experience.

1. Popular Collection List

Do you want to know which NFT collections are the hottest? Do you have a particular project that you are fond of or interested in, but don’t want to use the search engine frequently? Blur has thought of this feature. In the project collection list, you can click on the trending list to see the most popular NFT projects on the market.

If you want to keep track of your favorite collections, you can click the star icon on the right to add them to your Favorites list.

1. Attribute Filters

Like other NFT trading platforms, Blur also has built-in attribute filters that allow users to search for NFTs in a series based on different attributes and rarity.

1. Switchable Trading Panel and Tools

Like other NFT aggregation protocols, Blur has consolidated a lot of information that professional NFT traders pay attention to, including real-time market trading volume, floor price, order volume and depth, network gas fees and settings, etc. If users are just simple NFT collectors who want to browse, they can also switch to the simplified collector mode. Blur also supports three background colors: light, gray, and extreme black.

From Blur.io

1. Bulk buying and selling

If you are a wealthy investor or a collector with a large number of NFTs, through Blur, you can easily sweep the order book, immediately buying all NFTs of a specified series on the market, or exchanging specific series of NFTs for ETH, without going through the nightmare-like process of adjusting prices, confirming clicks, and placing orders over and over again. If you only want to buy or sell a specific number of NFTs, you can set it up when you sweep.

1. Liquidity Mining

By placing NFT liquidity orders on the Blur platform, you can earn Loyalty points, which are calculated and accumulated every five minutes. Users with higher points have a better chance of receiving lucrative Blur token airdrops as rewards. According to official Twitter, over 300 million Blur tokens will be released as part of the liquidity incentive plan in Season 2.

1. Resolving the conflict between traders and NFT creators

The biggest innovation of the Blur protocol is not in UI/UX improvement, tool integration, or token reward distribution, which can be found in other platforms such as LooksRare, X2Y2, GEM, and Despace, but in the token distribution that resolves the conflict between traders who want zero royalties and NFT creators who want royalties.

Users can trade with the lowest royalty rate (0.5%), but their Loyalty points settlement will be lower than other users who set a higher royalty rate (such as 1.5%). Since points directly affect the number of Blur tokens that can be obtained, users are encouraged to trade with a higher royalty rate to give back to NFT creators. In other words, NFT royalties are no longer just a transaction cost for users, but a way to invest in Blur protocol and a donation proof to NFT creators, which can be called a Donate to Earn reward mining method.

This is a concise and clever resource allocation rule. Traders can customize the conversion ratio of Blur tokens to investment, and talented NFT creators can earn more royalties. The Blur protocol also achieves decentralization by distributing tokens to core users, creating a three-win situation with no clearly damaged party in the system.

Blur vs. OpenSea

As a pioneer in the NFT market since early 2018, OpenSea, the dominant platform with a market share of nearly 90%, naturally noticed potential challengers like Blur.

In November 2022, many 0% royalty agreements appeared, causing dissatisfaction among the NFT creator community. OpenSea chose to support NFT creators and required users to pay royalties when conducting transactions. Trading routes without royalty protection would be blocked by OpenSea’s filter. Blur, which indirectly encourages royalty payment through token mechanisms, became one of the blocked objects.

On February 1st, 2023, Blur successfully bypassed OpenSea’s blacklist blockade by using OpenSea’s Seaport to establish a new NFT trading system. This allowed NFT projects that were blacklisted to be traded on the Blur platform through the new system.

On February 16th, 2023, Pacman, the founder of Blur, published an article titled “How to Earn Royalties on Blur” on the official blog. Pacman pointed out that due to OpenSea’s blocking policy, creators would be unable to receive royalties on both OpenSea and Blur. He analyzed the difficulties and choices NFT creators face in a detailed and comprehensive manner, and made a rational conclusion: “Block OpenSea, obtain complete royalty income, and be eligible for the second season of Blur airdrop rewards.”

From official blog

Blur’s suggestion to users to reverse-block OpenSea is nothing short of a challenge to the long-standing dominance of OpenSea in the NFT market. There is no clear choice between the two platforms, and NFT creators must choose which side to stand on. Market data shows that users are choosing Blur, as the allure and token rewards offered by this new platform are more attractive than the outdated OpenSea. In less than a week, the total locked value on Blur’s platform has increased nearly fourfold.

Figure from defillama

The rate of user loss far exceeded OpenSea’s expectations after Blur’s announcement two days ago. OpenSea quickly announced a new policy: “For a limited period, we will reduce the platform’s transaction fees to zero!” In addition, they also removed the limit of a minimum of 0.5% royalties and opened up access to filtered-out objects.

Blur’s success not only made a name for itself but also benefited other small-scale NFT markets that had been banned by OpenSea. However, whether NFT creators and traders will accept OpenSea’s first-ever compromise remains to be seen. If OpenSea cannot propose a better model to improve the liquidity problem that has plagued the NFT market for a long time, its market share and leading position may be replaced by up-and-coming protocols such as Blur.

Blur’s Token Economics

According to the official documentation of the Blur Foundation, $BLUR is a governance token, and its holders are members of the Blur community who can participate in the governance of the Blur DAO. The community can express their ideas and suggestions for Blur through proposals and voting, in order to promote the growth and development of the Blur ecosystem.

There are three types of BIP (Blur Improvement Proposals), which are core, process, and information proposals. Each proposal requires feedback through discussion forums and snapshot voting before being executed through on-chain voting. The proposal threshold, voting period, and acceptance criteria will vary depending on the different stages of the proposal.

The main governance rights of the Blur community include:

(A) Allocation and use of Blur tokens

(B) Fee rates for the Blur protocol after 180 days (up to 2.5%)

(C) Adjusting proposal thresholds, voting periods, quorum, and other parameters related to Blur DAO governance

The maximum supply of Blur tokens is 3 billion, and it is expected to be fully released by February 2027. 51% of the tokens are allocated to the Blur community, 29% to core developers, 19% to investors, and 1% to advisors.

Figure from Blur Foundation

The Blur token rewards for core developers, investors, and advisors will be linearly unlocked over a period of 4-5 years. Mining rewards for the community will gradually decrease by 40%, 30%, 20%, and 10% each year based on their share.

Figure from Blur Foundation

The Concerns and Prospects of Blur

As previously mentioned, Blur’s greatest innovation lies in its clever use of token distribution mechanisms to resolve the conflict between NFT creators and transaction users. Creators need income and naturally prefer higher royalties when their works are resold.

However, high royalties are not favorable for traders in the market. For most buyers and sellers of NFTs, royalties represent an additional transaction cost, and they do not gain additional benefits from paying higher royalties. This creates a vicious cycle where increasing royalties leads to decreased transaction volume, which in turn leads to a decrease in NFT creators’ income, making it impossible for them to produce more and better NFT works.

On the other hand, although reducing the royalties may make traders more willing to trade on the market, doing so will directly harm the rights of NFT creators, and traders will not give creators other forms of rewards just because costs have been reduced. As a result, the worst outcome will still be achieved: a decline in creator income, leading to a lack of liquidity in the market due to a shortage of high-quality NFT works.

The airdrop reward mechanism of Blur encourages users to pay a higher percentage of royalties, turning the original NFT transaction costs into investment in Blur tokens. NFT creators can earn more income, and trading users can also obtain more Blur tokens, indirectly becoming shareholders of the Blur platform. If the price of Blur tokens rises, it may even lead to a “donate to earn” scenario where the more one donates, the more one earns, such as “I donated 1 ETH and earned 2 ETH in mining rewards.”

It is evident that the Blur model can indeed provide economic incentives to improve liquidity in the NFT market. In prosperous times, it can even create a flywheel effect, driving growth in NFT trading volume and royalties through higher Blur mining rewards, directly encouraging NFT creators to produce high-quality works actively, thereby creating a positive virtuous cycle. The NFT market will likely recreate the glory of the DeFi summer of 2020.

However, the drawbacks of liquidity mining are also apparent. As discussed in another article that explores the profit model of wash trading, Blur, and X2Y2 are also a form of mining currency. Although the issuance mechanism has been slightly improved, Blur still cannot escape the fate of being mined, withdrawn, and sold by users. If the market cannot create more users that are willing to pay for it, it can be expected that the long-term price of Blur tokens will continue to decline. When mining rewards no longer attract people, the original positive cycle may even turn into a negative flywheel, accelerating the shrinkage of liquidity in the NFT market.

There is currently no clear answer on how to avoid the death spiral of BLUR, but perhaps by drawing lessons from the experiences of other DeFi or NFT protocols, some possible directions can be found.

Conclusion

NFT is at the forefront of the crypto market but has been plagued by a lack of liquidity since its inception. Disputes between NFT creators and traders have deepened the divide between buyers and sellers. Some large platforms have even used their power to suppress emerging small NFT market protocols without improvement. The chaotic situation has discouraged interested participants, making it difficult for NFT to become mainstream.

The rise of Blur sounds like the horn of reform for the NFT market, which is no less impactful than the Bitcoin white paper was to traditional finance. Blur directly addresses the core of the difficulties faced by the NFT market and eliminates the differences between different factions through a reasonable and fair distribution of interests. Improper third-party vested interests, even those once towering giants, cannot withstand the wave of Web3.

However, there are more challenges waiting for Blur. The lack of value support for the token is the first and foremost problem. There have been many precedents in the crypto market where governance tokens or profit distributions alone cannot reverse the fate of a declining token price. Blur must have other empowering features that make users willing to pay for it to avoid being seen as a coin that can only be mined, withdrawn, and sold without restrictions. Blur is expected to chart its own path in its future development.