As a self-proclaimed crypto degen, I'm disappointed in myself for not getting involved with blur.io sooner. It took a major airdrop to bring Blur into sharper focus. This essay is my attempt to make amends for my oversight, and share my thesis, whether rightly or wrongly, on where I see the token's potential heading in the future.
To be clear I will be using “$BLUR” when describing the Blur token (because we’re all here to make $$) and capital “B”s to refer to the NFT platform.
Tl;dr:
In the short run, it is likely that the volumes of the Blur NFT marketplace will stay ahead of Opensea.
Blur focuses on the main reason 99% of us collect art: to make money and stack ETH. Its intentional UI/UX design exemplifies this focus.
While the anon team remains a wildcard rug risk - what’s new in crypto?
Although there are multiple bullish catalysts that could drive token value higher, it remains to be seen whether they will be enough to overcome macro headwinds.
The Blur token is no means cheap by any measure
Lets trade some NFTs on Blur and get that next airdrop bag!
Introduction to Blur.io
When I first heard about the project some months ago I placed it on the backburner as the UI looked like it was made in 1999 (still does). I was very much more drawn to the MoMA-style feels of Opensea and gang.
So what makes blur.io special? Well, to quote a famous now-defunct exchange it is “built by traders for traders”. Essentially, what Blur lacks in the art gallery-like viewing experience, it makes up for it in what matters to NFT traders. Multi-marketplace listings at a click of a button, filtering and referencing traits by rarity in a single dropdown view. Data, data, data. Hit that bid, lift that offer. Buy low, sell high easily.
For a start, their amazingly easy-to-use order book depth charts really brings out the trader inside.
And their price charts intelligently tell you where, when and why an NFT got traded. Sold way below floor? It was probably a flagged NFT on Opensea. To easily find undervalued NFTs, you can click the broom button to sweep the floor via multi-buy and filter against flagged NFTs at the same time.
What makes Blur special is their focus on stats and liquidity rather than artistic value.
Contextualizing their Growth Strategy
We've seen this playbook before: well-funded tech company offers a bunch of free value, creating lots of hype and usage. When the freebies stop, some mercenaries may complain, but hopefully true believers remain. This happened with Uber and Lyft (or Grab, and Gojek if you live in Asia like me), among others, but the key difference with tokens is the potential for enduring loyalty via the promise of economic upside.
Even in crypto we’ve seen successful airdrops with LOOKS, ENS, UNI, DYDX and OP. While most are done retroactively, $BLUR was done with explicit intention. It was clear from their first airdrop announcements how the team wanted to incentivize users to generate liquidity rather than wash trading activity. They gave specific instructions for participants to “game” it (see Airdrops 1, 2, 3 here, here and here).
Airdrop 1 was for everyone who traded in the 6 months prior to the launch of the Blur marketplace. Airdrop 2 was for traders who actively listed on Blur through November. Airdrop 3 is for traders who place bids on Blur and with each subsequent Airdrop being larger than the previous one.
While it's not the first marketplace to use an airdrop and extensive tokenomics to compete for market share, Blur faces strong competition from established players like LooksRare and its $LOOKS token. Additionally, Rarible's recent Rarible 2 update has introduced new incentives to buy and sell its RARI token and participate in its growing ecosystem, including airdropped rewards. Despite these challenges, Blur has the potential to make a name for itself in the NFT market with its unique approach to trading and platform marketing.
Initial Market Reactions to the Airdrop1
As I write this a week after the first $BLUR airdrop, it's clear that Blur's marketing playbook has been successful in driving up the NFT trading volume. However, the number of identified participants still lags behind that of OpenSea. In the last 7 days, while Blur has a nearly 2x lead in ETH trading volume, OG OpenSea has nearly 97k (or 3.7x) more participants in traders alone.
To see its effect, Nouns have become a top target for major players in the Blur Season 2 airdrops because of their high floor price, zero royalties and “blue-chip” status. On February 18th, the single-day trading volume for Nouns soared to 1,624 ETH, thanks in large part to a handful of wallets leveraging the power of the Blur Bid Pool. Despite this, many Noun holders are still benefiting from the value surge, and the market shows no signs of slowing down. As Nouns continue to gain recognition and support from the broader NFT community, it remains to be seen how their value will evolve in the coming months with $BLUR’s new incentives focused on providing liquidity and price support to blue-chip collections.
Risks
Although the rough tokenomics were released during the date of the Airdrop, much is left to be desired. How will the token accrue value? Did investors invest in the $BLUR token via a SAFT? (see definition here) Or did they buy into the equity e.g. via a SAFE? (see definition here)
While either has their upsides and downsides, (liquidity vs. liquidation preference) we should all be aware that the law protects equity holders and not token holders in the event of a rugpull / ponzi.
To answer this, during a recent Bankless interview, Blur’s pseudonymous founder “Pacman” compared $BLUR to be that of Uniswap’s $UNI token. But keen followers of this space are also aware that the $UNI economic accrual model isn’t clear either. Until they turn on fees we also have zero idea how profitable of an enterprise this could be, or will it be a race to the bottom? We already see OpenSea’s knee-jerk reaction to their sudden dethronement via a “temporary” pause of fees, optional creator royalties, all in an effort to regain lost love over the last couple of days. They even make no effort in concealing their target enemy in their recent Twitter thread.
And lastly let's address the elephant in the room: the Blur team's anonymity. While this might be a red flag in traditional tech and finance, it's not uncommon in the crypto space. We have well-known an respected pseudonymous figures like Punk6529, Polynya and GCR. While also doxxed villains who have ran traditional crypto exchanges, funds or protocols to the ground. Of course, it would be reassuring if the team were at least known to their marquee investors, like Paradigm and 6529. But at the end, it is what it is, and awareness is half the battle won. (also @PacmanBlur if you’re reading this - please (let me) reach out, I have ideas for your new funds*)
Valuation
Before we dive into valuation, let us have a look at the Airdrop to get a better understanding of $BLUR’s liquidity situation and FDV realization. For that I source from two helpful dashboards on Dune Analytics (here and here).
At the time of writing, it seems like most of the tokens which can be claimed have been claimed (>94% claim rate), among 133.5k recipient wallets, 85k receipients sold out and 2k recipients bought more while 50.5M $BLUR tokens were transferred to CEXs. What this tells us is that:
1.) The token has found a short-term floor (~$1-1.20) with a price discovery swing of between $0.43 to well over $5 on the first day of trading.
2.) Expected supply unlocks in the future could result in selling pressure until Feb 2027. With the 12% of supply released in Airdrop1 there will be another 38% of the total supply released by H1 of 2024. Will the market be able to withstand the natural sell pressure? Maybe, but only time can tell.
3.) While wash trading is a key concern for Blur’s thesis, the positive view is that they have the whitespace potential to gain widespread adoption as their “trader” marketshare catches up with OG OpenSea. Just eyeballing the data table from NFT Go below. If Blur is able to match OpenSea’s active trader numbers there’s still roughly another 2-3x of baseline organic growth ahead, should the NFT market pick up.
Now let’s dive into the valuation. How does one value a mystical token such as $BLUR? It makes no representation of future cashflow, so a DCF might be tough at this stage, so we got to be creative. For that I suggest two methods: 1.) Relative Valuation with public tokens and, 2.) comparing with OpenSea’s equity funding rounds.
Relative Valuation
If we look at the publicly traded comparables of marketplace tokens, through some off-napkin calculations we can see that $BLUR is by no means cheap on any relative measure. Perhaps the market is pricing in a premium?
Comparing with OpenSea’s Equity Funding
The last time OpenSea raised was back in January 2022, collecting $300M at a $13B pre-money valuation. While in hindsight this was likely an overzealous bull market price tag, it certainly gives us insight as to the enormous warchest it has accumulated for bear build markets.
Blur similarly raised an $11M seed round back in March 2022, with marquee names like crypto market maker Paradigm. As of last week it was reported in the Block, that they are now in conversations for another $15-30M raise at a $1B valuation, given the spike in activity and interest.
Triangulating the information above. It brings a couple of thoughts to mind. Firstly, given the significant warchest of OpenSea and their willingness to acquire marketplaces like Gem and fiat-on-ramp rails like Dharma Labs, we cannot rule out the acquisition prospects of Blur. Should they be absorbed into the OpenSea empire, it could be value accretive as $BLUR tokens find cross-platform use and the war on royalties and fees takes a ceasefire. While this could be a hugely bullish catalyst, it is only part of a remotely possible future. Secondly, with a significantly smaller balance sheet, with Blur’s fresh round of funding, compared to OpenSea’s megaround last year, Blur would need to be more prudent in acquisition and product development spending.
This leads me to think that a sub $3B FDV makes the most sense at this juncture for $BLUR with a baseline fundamental support price of around $0.80. At that price point, it brings the token around 2.4x post-money equity value, while the fresh cash injection of $15-30M, roughly matches 5-10% of the Airdrop value. In my opinion this price aligns investors and hodlers with similar risk trade-offs. And upside will be at the narrative and fancy of the market’s invisible hand.
My Game Plan for $BLUR
I expect that with the arrival of NFT season 2.0, we could see an uptick in $BLUR prices as the market uses it as a memetic proxy index for NFTs in general. Also I would imagine the reflexive nature of a bull market where higher NFT prices » more incentive to trade » more volume » repeat. It’s also worth noting that at the time of writing, we’re are still awaiting a Binance listing which could offer a short-term pump in prices (its already listed on big exchanges like Coinbase, OKX, Kraken and Bybit).
That being said, if the market decides to skip NFT season this year, we will revisit the thesis again in Nov 2023 when Airdrop 2 allocations are out and chart our journey from there. In the meantime, I will be picking up sub-dollar $BLUR on pullbacks, spread trading overextensions on $BLUR relative value, and securing a small bag in Airdrop 2.
Best of luck anon and lets trade some art.
Disclaimer: This article is intended for informational and entertainment purposes only and should not be construed as financial advice or as representing the views or opinions of the firms which I represent. The information presented in this article is believed to be accurate and reliable, but no representations or warranties are made with respect to the accuracy, completeness, or reliability of the information. Any action you take upon the information presented in this article is strictly at your own risk and we will not be liable for any losses or mistakes that may occur. You are advised to conduct your own research and consult with a qualified professional before making any financial decisions.
*Some ideas for the Blur team: to use the fresh capital for a couple of purposes: 1.) Hire more devs to expand Blur’s product roadmap (think: instantaneous AMM pools for NFTs), 2.) Spend more on marketing and conquer the (OpenSea) giant with non-token go-to-market strategies and 3.) improving trust and safety of the platform.