As the NFT buying frenzy has subsided over the past year, a new trader-focused NFT marketplace quietly dethroned OpenSea as market leader.
Tieshun Roquerre, the 24 year old cofounder of NFT trading firm, Blur, is reminiscing about the Vestaboard hanging on the wall in his home office, remembering how just a few months ago the incessant clicking emanating from it was deafening. The cloud-connected split-flap display, designed to look like an old-fashioned train station departure board, had been programmed by Roquerre to alert him, flipping tiles whenever a non fungible token (NFT) was bought or sold on his fledgling NFT marketplace. Each click signaled a new trade made on Blur.
When Blur first launched in October 2022 —the threshold to flip a tile was 0.1 ETH, the equivalent of about $130 in NFT value. But as traders flocked onto his platform, the clicking and clacking quickly became a constant, even as Roquerre upped his thresholds to 1 ETH, 5 and then 10.
“It was such a cacophony, we had to turn it off,” admits Roquerre. “I was annoyed, but happy to be annoyed,” quips Roquerre.
In the last six months, Roquerre, and co-founder Anthony Liu, who until recently was known only by his online name “Galaga,” have built the largest marketplace by trading volume for NFTs, unseating market leader OpenSea, which secured a valuation of $13.3 billion in January 2022, turning its cofounders Devin Finzer and Alex Atallah into the first NFT billionaires. In March, tiny Blur, which has a staff of only 10, recorded $1 billion in trading volume, compared to OpenSea’s $260 million.
Along with other digital assets, the market for NFTs has declined since its peak in January 2022, when monthly sales swelled to $5 billion. But March saw $1.7 billion in trades alone and volume year-to-date has exceeded $4.7 billion. Some of the most popular NFTs like Bored Apes regularly sell for more than $100,000.
NFT Trading Volume by Marketplace
After launching in October, Blur has take share away from OpenSea despite an overall drop trading volume.
San Francisco-based Blur’s rapid ascent has stunned industry experts because it was able to overtake New York-based OpenSea, despite unsuccessful attempts by other well-funded startups. OpenSea came to dominate the NFT market in the summer of 2021 and even as a flurry of competitors arrived, OpenSea held about 75% of the market at the end of 2022. Its 2.5% transaction fees helped it rake in $472 million in revenue 2022 from $18.8 billion in trading volume, according to Dapp Radar. A year ago, Coinbase launched its own marketplace to compete with OpenSea, but it was a huge flop–it has recorded just $6 million in sales to date.
Several factors have contributed to Blur’s rapid rise. First, while OpenSea has been catering to retail NFT buyers and art aficionados, Blur has taken a markedly different approach. Taking a page out of Robinhood’s growth strategy, Blur targets active NFT traders and has undercut its competitors by charging no platform fees, instead funding its business and growth with venture capital from crypto investors like Paradigm and Cozomo de Medici. Like Binance, it also rewards its customers with its own self-minted coin, a maneuver OpenSea has yet to initiate. Blur’s timing has been fortuitous. Casual NFT buying by retail customers and collectors–a key market for user-friendly OpenSea- has largely evaporated. But in-it-for-the-money NFT traders are still churning the digital assets daily.
Blur’s alternative model and sudden emergence has shaken the entire NFT ecosystem, prompting many participants to question audience targeting, creator royalties and NFT utility.
The son of bed-and-breakfast managers in Cambridge, Massachusetts, Roquerre’s affinity for working at tech startups started in 2013, when he was 15 and landed a software engineering summer job with fast-growing t-shirt startup Teespring. The internship turned into a full time job, when Roquerre dropped out of his private Boston high school and moved, with help from his mother, to a San Francisco apartment he shared with a roommate he found on Craigslist.
After a year at Teespring, Roquerre launched his own recruiting startup called StrongIntro in 2015. He left the company a year later to enroll as a freshman at MIT, where Anthony Liu was already a sophomore. Liu, a San Francisco native, had always known he wanted to work in startups. “A lot of the way that I viewed why I am going to MIT,” he says “was the precious network here.”
In 2018, during his junior year, Liu met Roquerre at a mutual friend’s tea party, an excuse for MIT students interested in forming startups to meet each other on campus. “We were both pretty intentional about this cofounder dating stage,” says Liu.
By May of that year, Liu graduated with a degree in computer science, Roquerre decided to drop out of MIT to join him in creating a blockchain startup called Namebase. Namebase operates a marketplace for blockchain-based domain names. After three years, they sold it to Namecheap, the world’s second largest domain registrar after GoDaddy.
During 2021’s explosion in interest in NFTs, Roquerre started collecting and trading digital artwork, but became frustrated with the services available for traders. Existing marketplaces “treated NFTs like a retail shopping experience,” he says, not ideal for the experienced collectors who wanted to trade more and trade quicker. Liu, who had created and sold digital collectibles online since middle school, was all in on the idea. So in January 2022, Liu and Roquerre wrote the first lines of code for their new trader-focused NFT startup.
Marketplaces, where a company provides a meeting ground and infrastructure for buyers and sellers to transact, are notoriously difficult to break into. It’s hard to attract a critical mass of buyers and sellers to a new venue if a decent one already exists, and the bigger an incumbent marketplace gets, the harder it is to take down. For example, Craigslist brought in $660 million in revenue in 2021 even though its website still looks the same as it did more than 20 years ago and 11-year-old Coinbase remains the most popular place to buy crypto in America. When it comes to buying and selling NFTs, there are dozens of marketplaces globally.
Roquerre has said it would have been “impossible” to compete with OpenSea’s dominance among retail NFT buyers, but he thought there was an opening among the customers OpenSea wasn’t serving very well: the active NFT traders who sometimes swapped hundreds of thousands of dollars a day worth of NFTs.
To cater to traders, Blur designed its user interface to be dramatically different from OpenSea’s, which emphasizes the NFT artwork, in a gallery-style fashion. Blur takes a page from active stock trading interfaces, with simple lists of NFT collections against a black background and sortable columns displaying important trading data including minute by minute price, volume and ownership information. You can click further for things like “Depth” showing trading volume at different price levels, and its “Bidding Pools” allow traders to bid for multiple pieces at once as well as make bulk NFT purchases with a single click.
It’s a stark departure from the pre-Blur era, where traders looking to sell high volumes of NFTs had to list them individually on OpenSea. “It was so painful,” says Ovie Faruq, co-founder and artist at NFT collection Rektguyz, who is also a prominent NFT trader.
Top 10 NFT Collections by Trading Volume
To keep costs low for these traders, Blur launched with a controversial tactic: it made royalty payments to artists optional. With OpenSea and other marketplaces, NFT creators typically were entitled to earn royalties–often as much as 2.5%—on secondary sales of their work. But royalties were never built into the underlying, low-level code of NFTs that live on a blockchain, so they could only be enforced by software built on top of a blockchain, like OpenSea’s marketplace. Blur’s move, which angered artists, caused OpenSea to lower its royalties, and as of February both marketplaces had agreed to abide by a minimum royalty fee of 0.5%.
“Blur said, ‘I don’t care about the art. I want to make an exchange where people can make a market for these pieces, and I don’t really even care what they look like. I’m just going to trade it,’” says Shane Cutra, a former trader at the Chicago Board Options Exchange who is now retired and trades NFTs. Cutra, 53, says he’s made about $400,000 trading NFTs since he started trading in December 2020.
Blur also drew customers in by rewarding traders with its native blur token, a coin that was deposited–or airdropped, in crypto-speak–to traders’ wallets depending on their activity level. Creating such “loyalty” tokens, which in the case of blur can be used for discounts, and giving them out for free depending on usage, is a common marketing scheme in crypto to lure and keep customers. Blur’s tokens, which like Binance’s token do not represent ownership in the platform, but do come with voting rights that let token holders weigh in on changes to a platform’s software.
Blur’s first round of token airdrops came in February for users who had used the platform since its October launch, affording extra coins to traders who switched to Blur from any of its competitors. It also found an innovative way to offer token rewards for trading activity that minimized “wash trading,” a common phenomenon in crypto trading where people trade with themselves to reap trading incentives or manipulate a market, essentially only rewarding customers for certain types of bids. NFT marketplaces Looksrare and X2Y2 both launched in early 2022 trying to disrupt OpenSea, but both have been plagued by high volumes of wash trading and have never captured more than 15% each of the NFT trading market.
Roquerre won’t say how many Blur tokens he owns of the 342 million that are in circulation, other than that 29% of them are designated for Blur founders and employees, Of the remaining loyalty tokens, 51% are for Blur’s traders, and 20% are designated for investors and advisors. Blur’s current circulating coins today have a market value of about $250 million or $0.58 per blur, according to CoinGecko.
The cumulative effects of Blur’s strategies have had a dramatic effect on the NFT market. In February, OpenSea announced that it was temporarily eliminating its 2.5% platform fee–the business model that allowed it to earn nearly $500 million in revenue last year. In April, OpenSea launched OpenSea Pro, an NFT trading platform with 0% fees and similar trading tools as Blur. When Forbes called OpenSea for comment, they declined to directly address Blur, changes to its fee structure or whether it plans to launch its own loyalty token.
“I’ve seen a lot of races to the bottom in my life,” says Erick Calderon, the artist and founder behind prominent NFT studio ArtBlocks, which earned $35 million in fees from the $1.4 billion it made in primary and secondary NFT sales. “This, to me, is the most spectacular race to the bottom.”
the wild and sometimes bizzare world of trading crypto and NFTs, building sustainable moats around business models is nearly impossible. It took Blur less than six months from its launch last year to unseat OpenSea as market leader, but it faces many challenges if it hopes to stay on top. For starters it charges no fees, so it is living mostly on its $11 million in venture capital funding. It will need to adopt fees or figure out some other revenue generating model to sustain its overhead, which currently consist of just 10 employees, most of them software engineers. In August, Blur’s token holders will vote on a proposal to turn on 2.5% platform fees, but if those are turned on, it could quickly lose a big chunk of users. Though Blur has maintained a commanding lead over OpenSea in transaction volume for the past seven weeks, OpenSea still has more monthly users than Blur, with 90,000 weekly traders compared with about 40,000 for Blur, according to blockchain data.
There is also bad blood between Blur and NFT artists because of its brazen move to cut out all royalties to creators. “How do you expect the economy to flourish when you don’t acknowledge or build to support the people creating what you trade?” said Betty, the pseudoanonymous founder and CEO of popular collection Deadfellaz, in a recent tweet.
And then there’s the issue of regulation: the Securities and Exchange Commission (SEC) has been ramping up enforcement actions on crypto companies and is increasingly looking at NFTs as potential securities. A lawsuit against popular NBA Top Shot creator Dapper Labs alleges the company’s NFTs are securities, and the SEC is reportedly investigating leading NFT studio Yuga Labs over the sale of unregistered securities in the form of NFTs like Bored Apes.
Reward tokens such as Blur’s could also come under scrutiny, says Adam Pollet, partner at Everhseds Sutherland’s securities enforcement and litigation practices. Even if the token is only used as a governance token to improve and fund the development of the platform, Blur could still face regulatory action.
“It reduces the risk” of malpractice, he adds, “but it certainly doesn’t eliminate it.”
Roquerre, for his part, says Blur is working closely with its team of lawyers and partners at Paradigm to ensure they’re on the right side of the law. He says, “We’ve focused from day one on making sure that everything we do is regulatory compliant.”
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