Summary: In the previous NFT bull market of late 2021 and early 2022, OpenSea had near-full market dominance and saw billions of dollars in daily volume. However, there has been time for competitors to emerge, and one is seriously threatening OpenSea’s business model: Blur. Let’s dive into the battle between the two marketplace giants to understand ...
In the previous NFT bull market of late 2021 and early 2022, OpenSea had near-full market dominance and saw billions of dollars in daily volume. However, there has been time for competitors to emerge, and one is seriously threatening OpenSea’s business model: Blur. Let’s dive into the battle between the two marketplace giants to understand the future of the NFT industry.
Even though NFTs have been around since as early as 2015, they only exploded in popularity starting in 2021. At the time, the main place to buy, sell, and create NFTs was on OpenSea, a platform founded by Devin Finzer and Alex Atallah in 2017. Naturally, the platform saw immediate success, and its revenue went from an estimated $500,000 in 2020 to hundreds of millions in 2021. This was reflected in their massive $13 billion valuation. For reference, the peer-to-peer e-commerce site eBay is valued at $26 billion.
OpenSea offered basic features and had most tools that the average NFT buyer would need, but they still left room for improvement. For example, their 2.5% trading fee on every purchase could always be undercut by competitors. The main attraction of posting on OpenSea was the sheer amount of buyers and sellers on the site, but thanks to blockchain technology, a deal could be made over messaging and then done on another site for a cheaper fee. They also came under fire in November 2022 for releasing a tool allowing NFT collections to allow their tokens only to be listed on marketplaces that enforce creator royalties. The community took issue with the fact that OpenSea said they would not enforce royalties on collections that were not using an on-chain enforcement method.
Blur was launched in late 2022 as an NFT marketplace oriented towards advanced and professional NFT traders. Some of its features include portfolio analytics tools, marketplace aggregation, and faster market sweeping. Additionally, the marketplace charges zero fees, automatically undercutting OpenSea significantly. The platform initially reached popularity after the airdrop of its BLUR token in February 2023. The token was given to platform users and was incredibly lucrative, with some airdrops worth over a million dollars. Since the token was rewarded for marketplace activity, their volume numbers were artificially inflated, which partially explains why Blur beat OpenSea in trading volume in February.
OpenSea has responded to the Blur threat in a couple of ways. Initially, they banned NFTs minted on OpenSea from appearing on the Blur marketplace due to Blur’s lack of full creator royalty enforcement. However, shortly after Blur overtook OpenSea regarding trading volume, they changed their strategy and adopted a zero-fee model with optional creator royalties. This comes after Blur released a blog post indicating that NFT creators had to choose between OpenSea and Blur and recommended that collections block OpenSea to choose other marketplaces. OpenSea’s rapid response indicates that they perceive Blur as a serious threat to their business and are willing to forgo revenue in the short term to compete with Blur for trading volume and users.
How either OpenSea or Blur will generate revenue with their zero-fee model remains to be seen. Given Blur’s airdrop, they are essentially paying users to build up volume, which may work in the short term but prove futile in the long term if the users do not stick around. On the other hand, OpenSea, which has yet to release a token and may never do so, already has the advantage regarding users but is now lagging in terms of the trading volume. Given OpenSea’s vast resources and established history, they are the clear favorites to win this battle, but that does not mean there still is room for Blur to grow or even equal OpenSea’s size.
The NFT marketplace wars have one true winner: users. Now that both major marketplaces have no fees, there has not been a better time to speculate on NFTs without losing money on every transaction. Creators may have benefited the least since the main champion of their royalties, OpenSea, leaned away from its strict enforcement. When the dust settles, the NFT marketplace will be more efficient, liquid, and time-tested due to this David vs Goliath fight.
By Lincoln Murr