The founder of Blur has defended the NFT exchange’s token incentive system amid concerns that the platform is contributing to a decline in average NFT prices.
Since its meteoric rise against competitor OpenSea earlier this year, Blur has created an NFT trading frenzy. Some users trade NFTs for the purpose of acquiring Blur tokens, in a practice called farming. However, as many NFTs depreciate in value in this year’s brutal bear market, some traders are racking up major losses — sometimes exceeding $10 million.
This has led to widespread criticism of the exchange. Recently, crypto investor and entrepreneur Trevor Owens argued that whales with ample liquidity could accumulate Blur tokens by bidding and then take loans on the NFTs bought — only to re-bid again with the loans they’ve taken. As whales bid more at lower prices, floor prices come crashing down. According to Owens, this could “wipe out” the total NFT market cap.
Blur founder Tieshun Roquerre, known as Pacman online, defended the platform in response to this growing criticism. Roquerre said that since the platform launched in October 2022, “some floor prices have gone up, some floor prices have gone down.”
“One of the few times floor prices went up in concert was when we injected liquidity into nfts via our airdrop,” Pacman tweeted.
He pointed to the recent $40 million Azuki sale as an example that drained liquidity from the market: “One of the few times floor prices went down in concert was when $40m of liquidity was removed via the Azuki mint (not throwing stones, the market just moves based on liquidity more than anything else),” Pacman said.
But according to Brad Kay, a research analyst at The Block Research, the Azuki sell-off could, in large part, be attributed to Blur’s lending platform.
“When asset prices are up, ppl don’t really talk about the root cause (ie blur injecting liquidity), but when they are down, the pitchforks come out,” Pacman said. “Bad takes spread like wildfire and at this point I just consider it the cost of doing business.”
NFTs are currently in a brutal bear market with many of them down by more than 90% in value. Yuga Labs’ flagship NFT collections, Bored Ape Yacht Club, is down by more than 80% from its all-time high floor price.
Inevitably, NFT investors who are down bad are keen to understand why their collections have lost most of their value.