PRESS RELEASE. On February 14, the highly anticipated Blur airdrop was finally kicked off. According to Dune Analytics, as of February 15, over 40,000 addresses have claimed the Blur airdrop, with 8.2% of them receiving over 10,000 tokens. Most users received between 1,000 and 10,000 BLUR tokens, with 7,000 tokens distributed to every user on average. On CoinEx, the BLUR price stood at about $0.8 on the distribution day. Based on that figure, the Blur airdrop provided users with $5,600 worth of tokens on average, making it another airdrop legend following the Aptos airdrop.
Behind Blur’s boom: The NFT blue ocean
As a newcomer to the NFT market, Blur has captured the spotlight over the past year. Since its launch in March 2022, the project has gained a massive following through its airdrop announcement. Meanwhile, its aggregation system, which enables frequent trading, has earned extensive recognition among active NFT traders. In fact, Blur has surpassed OpenSea, which is the No.1 NFT marketplace, in terms of trading volume, demonstrating the fierce competition in the NFT market.
The popularity of Blur indicates that while there is a huge demand for NFTs, the market and its derivative tools remain underdeveloped. Data from NFTGO shows that the market cap of three top projects, specifically BAYC, CryptoPunks, and Otherside, has already reached 2 million ETH, which is worth over $3.1 billion according to the real-time ETH price on CoinEx.
That being said, the unique characteristics of NFTs make it difficult for us to accurately capture the value of each NFT. Like traditional collectibles, different NFTs come with varying features, and the attribute preferred by collectors may offer an NFT a different price tag. The lack of clear valuation methods makes NFT trading more challenging than FT trading, which also blocks the market circulation of NFTs and results in poor liquidity.
Moreover, blue-chip NFTs are often expensive and inaccessible to retail investors, hindering the development of the NFT market. Although the No.1 crypto Bitcoin is quoted at $20,000, retail investors get to purchase 0.01 or even a smaller amount on exchanges. However, the floor price of Bored Ape Yacht Club (BAYC) stands at 67 ETH, which is worth over $100,000, making it unaffordable to ordinary investors.
The NFT market has continued to explore new ways to address those problems, which triggered the appearance of the NFTFi category, spanning NFT marketplaces and aggregators, lending, renting, derivatives, fragmentation, and oracles.
NFT marketplace and aggregator
NFT marketplaces are considered the core of the entire NFT ecosystem. With an NFT marketplace, users can list their NFTs or purchase NFTs from others at any time. Moreover, most NFT trading platforms offer multiple sales models, including fixed-price sales, Dutch auctions, English auctions, and private transactions. Right now, trending NFT marketplaces include OpenSea, Rarible, LooksRare, and X2Y2. Except for OpenSea, all of these projects have issued their own tokens, and you can always check them out on CoinEx if you are interested in trading these tokens.
Aside from centralized marketplaces, some decentralized projects are working to solve NFT’s poor liquidity. For instance, Sudoswap introduced the AMM mechanism of DEXs into the NFT market. This allows users to provide liquidity and benefit from instant pricing through trade matching on Sudoswap, which addresses the liquidity problem in the decentralized NFT market. However, this method is more suited for NFT projects ranking in the middle or bottom of the market because the AMM mechanism eliminates rarity differences. Meanwhile, AMM is not applicable to blue-chip NFT projects, as they are subject to greater price differences.
In the NFT market, if a seller listed an NFT on OpenSea, users who only use LooksRare will not be able to see that NFT. As a result, when buyers are searching for their favorite NFT, they may have to switch between multiple NFT markets, which significantly drives up the time cost.
This has led to the rise of aggregators, which have become a major channel for buying NFTs. For example, in addition to its own marketplace, Blur also aggregates OpenSea, LooksRare, and X2Y2, allowing traders to quickly comb through the essential statistics of the relevant NFTs on just one platform. For professional traders, aggregators like Blur are much more efficient than regular marketplaces like OpenSea.
Many top projects are trying to deploy their own aggregator. Uniswap, a well-known DEX, recently acquired Genie and launched its own NFT aggregator, which supports popular NFT marketplaces such as OpenSea, X2Y2, LooksRare, Sudoswap, Larva Labs, Foundation, NFT20, and NFTX. OpenSea has also acquired NFT marketplace aggregator Gem, aggregating platforms that include OpenSea, Rarible, LooksRare, X2Y2, NFTX, and NFT20.
NFT lending has emerged as an essential part of the NFTFi category. Many NFT holders hope to obtain temporary liquidity without selling their assets, which has led to a growing demand for NFT lending. At the moment, NFT lending mainly includes two models: Peer-to-Peer and Peer-to-Pool.
NFTfi is a typical provider of Peer-to-Peer lending services. This lending model allows borrowers and lenders to negotiate all the lending conditions, including the amount, term, interest rate, and liquidation method. As such, Peer-to-Peer lending features smaller interest rate spreads, and since no external oracles are needed, users are not exposed to oracle risks. That said, Peer-to-Peer lending is subject to high time costs, and borrowers may need to spend a long time finding suitable lenders.
Many NFT lending platforms have leveraged AAVE’s lending model, employing the Peer-to-Pool approach, in which the protocol matches the two sides and makes decisions on behalf of lenders. This approach is more efficient and enables quick matching but lacks capital efficiency and is subject to significant interest rate spreads. For instance, if there is 1,000 ETH in the pool, but the borrower only wants to borrow 500 ETH, the interest he/she paid will be evenly distributed among all lenders, meaning that the lenders would receive a much smaller interest payment. As a result, most of the funds in the pool are not fully utilized. Moreover, under the Peer-to-Pool model, the platform might be run by users. For example, the well-known NFT lending platform BendDAO experienced liquidity crunches due to the liquidation of NFTs during a market downturn.
Last year, Ethereum approved the ERC-4907 smart contract standard, which introduced the concept of “expires” to enable collateral-free NFT renting through contracts. Collateral-free renting allows NFTs to be wrapped in a way that preserves their original features, but the wrapped NFT will be destroyed when the rental period expires. Since the release of ERC-4907, collateral-free renting has become the mainstream approach in the NFT rental market, replacing conventional collateralized renting, and most platforms including reNFT have adopted collateral-free renting. Despite that, NFT renting remains a small market, as the demand for renting blue-chip NFTs is limited, and most application scenarios for NFT renting are in fields including gaming and metaverse land.
In the financial sector, derivatives are indispensable products, and NFTFi’s experiments with derivatives have also attracted market attention. Many platforms are working on NFT-based futures and options, despite their lack of popularity. For example, nftperp provides NFT futures, allowing investors to go long or short on NFTs, while NiftyOption offers NFT options. Right now, the NFT derivatives market is still in its infancy, but as the relevant products are upgraded, investors will be able to use hedge against price swings in the NFT market through various strategies.
As NFTs are indivisible, blue-chip NFTs like BAYC and CryptoPunks are extremely expensive, making it a challenge for retail investors to join the game. To address the problem, many projects are exploring NFT fragmentation, i.e., splitting NFTs into multiple fragments that investors can purchase and share the returns. Fractional.art, a leading NFT fragmentation project, offers Uniswap-based trading functions that allow users to trade fragmented NFTs anytime, anywhere. Despite its advantages, NFT fragmentation also faces challenges, such as potential disputes over the distribution of airdrop benefits.
Accurately capturing NFT prices has always been one of the biggest challenges in the NFT market because prices affect a wide range of operations, including borrowing and liquidation. In light of that, NFT oracles were launched to solve the problem of NFT valuation. For instance, Abacus oracle uses a peer incentive pricing mechanism and the Abacus Spot liquidity valuation to provide NFT pricing services, which accurately capture the value of an NFT. Other platforms like Upshot and Banksea are also exploring their own pricing mechanisms. With a focus on accurate real-time NFT pricing, oracle projects are competing fiercely in the sector.
NFTFi is an essential part of the NFT market, and NFT segments are striving for a shared goal: achieving the large-scale circulation of NFTs and making them more accessible. At the moment, many NFTFi projects are still in a nascent stage and may present impressive innovations that will lead to the exponential growth of the NFT market. For instance, Blur’s third airdrop triggered a rapid increase in the transaction volume and floor price of blue-chip NFTs such as BAYC and Azuki. By the same token, the advancement of NFT infrastructure will also attract more users to the market.
BLUR and many innovative NFTFi tokens are now available on CoinEx (https://www.coinex.com/), you can go to the exchange to trade the latest NFTFi token at any moment. In addition, CoinEx has announced the “NFTFi Special Event: Join Trading Volume Ranking, 5,000 USDT For Grabs” promotion, starting from Feb 16 to Feb 22, 2023 (UTC).