In the face of fierce competition from its new rival-Blur, the NFT marketplace, OpenSea, announced today that it will temporarily waive its 2.5% sales fee and reduce creator royalty protection to cope with the rapidly changing market. There is no doubt that the royalty battle in the NFT market has escalated once again.
Blur’s opening move is stunning.
OpenSea’s move came after the new entrant in the market, Blur, had an eventful week. On Wednesday (February 15th), Blur airdropped its BLUR tokens to over 100,000 NFT traders, and then suggested that NFT project creators block OpenSea transactions and they will not charge traders market fees.
Blur has set up four scenarios as follows:
1. No blockage set: If the collection does not disable Block, it will not be able to block zero royalty or optional royalty markets. In this case, Blur will charge a 0.5% royalty, while OpenSea is optional.
2. Block Blur: NFT projects that block Blur or other zero-royalty/optional royalty markets will be forced to enforce royalties on OpenSea, but transactions can still be carried out on Blur, and a minimum of 0.5% royalty will be charged.
3. Block OpenSea (recommended): Blur recommends not using OpenSea, and hopes that creators do not use OpenSea. Any NFT project that does not use OpenSea will be forced to charge full royalties on Blur.
4. Neither is blocked: Blur requires OpenSea to cancel the optional royalty setting for NFT projects on Blur. If OpenSea cancels this policy, NFT projects will be able to collect royalties on both platforms. Currently, NFT project creators cannot collect royalties on both Blur and OpenSea at the same time, but can only collect all royalties on either OpenSea or Blur.
Can OpenSea’s response withstand Blur’s challenge?
According to OpenSea, currently 80% of market transaction volume does not pay full royalties, so adjustments are being made in response to changes in the market ecosystem. This includes launching a temporary 0% transaction fee promotion, offering an optional royalty service with a minimum standard of 0.5%, which applies to all series that are not enforcing royalties on the chain; and updating the operator filter to allow NFT markets with the same policies to jointly increase market liquidity.
Looking at the analysis, besides reducing its transaction fees within the “limited time” and effectively cutting off its main source of income, OpenSea only levies a mandatory creator royalty of 0.5% on projects without any NFT transactions on-chain, although sellers can choose to pay a higher percentage. Creator royalties are typically paid to NFT creators at 5% to 10% of the sale price and are currently a way for some NFT projects to generate ongoing revenue after the initial token sale.
In fact, at the end of last year, OpenSea made some changes to its creator royalties method and eventually announced that all NFT projects created before a certain date in January 2023 would have full royalty settings enforced, but the future royalties would only be enforced as an on-chain execution tool for new projects used.
OpenSea’s own enforcement tools will block markets that have not fully implemented creator royalty settings, including Blur. However, Blur has clearly found a way to circumvent this blacklist and has attracted more and more users in just a few weeks. On-chain data shows that Blur’s user base is rapidly growing, while OpenSea is doing the opposite (as shown in the following graph).
Obviously, OpenSea has realized the problems with its own model, which is why it made the decision that its operator filter tool will no longer block zero-royalty NFT markets. However, this move seems to have come a bit late. According to Dune Analytics data, after the launch of the Blur token, the daily NFT trading volume surged to 30,409.79 ETH, hitting a new high in recent three months. In addition, NFT sales volume reached 32,773 transactions, with 9,689 independent users, all hitting new highs in recent three months.
The NFT ecosystem has undergone enormous changes
Now, even OpenSea has to admit that the NFT ecosystem has undergone significant changes. They acknowledge that starting from October 2022, they noticed a shift in trading volume and users towards NFT markets that do not fully enforce creator revenue, and this trend is still rapidly accelerating.
OpenSea admitted on social media, “We believe we can promote broad implementation of creator revenue, and we hoped others would propose more flexible solutions — but that hasn’t happened. Recent events — including Blur’s decision to lower creator revenue (even on filtered collections) and the wrong choices they force creators to make between Blur or OpenSea liquidity — prove that our efforts haven’t been effective.”
Undoubtedly, the NFT market is now trying to find a development path that benefits both creators and traders. At least for now, Blur’s strategy seems to be effective, and whether this new rival can challenge or even surpass OpenSea’s market position remains to be seen.