Introduction
Blur is set to launch its platform token on February 14, converting user boxes and points into tokens. With limited details on tokenomics and utility, this analysis focuses on a comparative valuation approach using existing NFT marketplaces as benchmarks.
Given that Blur and its competitors, like X2Y2 and LooksRare, may engage in wash trading, this study adjusts transaction volumes to approximate real data for a clearer financial perspective.
NFT Marketplace Competitive Landscape
The NFT marketplace sector is highly competitive, with numerous platforms vying for user attention through lower fees, enhanced security, and diverse offerings. This analysis concentrates on Ethereum-based platforms, including OpenSea, Blur, X2Y2, and LooksRare.
Recent data indicates market share distributions of 36.77% for OpenSea, 28.05% for Blur, 24.35% for X2Y2, and 7.42% for LooksRare. However, these figures include wash trading, necessitating adjustments for accurate valuation.
Estimating Real Trading Volumes
X2Y2 and LooksRare
Both platforms incentivize trading through token rewards, leading to inflated volumes. By excluding circular trades (e.g., A to B and back to A) on zero-royalty collections, the adjusted monthly volumes are approximately 69,857 ETH for X2Y2 and 14,553 ETH for LooksRare.
Blur
Blur’s lack of mandatory royalties and fees complicates volume analysis. Comparing gas usage and transaction counts with OpenSea suggests significant wash trading. Assuming Blur’s average transaction value is 1.5 times that of OpenSea due to high-value blue-chip NFT trading, Blur’s real monthly volume is estimated at 98,600 ETH.
Adjusted Market Shares
After adjustments, real market shares are:
- OpenSea: 59.1%
- Blur: 19.5%
- X2Y2: 13.2%
- LooksRare: 2.9%
These figures highlight Blur’s lower real volume than reported, influenced by factors like OpenSea’s exclusivity agreements and Blur’s use of Seaport contracts.
Valuation Analysis of NFT Marketplaces
Using OpenSea, X2Y2, and LooksRare as benchmarks, valuations are derived based on price-to-sales (P/S) and price-to-earnings (P/E) ratios. Assumptions include:
- OpenSea’s valuation at $3 billion, considering current market conditions.
- Annualized trading volumes based on recent monthly data.
- Fee structures: OpenSea (2.5%), LooksRare (1.5%), X2Y2 (0.5%), Blur (0%, assumed to become 0.5% post-token launch).
Valuation Metrics
- P/S Averages: 0.27 (industry average)
- P/E Averages: 15.39 (industry average)
Unadjusted Volumes (Including Wash Trading)
- P-Based Valuation: $204M (vs. X2Y2), $1.144B (vs. LooksRare), $2.289B (vs. OpenSea)
- P/E-Based Valuation: $204M (vs. X2Y2), $382M (vs. LooksRare), $458M (vs. OpenSea)
Adjusted Volumes (Excluding Wash Trading)
- P-Based Valuation: $88M (vs. X2Y2), $494M (vs. LooksRare), $989M (vs. OpenSea)
- P/E-Based Valuation: $88M (vs. X2Y2), $164M (vs. LooksRare), $197M (vs. OpenSea)
Refining the Valuation Range
Given market inefficiencies and investor reliance on unadjusted data, short-term valuations using unadjusted volumes are more relevant. However, P/E ratios are prioritized for long-term accuracy, as they reflect stable fee-based revenue rather than volatile trading volumes.
Considering Blur’s market momentum and planned exchange listings, its valuation likely falls between LooksRare and OpenSea. The estimated range is $382 million to $458 million.
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Risk Factors
Token Model Uncertainty
Blur’s undisclosed tokenomics introduce risks, including:
- Uncertainty regarding fee capture mechanisms.
- Unknown initial circulation distribution (e.g., airdrop-dominated vs. vested tokens).
- Potential discrepancies between market cap (MC) and fully diluted valuation (FDV).
Competitive Pressures
OpenSea’s exclusivity agreements have impacted Blur’s volumes. While Blur circumvented this via Seaport contracts, reliance on external contracts may hinder fee capture for token holders. This could affect long-term revenue and token utility.
Frequently Asked Questions
What is wash trading in NFT marketplaces?
Wash trading involves artificially inflating trading volumes through circular transactions. Platforms like Blur, X2Y2, and LooksRare may incentivize this to attract users, but it distorts true market activity and valuations.
How does Blur’s fee structure affect its valuation?
Blur currently charges zero fees, but plans to introduce a 0.5% fee post-token launch. This transition could impact trading volumes and revenue, influencing both P/S and P/E ratios.
Why use P/E over P/S for NFT marketplace valuation?
P/E ratios focus on earnings from fees, which are more stable than trading volumes. This provides a clearer picture of a platform’s financial health and long-term sustainability.
What risks does Blur face from OpenSea?
OpenSea’s exclusivity agreements restrict Blur’s access to certain NFTs, potentially reducing volumes. Blur’s workaround using Seaport contracts may also limit its ability to capture fees, affecting token value.
How accurate are the adjusted volume estimates?
Adjustments rely on assumptions, such as Blur’s average transaction value being 1.5 times OpenSea’s. While based on data, these estimates may not fully capture real-world complexities.
What factors could change Blur’s valuation?
Key factors include tokenomics details, fee implementation success, competitive dynamics, and broader NFT market trends. Positive developments could increase valuation, while risks could lower it.