How many wash trades are there on Blur?

Blockchain March 1st News In recent weeks, the upstart NFT market Blur has become a leader in this field. Through tokenized trading rewards, Blur has surpassed the market leader OpenSea . However, the high trading volume has also aroused suspicion in the crypto market, prompting a Web3 analysis company to analyze most of the recent trading data of the Blur market. Now, let's take a look at how many wash sales there are on Blur.

NFT analysis platform CryptoSlam announced last Friday that it had deleted $577 million worth of Blur transactions from its platform due to "market manipulation." The platform also said it would filter future Blur platform transactions by updating the algorithm to exclude sales transactions. On-chain data shows that the sudden increase in Blur NFT trading volume is mainly due to whales (i.e. traders who hold a large amount of a given asset) constantly buying and selling NFTs through the bid pool. This "farming" practice can get more token rewards in the next airdrop. However, there is some disagreement in the industry as to whether this DeFi-like token sell-off actually constitutes an absorption transaction.

Blur believes that data from another data analysis platform, Dune Analytics, shows that the proportion of wash sales during the period is much smaller. So, which one is more convincing?

The rapidly changing NFT market

In fact, CryptoSlam explained why it decided to filter out a large amount of recent Blur platform transaction data. The platform stated that only about 1% of high-value NFT traders drove most of the transaction volume on Blur. They obtained token incentive returns in this way. This behavior distorted the NFT market and put traders at risk.

As of Monday morning, numbers on the CryptoSlam platform showed that Blur wash sales had expanded to nearly $824 million, accounting for more than 80% of the total trading volume ($1.02 billion) since the launch of the BLUR token airdrop on February 14. It should be noted that CryptoSlam has not yet analyzed all trading volume data from October 2022 to the launch of the airdrop.

Although CryptoSlam did not disclose the relationship between Blur's high trading volume and its airdrop token trading data, it pointed out that OpenSea's wash sales accounted for a relatively low proportion. Data showed that there were only $6.6 million in wash sales transactions from February 14 to February 27, accounting for about 2.5% of OpenSea's total transaction volume of approximately $249 million, which means that there are more organic NFT transactions on the OpenSea platform.

Frankly speaking, there are indeed fake transactions in the NFT market. Traders will submit inflated amounts when buying and selling NFTs between their own wallets, or multiple traders can do the same thing after negotiation. The reason for doing this is simple. By inflating the transaction volume, they can obtain tokens for subsequent airdrops or rewards from the platform. Related behaviors have also appeared in early NFT markets such as LooksRare and X2Y2.

Some heavy users on the Blur market are also constantly buying and selling assets, and some NFTs are frequently traded multiple times. According to the public chain data disclosed last week, about 50% of the NFT trading volume on the Blur platform is generated by only 300 wallets, and 1% of traders (565 wallets) account for 74% of the total asset value locked in the Blur bidding pool.

Blur Strikes Back

The CryptoSlam data may be anecdotal, as Dune Analytics data shows that since Blur launched last month, wash trades as of Monday were worth only about $345 million, or nearly 14% of its total recorded volume.

On-chain analyst Hildobby's method of classifying wash trades boils down to four key elements. If the following conditions occur, wash trades will be marked:

1. Both the buyer and the seller use the same wallet;

2. An NFT is traded back and forth between multiple wallets;

3. A wallet purchased the same NFT three or more times (only applies to NFTs using the ERC-721 token standard)

4. Both the buyer’s and seller’s wallets are initially funded by the same wallet.

A Blur representative responded: "We generally like to refer to analysts who have a history of thorough research using well-documented methods, rather than data that takes bold claims at face value. Rigorous knowledge is needed to understand what is happening so that we can improve the NFT market. Blur was very cautious when developing its token incentive model. Its model does not provide token rewards based solely on a large amount of NFT trading volume. It has learned from the mistakes of LooksRare and focused on rewarding liquidity. Many analysts misunderstood Blur's trading volume and compared it with LooksRare. The NFT market is indeed difficult to study in detail."

CryptoSlam responded that its previous sales targeted traders who provided liquidity to NFT trading pools without giving much consideration to their status as digital collectibles or unique assets, and that it had also expanded the "criteria for identifying a new category of wash sales."

Summarize

Perhaps wash sales are difficult to avoid in the development of the NFT market. After all, economic interests have long been the main driving force for NFT traders. Although high-frequency trading in traditional markets is not suitable for everyone, if it is feasible on the blockchain, traders will find a way to maximize their own interests.

However, at least at the time of writing, CryptoSlam still classifies some transactions on Blur as "wash trades", but using the term "wash trades" to describe what is happening on Blur may not be appropriate, and it may be more accurate to replace it with "inorganic trading".

Blur has been fraught with controversy since its inception, from the royalty dispute with OpenSea to the current wash sales. In any case, this rising platform has injected a shot in the arm to the dull crypto market, and its future development is worth paying attention to.