Some say there’s never a boring day in the NFT space, and they’re right. The uprising NFT market and aggregator Blur has been trending lately for all the buzz it is causing. After a wild ride of BLUR token airdrops, a ruthless battle with Opensea, and the initiation of a gas war, many NFT analytics platforms are highlighting suspicious behaviors related to the soaring Blur trade sales. CryptoSlam, the leading platform for tracking NFT sales, raised some Blur NFT wash trading speculation last Friday, and the community is on FIRE.
Blur Taking Over Marketplace Reign
After Blur’s native token airdropped on Valentine’s day, the uprising NFT marketplace has generated over $1.49 billion in total volume over the past 30 days, according to data from DappRadar. After surpassing the leading NFT trading platform Opensea, Blur initiated a royalty fee war by enforcing creator fees as long as creators block Opensea. Wait, it gets worse.
Many traders attributed this move as a GOD-tier and major W move from Blur with some saying that they’ll never use Opensea again. On the other hand, many have accused Blur of killing the NFT space and ruining NFTs.
The sudden rise in sales left many people questioning whether or not wash trading was a major factor. In fact, Blur has admitted that a small percentage of wash trading was part of airdrop 2 as it recalculated the care package count back in December.
Wash trading is a type of NFT fraud that occurs when buyers manipulate NFT transactions by trading them with themselves. Creating the allusion of a high-demand NFT, which increases the floor price.
The NFT aggregator CryptoSlam has flagged nearly 80% of Blur’s total NFT trading volume as suspicious activity. Which raised the Blur wash trading speculations to a new level.
What’s the Point of Wash Trading in this Context?
Blur’s strategy to get up on the marketplace ladder is to create HYPE. What type of hype? The type that creates a spike in sales and a huge surge in trading volume. Blur decided to launch its native token $BLUR after a series of airdrops that contain an undisclosed amount of tokens. In order for users to receive these airdrops in the form of care packages, Blur incentivized trading, listing, and bidding on the platform.
This way, the constant bidding and trading on the NFT marketplace for the promise of being gifted with tokens will surely create a surge in NFT sales. However, Scott Hawkins, a data engineer at CryptoSlam, claimed that “This token scheme has artificially distorted real activity in NFTs.”
Some fraudulent users might go above and beyond their way in order to receive these Blur care packages. How? By wash trading of course. Traders can trade NFTs with each other or with themselves using a different wallet, in order to create the illusion of legit NFT trade.
According to data from CryptoSlam, only 1% of high-value NFT traders, or whales, are the catalyst of the major Blur sale spikes. These traders have been flipping NFTs at a fast rate between each other in the hopes of receiving $BLUR.
The top 3 addresses that were airdropped $BLUR:
💰 ADDRESS #1: 3.2 million BLUR tokens
💰 ADDRESS #2: 2.9 million BLUR tokens
💰 ADDRESS #3: 2.5 million BLUR tokens
All of these ☝️ addresses have been trading NFTs back and forth with each other – they WASH-TRADED!
— Vijay Pravin (VP) | bitsCrunch (@VijayPravinM) February 16, 2023
CryptoSlam’s Blur Wash Trading Discoveries
CryptoSlam explained in an email sent to subscribers last Friday that will deduct a huge amount of recent Blur trading data from the charts. By now, the platform has detected nearly $820 million worth of wash trading sales. That means, 80% of the total $ 1.49 billion Blur trading volume is inorganic.
To fuel the marketplace war, CryptoSlam continued to compare the market in question with its rival Opensea. Claiming that by the time Blur witnessed such a high percentage of wash trading, Opensea’s wash trades only add up to 2.5%.
The data coming in from @cryptoslamio is not painting a pretty picture for @blur_io.
A marketplace held up by 80% wash trading is not sustainable.
Say what you want about OS, but they aren't playing the deceptive wash trading games like Blur.
Keep it honest in Web3 💪 pic.twitter.com/v6myVtxWq9
— Ahi.eth 🚀🌚 (@CryptoNFTs) March 1, 2023
In an interview with Decrypt, CryptoSlam’s founder Randy Wasinger stated that “These flagged transactions are the byproduct of token farming incentives recently introduced by Blur in their war with OpenSea and other marketplaces. They’re not arm’s-length transactions between an unrelated buyer and seller.”
Wash Trading Detection Methodology
When Blur was faced with the cold-hearted truth about CryptoSlam’s accusations, the platform redirected the claims to a Dune dashboard created by the pseudonymous Web3 data analyst Hildobby. The dashboard represents that only 14% of the total trading volume on Blur was wash traded. That’s around $340 million. The data analyst has even explained his methodology of spotting wash trades in a blog post that goes like this. A wash trade according to Hildobby happens if:
- Buyer = Seller: If the buyer and the seller use the same wallet, then obviously it’s an inorganic trade.
- Back and Forth Trades: If the same NFt has been traded multiple times by the same wallets. Whenever there’s a transaction with a seller and buyer, and another one that’s inverted, that signals a wash trade.
- Buying the Same NFT: If an NFT was caught benign bought more than 3 times by the same address, this makes it filtered as a wash trade.
- Same Fund Source: If the wallets of the buyer and seller were funded in Eth by the same address, this categorizes it as a wash trade.
These criteria are considered by Blur to be “well-documented methodologies” and not “Bold claims at face value”.
However, CryptoSlam’s methodology mirrors that of Hildobby’s. In fact, it takes it a step further to detect a new type of wash trading. The wash trade happens when traders who are providing liquidity are not much considerate of their digital assets.
“This new class of wash trading is more difficult to detect and involves a key determination—that during a small time period, a particular wallet’s trading activity signals that it has no regard for the metadata of a particular collection,” Wasinger told Decrypt. “So we assume that it is trading an asset that has a similar risk profile and is ‘substantially identical’ to other assets that were recently traded.”
Is it Wash Trading or Airdrop Farming?
One has to think about what is airdrop farming in the first place. Some claim that Blur has opened the platform for these kinds of wash trades. Pointing out that the people who are complaining about it are the ones who are not using this token scheme.
NFT wash traders have a point:
If Blur incentivizes wash trading… Who not do it? Why try to create a community and innovate when whales make more pushing floors up and down 10%?
Blur was built to incentivize whales to dump their NFTs slowly, rather than all at once. pic.twitter.com/FXIIndxyrX
— HashBastards NFTs 🤑 (@HashBastardsNFT) February 27, 2023
Did Blur incentivize people to farm points in all possible ways? Including wash trading? We might never know. What we do know however that many have a contradicting perspectives on the subject. In some way, Blur is perpetrating capitalistic systems instead of curating to a Web3 community who are actually invested in the space.
1. I’m going to be 100% real here. @blur_io is bad for NFTs and CryptoArt. There have been jokes that NFTs are just “shitcoins with pictures” and blur has essentially turned them into that by creating a GUI that minimizes the actual art for NFTs into nothing. pic.twitter.com/7vAs7osOcM
— exlawyer.eth/tez (@exlawyernft) February 24, 2023
Some traders have stated that ponzinomics encouraging wash trading isn’t what the underlying technology of NFTs is all about. NFTs are certificates of ownership that relate to digital or physical assets. Some believe that NFTs are much more than flipping non-fungible tokens for a quick profit. There are people who are interested in digital art, culture, and the potential this decentralized technology has.
Is BLUR just a wash trading platform?
— Feral (@CryptoFeral) February 27, 2023
Blur Wash Trading: Sustainable Presence or Illegal Behavior?
Blur has insisted on monitoring the bad practices, however, some speculate that some of the wash trading wallets belong to the founders themselves, as a tactic to get ahead in the marketplace race. The question lies in, is wash trading even legal? Well, in the traditional finance sector, and according to the Commodity Exchange Act (CEA), it is not. However, wash trading is still in a gray area in the unregulated NFT world.
As for Blur, the uprising marketplace has to put a clear roadmap on where it’s heading. For now, it seems it is digging its own grave by announcing a season 2 of its airdrops. While the wash trading speculations are still not resolved, we might see another wash trading round in the next airdrop. Which will just throw more shade on the NFT marketplace. Blur’s rival Opensea might be waiting to see if Blur’s downfall is near. Until then, the NFT community will split into those who care about the Web3 space, and those who are after quick profit.