key insights
- Blur's progressive token-incentivized AirDrop model has proven very successful to date, making it an industry leader by driving user acquisition and retention.
- With retention rates 10% higher among high-volume traders than other platforms, Blur’s case highlights that long-term user engagement can be maintained by providing a superior user experience rather than relying solely on token incentives.
- After Blur's success, some copycat projects emerged, but to achieve its growth and market dominance, these projects needed to go beyond Blur, introduce unique features, and adapt to changing user needs and market trends.
- Token incentives play an important role in attracting and retaining users. Blur promoted the use of the event AirDrop system. Unlike traditional one-time AirDrop, the campaign system facilitates long-term engagement by combining future AirDrop and token issuance with a customer loyalty program. This move propelled Blur into an industry-leading position, changing the paradigm of user acquisition and retention.
- While the success of token incentives has been instrumental in fueling Blur's rise, such incentives have not generally translated into significant post-retention effects across the cryptocurrency industry. Admittedly, Blur's model of maintaining loyalty and ongoing incentives appears to be a promising development in fostering lasting customer engagement. However, the question remains: Is this just a step in the right direction, or has the goal been reached? To gauge the effectiveness of the Blur model versus previous incentive models, we measure user retention patterns for different user segments. Additionally, we use the rate of new user onboarding to determine Blur's item appeal to the product.
Blur's Token Incentive Model
The incentive model employed by Blur seamlessly blends future AirDrop and token offerings with a well-publicized rewards program (or "reward season"). To date, two such AirDrop seasons have taken place. The inaugural season began in October at the same time as the debut of the Blur platform and continued until the token launch in mid-February. During this period, users can accumulate reward points by actively placing orders and bidding for NFT collectibles. The second AirDrop season, currently underway, has expanded the scope of eligible activities to include lending services on the newly launched Blend NFT lending platform. In essence, the points earned are directly related to the user's trading volume in various areas of the Blur marketplace.
During each season, users can track their loyalty points and compare their performance against other users on a public dashboard. At the end of each season, users will receive BLUR tokens in proportion to their reward points. At its core, Blur’s tokenized incentive model is similar to the basic structure of many airline rewards programs: the more you travel with an airline, the more miles you accumulate, encouraging continued use of that airline.
A one-time token distribution provides users with free benefits in exchange for their early loyalty, creating an intrinsic incentive for long-term growth and engagement with the project. However, as the above case studies demonstrate, these incentive programs need to be chosen and executed strategically. A one-off token distribution may not yield effective results without a compelling user experience to foster platform loyalty. Instead, what Blur's innovative loyalty features do is create a unique and enduring value proposition. Users can actively track their point accumulation and therefore be motivated to continue engaging with Blur.
Blur's performance so far
With its innovative professional trader features and much-publicized AirDrop, Blur has established itself as a leader in the Ethereum NFT space less than a month after its launch. It quickly became the marketplace of choice for high-volume NFT traders. On one date, it overtook arch-rival OpenSea in weekly transaction volume, with an average market share of 63% over the past month. While Blur doesn’t capture the majority of Ethereum NFT traders, its share peaked at 33% shortly after the token’s launch in February. The platform’s trading volume ratio per user has remained consistently high, thanks to its ongoing AirDrop mechanism design.
Blur is not the first NFT marketplace to introduce token incentives. Competitors like LooksRare and X2Y2 distribute governance tokens to OpenSea traders to entice them to switch platforms. However, as Blur gains substantial momentum in late 2022, user engagement for these rivals gradually declines.
Sudoswap opted for a different strategy, offering compensation to early Liquidity providers on its platform about six months after launch. Unfortunately for Sudoswap, the delayed token launch coincided with Blur's emergence. None of the above markets, even at their peak, managed to capture more than 5% user market share.
A one-time token distribution provides users with free benefits in exchange for their early loyalty, creating an intrinsic incentive for long-term growth and engagement with the project. However, as the above case studies demonstrate, these incentive programs need to be chosen and executed strategically. A one-off token distribution may not yield effective results without a compelling user experience to foster platform loyalty. Instead, what Blur's innovative loyalty features do is create a unique and enduring value proposition. Users can actively track their point accumulation and therefore be motivated to continue engaging with Blur.
Going forward, Blur intends to continue the AirDrop and incentivize all aspects of the platform. While ongoing AirDrop play a key role in attracting new users, its true success should be measured by its long-term sustainability and impact on user retention and engagement.
User retention on Blur
In the first AirDrop season, users accumulate points by continuously placing orders and bidding activities on the platform. These points are then converted into token rewards, and higher transaction volume on Blur results in a larger distribution of tokens. Therefore, since token distribution and participation on Blur are almost synonymous, we segmented Blur users based on the amount of tokens they received from the first AirDrop to assess their historical performance.
The majority of Blur traders, about 72% of the AirDrop recipients, participated in relatively low trading volumes. These users typically redeemed 1,000 BLUR tokens or less and exhibited the lowest retention rates since the token was launched. The relatively small distribution of tokens may discourage these users from actively participating in subsequent AirDrop seasons, thereby affecting their continued participation.
In contrast, mid- to high-volume traders who received more than 100,000 BLUR in the first AirDrop had a retention rate at least 10% higher than low-volume traders. These traders who received a 5- to 6-figure token allocation are likely to be incentivized to remain active and participate in the upcoming reward season. This finding fits with the observation that while Blur may not be dominant in terms of user share, it still maintains more than 50% of transactions, mainly thanks to a small group of high-volume users.
After the launch of the BLUR token, the number of daily active users on the platform surged, tripling the previous figure. This growth is mainly due to the influx of new traders. The allure of a massive token distribution, combined with the start of a second AirDrop season, created a meme effect that attracted new users. Currently, these users account for the majority (51%) of Blur's total user base, and account for more than 60% of the NFT lending platform Blend's user base.
According to the roadmap, Blur plans to continue with continuous AirDrop. However, the drop in the number of AirDrop recipients in the first quarter raised concerns about the future of the platform. The program was successful in attracting new users, but faced challenges in retaining them. If this pattern continues after the next token distribution, Blur's potential to attract new users may be limited given the limited number of potential users in the existing market. Therefore, Blur needs to introduce new features in the AirDrop in order to retain existing users and promote engagement.
Creating products that truly resonate with consumers is critical to building loyalty over the long term. Like an airline's rewards program, whose success is based on a persistent need for travel, an effective product must satisfy a persistent and widespread need or desire. In the case of Blur, the NFT industry is an emerging and inherently volatile industry that has yet to develop a stable demand. Therefore, the task of creating loyalty is not simply to satisfy existing demand, but to create natural demand for the product.
Blur should take a two-pronged approach: attract new users with incentives, and develop features to foster ongoing engagement to optimize growth and retention. For Blur, introducing innovative tools that enhance the trading experience and create opportunities for high-volume traders is critical. By understanding the behavior and motivations of different user segments, Blur can tailor its strategy to maximize user retention and remain competitive.
market comparison
After Blur's initial success, a slew of copycat projects flooded the market. OpenSea has launched OpenSea Pro, a professional trading platform that seems aimed at appealing to users who prefer Blur's professional trading interface. In the Solana ecosystem, Tensorswap appears with almost the same interface as Blur and a similar progressive AirDrop model.
Similar to Blur’s parallel trajectory, Tensorswap has experienced a rapid rise and now accounts for a sizable share of Solana’s NFT trading volume, around 42% (as of this writing). It's worth noting, however, that Magic Eden still commands the majority of user share on Solana.
Recently, Tensorswap ended its initial phase of reward distribution, although it has yet to launch its own token. Tensorswap’s user adoption pattern may mirror Blur’s pattern of steady growth before the token launch followed by a surge before returning to pre-token launch levels.
Tensorswap’s imitation of Blur shows recognition of the platform’s features and incentives. While replicating a proven model can bring initial success, the key to sustained growth and market share over the long term is innovation and the ability to adapt. Just like Blur differentiated itself from many platforms through its pioneering professional trading interface and free transactions, TensorSwap and other platforms entering the market need to implement a unique value proposition in order to retain existing users and attract new ones.
final thoughts
Progressive token incentive models have been successful in attracting and retaining certain user segments, but cannot alone solve user retention. Rather, it's part of Blur's broader strategy to balance user incentives and feature enhancements within the overall trading experience. The innovative progressive AirDrop model not only drives user acquisition, but also appears to achieve higher retention rates than other distribution methods. However, with the upcoming token distribution, there is a possibility of user fatigue due to repetitive patterns.
Additionally, our evaluation highlights that cultivating ongoing user engagement requires continuous improvements to the AirDrop program, responding to user feedback, and introducing new platform features. Other platforms such as TensorSwap have succeeded by imitating Blur's model, which again confirms its effectiveness. However, the future of these platforms depends on their ability to adapt to changing market dynamics and cater to diverse user preferences. Time will reveal whether a progressive token incentive model can garner long-term loyalty, providing important insights into tokenless applications across the crypto ecosystem.
Original link : https://messari.io/report/blur-s-token-incentive-model?referrer=all-research
Translation : Terry |
