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Article: @Buidler DAO
By @Jane @Economic Modeling Group
Arrangement: @黑羽小斗@createpjf
Note: The article only represents personal views and does not constitute any investment advice
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In the internal sharing meeting of our economic model group, Blur is often discussed as a typical case. In just under a year, it has shaken Opensea's leadership in the NFT market as a Rules Breaker. However, when we wanted to systematically study Blur's AirDrop strategy, we found that there was a lack of in-depth relevant information on the market, so we decided to dig deeper by ourselves.
When reviewing Blur's AirDrop mechanism and product iteration process, we can especially feel the subtle design of the systematic strategy behind it and the excellent execution of the team. I hope this article can bring some enlightenment to those project parties and readers who are designing or paying attention to TGE. ——Jane
Article Quick Facts 👀
1/ Intro
2/ Staged Reward Model
3/ Highlights from the perspective of Token design
3.1/ Appropriate sense of rhythm
3.2/ Loyalty Rewards for "Self-benefiting"
3.3/ Consistent core incentive indicators
3.4/ In-depth gamification thinking
3.5/ Lean Token usage concept
4/ some discussion
5/ Reference
1. Introduction
Whether Blur's token rewards and product design have a benign impact on the NFT market has recently been widely discussed again. Controversy aside, Blur’s AirDrop strategy has many merits. The deep integration of token incentive design with product and operation rhythm has played a huge role in the evolution of Blur’s platform ecology. Founder Pacman believes that tokens are a new medium that can help unlock growth and ecological prosperity.
Blur's economic model draws a lot of inspiration from classic DeFi projects such as GMX, Uniswap, DYDX, etc. It was jointly designed by the team and Paradigm, and FenwickWest provided a lot of help at the legal level. Its token allocation design is as follows:
Whether Blur's token rewards and product design have a benign impact on the NFT market has recently been widely discussed again. Controversy aside, Blur’s AirDrop strategy has many merits. The deep integration of token incentive design with product and operation rhythm has played a huge role in the evolution of Blur’s platform ecology. Founder Pacman believes that tokens are a new medium that can help unlock growth and ecological prosperity.
Blur's economic model draws a lot of inspiration from classic DeFi projects such as GMX, Uniswap, DYDX, etc. It was jointly designed by the team and Paradigm, and FenwickWest provided a lot of help at the legal level. Its token allocation design is as follows
The total amount of Blur tokens is 3 billion. Among them, tokens belonging to the community accounted for 51% (1.53 billion): 360 million AirDrop were issued in the first quarter, and 300 million AirDrop are to be issued in the second quarter. Token incentive budgets are determined by governance votes.
In the following, we will first analyze its staged token reward model, and on this basis, we will extend the discussion on the points that other projects can learn from in Token design, including rhythm, loyalty incentives, core incentive index refinement, gamification, etc. Enjoy~
2. Staged Reward Model
Drawing:
feature of product:
2.1 0th time
Date: 2022/05/04
Milestones: Blur beta goes live
core summary
The beta version of Blur grants trial rights based on the ranking of blur points, which consists of two parts: the initial score corresponding to the historical transaction volume and the invitation score. Each participant gets 5 invitation quotas initially, and the invitation points means that he will get 1/5 of the points of the invitees and 1/25 of the points of the people invited by the invitees. In addition, when the second and fifth invitations are confirmed, you can get 50% and 100% score multipliers respectively. The design of the invitation score enables users to be motivated to invite users with considerable trading volume as much as possible. At the same time, the final selected users have a high probability of having a high initial score, thus completing a good target user screening. Only users with many historical transactions and influential users are eligible for the test.
Given that Blur is initially a product for professional traders, this initial rigorous screening can help the product test whether it really achieves PMF. Of course, part of the premise of the screening implementation is that the invitation can spread at a large scale while incorporating a certain amount of fomo emotion.
2.2 Season 1
The AirDrop in the first quarter was divided into three times, and a total of 360 million Blur tokens were distributed, and the awarding objects included active traders, care package holders, creators, etc.
Airdrop 1
AirDrop date: 2022/10/19
Milestones: Blur launches
Core summary:
The audience for the first AirDrop(hereinafter referred to as A1) is users who have traded more than 1eth on Opensea in the past 6 months. Then they will get a score based on the total transaction volume on Opensea, Looksrare, X2Y2 and other platforms. This score determines the number of care packages they can get. The care package contains Blur tokens, and the specific number of tokens will be announced when the tokens are officially released (initially scheduled for January). To receive a care package, users need to put an NFT on the Blur platform within 14 days.
A1 As a retrospective reward, the order of magnitude is not large, and it mainly plays a role of voice. From the perspective of CAC customer acquisition cost, it is expected to be very cost-effective. From another perspective, this is also an attempt to poach the corners of competitors. At the same time, users do not directly receive AirDrop, but need to complete the core action of listing to pave the way for the subsequent A2.
Airdrop 2
AirDrop date: 2022/12/05 (the original announcement was in November)
Memorabilia: Support for bid with ETH
Core summary:
While Blur was doing A1, it announced the reward rules for A2. A2 will calculate the score based on the listing behavior. Although there is no clear reward formula, the overall reward tendency is to encourage more NFT listings, blue chips and active series are better, and those with a higher probability of selling will have higher scores. At the same time, they will guide the use of different listing tools (floor price/characteristic floor price, etc.). By clearly informing in advance that A2 will be significantly larger, Blur gives users the motivation to continue to participate in the preparation of A2 and increase the motivation to put it on the shelf. At the same time, A2 also proposed the concept of loyalty for the first time. Only when users list on Blur at a price no higher than other platforms, their loyalty will be kept 100%. Users with full loyalty can get double points. Loyalty will further affect the probability of receiving different quality care packages in the future. There will also be certain point rewards for using functions such as sweeping the floor price.
In view of the simultaneous launch of A2, the core function of bidding with ETH was launched simultaneously on the product side. Users claiming the care package of A2 must try the bid function, and bid is the core incentive behavior for the subsequent A3 AirDrop. This also shows that the focus of incentives has shifted from the supply side to the demand side.
Airdrop3
AirDrop date: 2023/02/14 (the original announcement was in January)
Milestones: Blur Token Launched
Core summary:
A3 is the largest AirDrop in the first season, awarding points based on the user's bid behavior during the period. Different from the previous two AirDrop, A3 announced a relatively clear incentive mechanism:
On the whole, the series with the more active participation in bidding can get more points, and within the same series, the bidding with the highest transaction risk can get higher points. In this way, users have the motivation to bid close to the floor price, and the bid-ask spread can be effectively narrowed to promote transactions. It's worth noting that once a bid is accepted, it no longer earns points for the bidder. The calculation method of d_j in the formula shows that if the bid is higher than the floor price, d_j will be larger and the final score will be smaller. Therefore, from the perspective of obtaining points, one of the relatively superior bidding strategies is to bid relatively close to the floor price, but it is best not to be the best bidder. It is better to have a certain degree of bidding depth in more aggressive bidding places, so as to ensure that your own bidding is safer and has a certain distance from the actual transaction. The purpose of this mechanism design that does not directly encourage trading volume is to increase liquidity while avoiding false transactions as much as possible.
But in another dimension, we can see that an important dimension w in xp refers to the weight of the series in the trading volume of the day, which is similar to the active trading pool in DeFi. It can be seen that the platform still has considerable pursuit of trading volume. Such a design will also lead to a certain Matthew effect, that is, the series with active transactions will be more active because more people provide liquidity. Additionally, the top 100 bidders on the rolling 24-hour leaderboard receive an additional 2.5x reward multiplier. This design, which is obviously beneficial to large investors, may also cause users to make a lot of "meaningless" bids in order to obtain excess rewards. When the NFT transaction itself is not the purpose (score scoring is), the user will allow the bid itself to generate losses. Based on the expectation that the Blur AirDrop can make up for the bid loss, everyone traded repeatedly, hoping to get a higher score. This kind of expectation is the beauty of its design, but it also buryes certain hidden dangers: when the market is good, this expectation will be a positive boost to a higher transaction volume; and when the market is normal or expected to fluctuate, there will be uncontrollable loss of users. The Twitter account @ShaneCultra once had a wonderful discussion on this. You might as well treat yourself as a market maker instead of a Blur miner. You may be able to make better decisions-you may lose points in the short term, but you will lose less money. It is more sustainable, and you may get more points in the long run, and ultimately make money.
2.3 Season 2
Start date: 2023/02
AirDrop Date: Unknown
The AirDrop of the second season will start in February 2023, and the current end date is unknown, with a total of 300 million Blur tokens to be distributed. In Blur's design, the incentive direction of tokens is like a baton, and its directionality will also change as the core functions of the product are iterated.
In the initial stage, the listing and bidding behaviors will share the total rewards equally. The method of obtaining listing points is the same as A2, and the method of bidding points is the same as A3.
After the peer-to-peer perpetual lending agreement Blend was launched in May, some NFT series no longer get listing points, and the listing rewards are transferred to loan rewards, and the total score value remains unchanged. Users can obtain borrowing scores by providing borrowing options. The higher the user's risk tolerance (reflected by the higher borrowing amount of the same collateral), the lower the income requirement (lower APY), the higher the loan score, so as to provide potential buyers with attractive borrowing options as much as possible. This also puts a lever on the demand side.
In early July, Blur updated its trait bid feature, allowing users to bid on specific traits. Although all NFTs support this feature, only certain NFT series (including Punks, Degods, and Milady, etc.) can get special bid points, and these NFTs no longer get bid points. (The types of points that can be obtained by different NFTs can be viewed in detail: https://blur.io/collections in the Points section)
Trait bid score = (Trait bid/Top collection bid) x (# of NFTs with that Trait)
The higher the bid for a trait, the more NFTs the trait contains, and the higher the score, but its score weight is limited by a certain multiple. The official gave an example, assuming that there are 10 NFTs in a series: 6 floor prices, 3 intermediate grades and 1 scarce NFT. Assuming that the intermediate price is 1.5 times the premium, the rare NFT is 10 times the premium, and the upper limit of the multiple is set to 3. Then the weight of each part is as follows:
6 floor prices: 6x; corresponds to a score of 44%
3 middle brackets: 3 x 1.5 = 4.5x; corresponds to a score of 33%
1 scarcity: 1 x MIN(3, 10) = 3x; corresponds to a score of 22%
It can be seen that the idiosyncratic bidding only affects the scores obtained by bidding different NFTs, but does not affect the total score of the bidding side (different scarcity is distributed in proportion). And because there are more floor price NFTs, most of the scores still belong to collective bidding. The reason for limiting the upper limit of scarce NFT is to prevent someone from maliciously bidding to manipulate the score. The specific multiple of the upper limit can be adjusted according to market conditions.
There are different opinions on the impact of this scoring mechanism on NFT transactions. One faction believes that the special bidding function will lower the price of scarce NFTs, because miners are motivated to bid for high points and then sell them quickly; the other faction believes that the actual situation is much more complicated and cannot be extrapolated linearly. For example, the pricing of scarce NFTs is difficult, and miners will be more cautious in bidding. The specific impact remains to be tested over time.
Observing the changes in the scoring method in the second season, it can be clearly seen that the strategy it follows is: when a certain behavior is already relatively stable, incentives will be transferred to places that are more needed to maximize the incentive effect. This also complies with the different points that the platform needs to focus on in different stages of development. It is the starting point of Blur's token incentives to be able to adjust the baton in a timely manner and guide user behavior with the least resistance.
So far, the second season has not yet confirmed when it will end. Especially when the trait bid was launched, the official announcement that there are still three key functions to be launched means that it may still take quite a while for the end point, and the dissatisfaction in the community has further fermented. The top-ranked investor directly withdrew 7842 ETH, temporarily withdrawing from the points game. The reason for dissatisfaction is that in Blur's design, obtaining points is not equal to obtaining tokens, but a conversion relationship between the two. The total budget for the second quarter is 300 million tokens. The longer the duration, the more points will be issued, and the fewer tokens corresponding to each point, which is equivalent to being diluted in disguise.
Blur’s way of issuing points first gives itself a lot of freedom, and can regulate the duration of the season, which is essentially regulating the incentive cost of behavior. But this is also a two-way tug-of-war with users. Once the season is too long, or the price of tokens falls, and users cannot have a clear yearning for the value of incentives, users are likely to quit the game, so a balance needs to be done. Although there was a delay when reviewing the first season, Blur has always announced the approximate end time of each AirDrop in advance. The second season has been adjusted to an unknown end time, and the current duration has been 5 months. It is inevitable that some users will lose patience. This shows that high expectations for tokens are not a panacea, and sometimes they will backfire, and expectations management needs to be done well.
2.4 Summary
It can be seen from Blur's continuous product and token incentive iterations that PMF is to some extent the foundation of Blur's survival, and excellent token design is a lever that also helps it better face market competition.
Blur was clearly aimed at professional traders from the beginning, with a sharp enough foothold to distinguish it from the main crowd of Opensea. This group of people has large transaction amounts, high frequency, more profit-seeking, and better incentive indicators. At the level of product functions, the design of mass-marketing and sweeping floor prices also fully meets the unmet needs of these traders, and at the same time encourages users to use these functions through tokens.
The premise of making the above product design is that Pacman judges that NFT also has a demand for specialized transactions, and that NFT trading will be a market that is at least equivalent to or even larger than FT trading. In addition, NFT is different from FT, and it is difficult for traditional exchanges to do both well at the same time with old thinking. The initial zero-fee design stems from Pacman’s understanding of the origin and development of platforms such as Taobao and Amazon. From this, he concluded that monetization is not a difficult point, and how to build the network at the beginning is the real challenge. Once a valuable network is formed, there are many ways to commercialize it. And because of the zero-fee design, the platform did not have much motivation to motivate users to generate false trading volume at the beginning, which is of little benefit to the platform.
It is undeniable that AirDrop is an effective way to attract users, but if there is no excellent product or agreement to undertake it, it is like receiving water with a leaky bucket. Blur, on the other hand, has achieved a higher level. Not only has it come up with products that solve clear pain points, but its incentive design has enabled it to catch up in the competition, helping itself to complete a good cold start and break the game. For example, A2 encourages the lowest price to be put on the shelves, which effectively improves the competitiveness of the supply, attracts more purchase orders, and precisely strikes competitors. On this basis, if it is higher, it may be whether the token incentives and product design can bring more positive impacts to the industry while benefiting itself. This is often a question that only companies in the leading position can afford to think about.
Become a community of interests with the community
Another commendable point in Blur's entire development process is its close communication with the community. For example, in the beta stage, after screening and inviting some core users, it maintained high-frequency communication with users participating in the test, and the founder was also active in DC to accept user feedback. In this way, traders have a sense of participation and a certain sense of belonging to the product. In addition to the emotional connection, the interest binding is more direct. When the product was officially launched in October, Blur announced that it also introduced @punk6529, @CozomoMedici, @dhof, @krybharat, @Zeneca_33 and others as investors. These people are not only investors, important users, but also influential KOLs in the NFT field, and can be important and effective publicity nodes. The ROI of being able to leverage and retain these people is high.
In this regard, Pacman has a description that Blur ultimately wins because everyone decides to use Blur and helps Blur win, and this victory belongs to everyone and the community that actively uses blur. From this point of view, it can be understood that the two major AirDrop of Blur's A2 and A3 both awarded tokens to Blur's active users, thus fully connecting token incentives with the demands of developing the network. When users become a community of interests, their stickiness will be stronger and they will have the motivation to contribute to the continued prosperity of the network. However, this also has a major premise, that is, the price of Blur currency can be relatively stable and users can enjoy some specific rights and interests after becoming token holders. This point will be discussed later in the token value.
3. Highlights from the perspective of Token design
3.1 Appropriate sense of rhythm
When we look at Blur’s token AirDrop from the perspective of the above timeline, we can clearly perceive the rhythmic grasp of its design. Only with good design and good rhythm can it run properly and give full play to the power of tokens.
1) Design of AirDrop timing
For example, there was a 5-month interval between the official launch and the beta version. It is guessed that during these 5 months, Blur was doing several things at the same time: 1) BD head trader; 2) Product iteration: based on user feedback; 3) Brewing AirDrop plans and marketing strategies, etc. On the eve of its official launch, Blur was already the second place from the perspective of aggregator volume, so when it was officially launched to the public, it already had good potential and product experience.
In early November, the NFT series Art Gobbler led by Paradigm was launched, which aroused great Fomo sentiment in the NFT circle. It is very suitable for trading with Blur (some product features for professional traders: fast speed, timely updates, etc.), boosting Blur to the top of the trading volume level. In the eyes of outsiders, this growth rate is amazing, and it will also trigger huge word-of-mouth communication. As Blur is a invested company that has a close cooperation with Paradigm, it is difficult to say that the timing of AG's release is purely accidental. This ability to operate a top-notch NFT and its coordination with the launch time has to make people marvel at the precision of its thinking arrangements. The original A2 AirDrop was scheduled for November. When the development is in full swing, combined with the AirDrop expectations, it will undoubtedly explode.
The token AirDrop in the first season are expected to be gathered in January 23. The interval between A1, A2, and A3 (package AirDrop) is about 2 months, and the approximate time point is notified in advance, in line with the continuous pace of product updates, and the pace is harmonious (Blur’s new updates are very efficient and the team is very hardworking). The question here is that the Blur team obviously has the ability to control the rhythm, so what is the most important consideration besides the degree of freedom in choosing a method with an unknown duration in the second season? Or is it too confident in the loyalty of the community?
2) Design of AirDrop quantity
The number of AirDrop in the first season has also been carefully planned. The volume of A2 is 10 times that of A1 (reflected in the overall distribution of more care packages), and the volume of A3 is 1-2 times that of A2. This order of magnitude design and continuous upward expectations allow old users to stick to A3 for a bigger head, while continuing to attract some new users. The relatively small number of A1s is mainly to attract attention in the early stage, indicating that the team is "spending" tokens very leanly.
The number of AirDrop in the second quarter is generally equivalent to that in the first quarter (~10% of the total tokens), which also shows that Blur is still in the stage where it needs to spend a lot of tokens to achieve business goals.
3) Two-sided market construction
The construction of a platform has never been easy. How to build a bilateral platform and where token incentives can play an incentive role requires careful thinking. The path chosen by Blur is to build the supply side first, then stimulate the demand side, and finally stimulate each other to achieve a smaller bid-ask spread and high liquidity. The logical rationale for this is that if there is an optimal and cost-effective supply, then it will be much easier to stimulate the demand side. At this time, token incentives play the role of icing on the cake. After the follow-up demand comes, the supply side will have the motivation to stay on the platform. At this time, the incentive can be transferred from the supply side to the demand side. Conversely, if the order is to use tokens to pry the demand side out of thin air, but lacks high-quality supply, it will obviously take a lot of effort.
The overall logic is not complicated, but in practice there are many details and ingenuity, and the final reward is to realize the network effect.
3.2 Loyalty Rewards for "Self-benefiting at the Detriment of Others"
Loyalty design is an unavoidable part of Blur's token mechanism, and it is also an important way for its token level to deal with market competition. Simply put, if a user maintains a high level of loyalty during AirDrop preparation, the likelihood of receiving more tokens increases. It's worth noting that Blur looks at average loyalty over the period, so users can't be rewarded significantly more by just increasing their loyalty at the end of the period.
In the first season of A2, A3, users only need to be listed on Blur, and the price is the lowest compared to other platforms, and they can get 100% loyalty. In the second season, the conditions for loyalty became more stringent, and users could only get 100% loyalty if they only listed Blur.
The motivation for users to accumulate 100% loyalty comes from a greater probability of high token rewards. Care packages are divided into different rarity levels, namely Uncommon, Rare, Legendary and Mythical. The higher the rarity, the more Blur Tokens it contains. At A1, the rarity of care packages is randomly assigned purely according to mathematical probability (A1 contains three levels, Founder once revealed in an interview that the distribution probability is about 88% for Uncommons, 11% for rare, and 2.2% for legendaries). After A2, although the number of packages allocated is not affected, the luck value allocated to scarce packages is closely related to loyalty.
Users who maintain complete loyalty have 2 times the chance to get the rare package, and 3 times the chance to get the Mythicals package. The number of tokens contained in Mythicals is 100 times that of Uncommon. This large multiple comparison will give users enough motivation to maintain high loyalty.
In the end, the number of tokens the user gets depends on the number of packages * the scarcity of the package. The scarcity is a further fork in the design. The business purpose of the reaction is that Blur not only hopes that users will use its own products, but also hopes to use this to combat competition and achieve absolute advantages, that is, to realize "benefiting others at the expense of others" in one step. It can be said that the design of loyalty is the most delicate part of the Blur flywheel. To some extent, 100% loyalty is also a product of transparent behavior on the chain. Strong companies can promote their hegemony, which is difficult to achieve in the commercial competition in the physical world. For example, it is difficult for Luckin to restrict customers from buying Cudi’s coffee.
As shown in the diagram below, the weak link in the cycle is the habit forming part. Assuming that the incentives stop/weaken, will the competitive situation change, and will there be other trading platforms that can pry users away through stronger token incentives? There is still uncertainty here. This also tests whether the Blur platform can accumulate enough temporarily insurmountable advantages and irreplaceability at the non-token level, such as product functions, liquidity and other parts that cannot be easily surpassed when the current token incentives are strong.
3.3 Consistent core incentive indicators
Token incentives are a very important means for building a network from scratch, but where to focus on setting the incentive point reflects the designer's judgment on the core success factors. In the past, including in the DeFi scene, most protocols mainly motivated transaction volume, and the direct side effect of this was false transactions. The scene dominated by false transactions seems to create a false prosperity, which can neither build a healthy system nor be sustainable. Once the incentives stop, it will collapse like a cliff. Therefore, it is very important to have the "truth" of the origin: to attract and retain real users.
At this point, Blur has always insisted on motivating liquidity. This incentive orientation is also related to the fact that Blur's current core audience is professional traders. For high-frequency traders, liquidity is crucial. The stronger the liquidity, the smaller the bid-ask spread, and the smoother the transaction, it will naturally attract more transaction volume, and this transaction volume is organic and more sustainable. And in Blur, once the bid is accepted, it stops scoring, so in a way, it's anti-spoofing. It encourages users to provide sufficient depth close to the floor price. This incentive idea is similar to that of Curve, which creates a good liquidity environment by rewarding LPs instead of directly rewarding trading volume.
Included in the latest product Blend, which does not incentivize borrowing (borrowing), but only incentivizes users who provide lending (lending). If the incentive to borrow is consistent with the encouraged transaction volume, it will create incentives for false transactions, especially since Blur currently does not set transaction fees, false transactions may be more rampant. For borrowers, although they are not directly motivated, they can get a loan with better conditions and benefit indirectly from liquidity. In the early days of Blend, only a few NFTs could be borrowed. The thinking behind it is to gather limited liquidity on a few NFT series, so as to obtain sufficient liquidity at the beginning of the launch. In the process, users gradually understand the operation mode of the agreement, are attracted by the benefits, and participate in it to provide liquidity. When the liquidity is more abundant, the platform can openly support more NFT series for lending. As a result, the lending market has always been operating relatively efficiently, but it has gone from a small scale to a larger scale of harmony.
In terms of products, the corresponding design of the bidding pool is very commendable. The same amount of money can be used repeatedly by users. It can be used for bidding or borrowing. It can even provide multiple borrowing options in one series, or provide loans for multiple series. That is, users can obtain bidding scores and borrowing scores with the same amount of money at the same time, so as to increase the motivation of users to pay the money as much as possible. This design undoubtedly greatly improves the utilization efficiency of funds and improves liquidity.
3.4 In-depth gamification thinking
Pacman once mentioned that buying NFT is a fun experience, and he hopes to reproduce this fun as much as possible. Throughout the process, we can often see the shadow of gamification. The introduction of moderate gamification is very useful for improving user participation and participation. For example, the distribution of rewards is not known in advance, but the care package is obtained first. Due to the randomness of the scarcity of the care package, it gives users an experience like opening a blind box. The effect of loyalty on the probability of scarcity adds complexity and playability to the game. The result of opening the blind box will also lead to widespread dissemination. In addition, most of the time, Blur does not directly inform the clear reward formula (even in A3, because some core parameters are not disclosed, the formula can only give qualitative guidance), so that users are not doing mechanical tasks for a relatively clear rate of return like DeFi mining. Facing the unknown, users need to do more exploration. This uncertainty may be costly in achieving the goal, but it is also effective against manipulation.
Blur has also carefully designed the construction of sharing motivation. For example, when inviting beta version test users in May 2022, when users log in and connect to their wallets, they can see their own scorecards. The scorecards classify the user's trader type based on the scores, and rank the scores. The scorecards of different levels have different colors. Users with high scores will naturally share their scorecards to show off their attributes. Users with lower rankings will also share some interesting content for self-deprecating or other purposes, such as me vs a legendary trader, comparing their own scores with legendary traders. This is undoubtedly much more contagious than just showing users their transaction volume in the past year.
In addition, the lottery is also a basic idea. At some important points, Blur will also encourage users to retweet and share why they are excited about Blur by rewarding care packages (such as this one when the product is officially launched:
https://twitter.com/blur_io/status/1582777892827586562
The rewards are not big (100 care packages shared by 10 followers), but it can form a good momentum and self-propagation on Twitter.
A good mechanism design coupled with good operating methods may get twice the result with half the effort. Blur's idea of deeply rooting the purpose of communication in every link of product launch or release is worth learning, and the introduction of gamification and uncertainty may be a wonderful introduction. And sometimes, it’s not all high-level strategies, but some details, such as the UI design of the score card can fully show off the attributes, the sharing experience is smooth, and so on.
3.5 Lean Token usage concept
On the surface, the Token issuance does not take money out of the company's pocket, but it is actually a real fee. From a capital expenditure perspective, every expense should be measured as ROI as much as possible. Blur has done careful thinking at this level. In Pacman's view, it is not the most efficient way to use Token only as a retrospective reward, and it should not be AirDrop quietly, without publicity. Instead, it should be used to acquire new users forward, while rewarding those who are helping Blur build network effects. For companies in the early stages of network construction, Token is the fuel. Where the fuel point is most beneficial to the cold start of the network, and how to give it to the users who are currently contributing determines whether the flywheel can be turned. It needs to be carefully calculated. Whoever can use Token rewards better, and whoever pre-dominates is more efficient, will be able to gain an advantage and be one step closer to the goal. From this, we can go back and re-understand some of Blur's AirDrop designs, such as dividing the AirDrop into multiple rounds, in order to give incentives to more relevant current contributors, and the incentive rules can be adjusted more flexibly according to needs.
We can also look at Blur's cost of maintaining liquidity from a capex perspective. Taking the second quarter as an example, a total of 300 million tokens will be distributed, and a considerable part of the speculation that the AirDrop may occur in October will last for about 8 months. Calculated at the current (230713) token price ($0.32):
总投入约为300M*0.32=96M，日投入为96M/240=0.4M
The current balance of Blur Bidding Pool is about $115M, which is equivalent to spending $0.4M per day to maintain the liquidity of $115M, about 0.35%/day, and the annual interest rate is about 127%. From the perspective of interest rate, this maintenance cost is still quite high.
4. Some discussion
4.1 $Blur Token value
The $Blur token currently has no clear economic token empowerment, which is one of the sources of controversy over whether the token has value. However, if you look closely, its governance power has a certain substantive effect. $Blur controls the governance of both the marketplace protocol and the lending protocol. On the income side, Blur is still in a zero-fee status. In the future, the community can vote to decide whether to open the market service fee and the switch of the loan agreement rate. In addition, governance can also determine the issuance of treasury Grants, as well as some function settings on the chain, such as voting period, minimum number of votes, etc. To participate in governance, users need to entrust their tokens to an address, and the final governance rights are proportional to the number of tokens they entrust. In addition, the Incentive Committee under Blur DAO can decide to issue 10% of the tokens for incentives. Ultimately, the hope is that $Blur can control the value growth and distribution of the protocol.
Looking back at Curve, investors who own and pledge CRV can control the distribution of handling fees. At the same time, the competition for CRV rewards has also triggered a war of bribery. Once real benefits happen, it is expected that there may be interesting governance competition on the Blur platform. And this ability to use tokens to capture protocol growth and financial benefits is also a significant difference between w3 and w2. To some extent, it also reflects the concept of taking from the people and returning to the people. Correspondingly, Pacman has always said that Opensea is a w2 company, and most of the interests belong to the team and equity investors.
On the other hand, in view of the fact that most of the trading volume of the NFT market is gathered on Blur, especially the relatively fastest-growing market for professional traders. Owning a $Blur position is to some extent equivalent to buying an index in the NFT field. Compared with specific NFT series with low liquidity, it can be traded in a larger amount and more flexibly. In addition, if the NFTfi field where Blend is located will usher in explosive growth, holding Blur can also enjoy the benefits of this market growth. That is, the value sources of $Blur may be diversified. When the NFT market grows, Blur will most likely benefit. We can regard it as a Beta in the NFT field.
4.2 Can Token Design Promote Royalties?
Discussions about royalties have been at the heart of Blur's controversy. If there is a platform that imposes a full amount of royalties, users can bypass the platform for private transactions, or some new platforms can leverage the market with zero royalties. It can be seen that coercion is not the best strategy at the business level (especially for new platforms). On the other hand, what is the motivation for the platform to encourage royalties? Part of it comes from the fact that creators are an important part of the current NFT ecology, and a benign royalty system will help the overall prosperity of the NFT ecology. However, given that this is the long-term benefit of the industry, perhaps only the leader has this structure and ability to truly implement royalties. So we might as well discuss whether it is possible to promote users to actively choose royalties from the perspective of Token design alone.
When Blur’s official version was launched, it tried a relatively mild royalty incentive strategy. When users set the royalty above 0.5%, it can gain a greater advantage in AirDrop, which is equivalent to using token rewards combined with royalty payments. The overall return is positive to encourage users to pay royalties. This idea has achieved some results, but it is still lower than the Opensea royalty rate. One of the simplest ideas that can be tried here is whether it is possible to widen the gap between the token reward multiples of not setting royalties and setting full royalties. In extreme cases, assume that the former is 0, and paying 100% royalties is 10x+ of 50% royalties reward multiples (like the multiple of care packages). Of course, this is based on high expectations for the value of $Blur.
In December, Blur implemented a minimum 0.5% royalty setting on the existing NFT series, and matched the price matching strategy, that is, if a low-royalty market obtains a market share exceeding a certain threshold (single series dimension), the platform will automatically increase its price until the low-royalty market raises its royalty design. It's a bit like regulating through the visible hand in order to achieve the optimal outcome of game theory.
In addition, is there a plan to achieve a win-win situation for the platform, users, and creators? For example, users who trade on a certain platform and pay full royalties for NFT can accumulate some kind of points, and the points can later enjoy part of the income of the platform, that is, the payment of royalties becomes an early investment in exchange for long-term dividend expectations. For the platform, it can indirectly exchange for the creator's stickiness through the share incentive. The connection with high-quality creators and the reciprocal mechanism design are conducive to the long-term healthy development of the platform.
4.3 The evolution of incentive rules
The characteristic of the platform lies in the evolution of its ecology, and its development focus and incentive behavior will change in different periods. For example, with the iteration of NFT, the majority of NFT assets in the future may not be PFP, but gamefi or RWA-related assets. If Blur wants to continue to take the lead in the changing industry, it must adapt to the new mainstream assets, and its incentive objects may have a greater adjustment.
How to adjust the incentive rules in a timely manner and balance the interests of new and old users is the key here. This also means that incentive design needs to be moderate. If it is excessive, that is, if too much right to speak ($Blur token) is handed over to a certain group in advance, then they, as vested interests, may not continue to contribute to the development of the Blur ecological network, but they also hold the right to distribute benefits, and the incentives for subsequent contributors may not be enough. If a whale grabs a huge amount of $Blur tokens, its role in the ecology is too heavy, and if it stands on the opposite side of the platform, the platform will be very passive. It is easy to take strong medicine, but difficult to take it back. In order for tokens to continue to play a positive role in the development of the platform, it is necessary to roughly plan the incentive distribution. Continuous and occasional outbreaks may be the best rhythm, which is also the benefit of the season system, so as to continuously increase the value of the network. At present, 51% of the tokens used by Blur for community rewards, in addition to the ones to be distributed in the second quarter, still have 870 million. If you plan well, there are still several large incentives and AirDrop.
From this perspective, we look at the undecided duration of the second season. If it is intentional, it is likely that the platform is fine-tuning its incentives. Although there will be a certain loss of users and pain, users who can accept the current rules will also be screened and retained. With Blur's current leading position, the departure of large individual investors will not have a subversive impact on the basic market. Even in the long run, it helps to precipitate a more reasonable and better token holder structure.
Blur's achievements so far fully demonstrate the deep integration of tokens and protocols, which can play a huge role in overall growth. Its multi-stage and refined AirDrop method also makes us re-examine the possibility of AirDrop. AirDrop is not just a one-time distribution of tokens, and its role is not limited to attracting new users. It can fully cooperate with the product and operation rhythm, guide users to reach the North Star indicator at the current stage, and reward users who are truly active and make continuous contributions to network growth. It can be said that the success of Blur is the success of Tokenomics to Web2, and the success of the AirDrop model to traditional TGE. Ultimately, what we hope to achieve is that such an incentive and ownership system can be reflected in the longer-term high-quality development of the protocol and better retention of users.
5. Reference
https://docs.blur.foundation/tokenomics
https://twitter.com/flyingmountain0/status/1583696150472728576
https://www.youtube.com/watch?v=eJg_NeXMS3o
https://www.theblockbeats.info/news/36962
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