Ethereum validators are benefiting from the increasingly fierce competition between the two largest NFT marketplaces, OpenSea and Blur, which is driving up gas rates.
However, the windfall may not last long. Below are the details.
Competition in the NFT marketplace between OpenSea and Blur
Ethereum’s validator nodes, no longer miners after the “Merge” in September, are benefiting from the intense competition between non-fungible token (NFT) marketplaces Blur and OpenSea, which has increased transaction fees, aka gas, on the network.
Ethereum’s gas fees, which typically rise when there is increased demand for network blockspace, have increased since the beginning of the year, with recent spikes driven primarily by the NFT market, according to data from on-chain data firm Glassnode.
In fact, Ethereum validators earn rewards through gas rates by staking their Ether to protect the network. As a result, average transaction gas prices were 35 Gwei (a denomination of ETH) on Monday and exceeded 38 Gwei on 16 February.
In other words, Glassnode data showed the highest value since June 2022. Yehudah Petscher, Cryptoslam NFT relationship strategist at Forkast Labs, said the following on the matter:
“Miners are the clear winners right now, as they are processing this massive surge in Ethereum transactions. You remember this every time you make a transaction, whether it’s sending some ETH between wallets or buying an NFT. That little warning pops up in the MetaMask and tells you the network is busy and you can’t help but think how well the miners are doing.”
Why did competition arise between the OpenSea and Blur NFT marketplaces?
The Blur NFT marketplace, launched in October, has gained traction because it does not charge transaction fees for users and recommends a low royalty rate for NFT creators.
The moves were seen as a clear challenge to NFT marketplace leader OpenSea, which responded by cutting its fees for popular NFT collections to zero while losing ground to Blur.
Glassnode analyst Alice Kohn wrote in a report last week that the market’s recent focus on Blur has led to increased demand for blockspace, resulting in higher fees for validators.
In the past seven days, the Blur NFT market has recorded a trading volume of $410.93 million, more than seven times higher than OpenSea’s $52.4 million, according to data from DappRadar.
Elsa Kong, head of research at Singapore-based NFT data company NFTGo, told Forkast that the high gas fees caused by the airdrop of the Blur token can be seen as beneficial for Ethereum validators in the short term.
Although, it would probably not bring any major changes in the long run.
Kong said it is not entirely fair to call Ethereum miners the “winners” in this situation, as the success of the Ethereum network depends on a variety of factors, including user adoption, network security and developer activity.
In fact, Kong stated:
“It is important to note that the Blur token airdrop is not directly related to Ethereum miners, as miners are more concerned with upgrading Ethereum such as going from proof-of-work to proof-of-stake.”
Nick Ruck’s comment on the NFT conflict
Nick Ruck, chief strategy officer of intellectual property licensing firm NFT ContentFi, said smaller stakers may not see a big difference in their earnings.
He added, further, that he has been an active Ether staker since November:
“Of course, the higher gas rates aren’t great for everyday users, but you still get more commissions for stakers. Personally, the higher gas fees from my day trading aren’t offset by the increased fees I earn, but I’m also not betting much compared to a larger staking-as-a-service firm.”
In other words, in Ruck’s view, for most people who stake in pools, they might not see a big difference since they are sharing in portions.
Ruck said there is a lot of maintenance that goes into validation. Hence, the more industrialized the configuration, the more will be gained simply through increased efficiency. If you do it at home, you will be penalized for going offline, for example.
Ruck agreed that validators will not be long-term beneficiaries of Blur and OpenSea’s struggle for dominance, simply because he thinks it will be short-lived. Finally, Ruck concluded:
“For now, they can earn more, but I think it’s too temporary. How long can Blur and OpenSea go without earning those commissions or earning only minimally compared to before?”
Glassnode’s Kohn wrote that the recent buzz surrounding Blur has not yet had an appreciable impact on network adoption.
Kohn said that Blur and OpenSea may be fighting over the same pre-existing user base, as the latest interest in NFTs seems to attract mainly existing users and are not yet able to attract new users to the Ethereum network.
OpenSea and Blur rivalry: the rise of NFT sales
Global sales of non-fungible tokens (NFTs) increased 159% in the seven days from 17 to 23 February, with the increase in rewards from the NFT Blur market appearing to continue to drive most of the action across the industry.
Total weekly NFT sales increased to $772 million over the seven days from $299 million the previous week, according to data from NFT aggregation site CryptoSlam.
The average price of assets sold Tuesday rose to $566.43, more than three times higher than the $175.57 on 14 Feb. Yehudah Petscher, NFT relationship strategist at Cryptoslam, said:
“Blur Rewards are still driving most of the action in the NFT space as Blur farming season 2 is now open.”
On 14 February, Blur released and distributed its Blur tokens. On Wednesday, it will distribute another 300 million BLUR tokens. The cryptocurrency was trading at $0.94 as of 3 PM. Friday in Hong Kong, according to CoinMarketCap data.
In addition, in the past seven days, the NFT Blur marketplace has recorded a trading volume of $652.28 million, more than four times the $150.66 million of market leader OpenSea, according to data from DappRadar.
