Research on the survival status of NFT trading platforms (2) The end of transaction mining

Wu said the author | nobody (Twitter: @defioasis)

Editor of this issue | Colin Wu

Disclosure: As an individual investor, the author holds NFT platform tokens and other related assets, and has no interests with any platform or project party.

This article is the second part of a study on the survival status of NFT trading platforms. It explores transaction mining platformsLooksRare 和 X2Y2The plight and the end of the game are still lying flat and stiff on the scalp.

LooksRare and X2Y2 are representatives of the transaction mining model, the earliest practitioners, and continue to this day. A notable feature of transaction mining platforms is that the unit price for each transaction is extremely high. In a bear market, this characteristic is also profoundly reflected in a very small number of users, yet it supports a huge trading volume on the platform. @SeaLaunch_ data shows that for a period of time in April, LooksRare's average transaction volume could once exceed 100 ETH. Even under normal circumstances, the average transaction amount of LooksRare and X2Y2 was between 20-30 ETH, which is almostOpenSea40-60 times.

Data sources:https://dune.com/sealaunch/NFT?undefined=&Select+Timeframe_ef4aff=365+days

The core logic of transaction mining is uncomplicated, that is, 100% of the platform fees paid for each exchange are captured by token stakers. Generally speaking, the team/foundation or treasury will keep a portion of the token to be used to pledge shared platform fees to support the development of the agreement. Theoretically, the larger the transaction volume created by the platform, the more tokens users pledge, the more platform fees they absorb, and the more fee rewards they capture. Therefore, transaction mining can easily form a positive driver in the early stages of development from 0 to 1. The increase in transaction volume brings about an increase in platform fees. Platform fees are captured by pledgers, the APY of pledge income increases, token prices rise, and the potential reward value of transaction mining rises, attracting more users to trade and mine. However, along with multiple factors such as the slump in the general environment, the emergence of competitors, changes in market share, and reduction in token production, this transaction mining model can easily turn around to bring a negative spiral to Token.

Wash-trade, which is trading mining, is not as complicated as Blur; mostly large players go back and forth between several wallets they control. As long as the subsidized tokens cover the pre-paid platform fees, then it is profitable. Furthermore, the subsidy is settled on a daily basis, and there is almost no excessive loyalty after receiving the token. Once you get it, sell it first to recover the costs you have paid, and then measure whether to continue selling the profit or pledge it again. The @hildobby_ data panel shows that in the weekly trading volume last week (4.10-4.16), LooksRare's cumulative trading volume was $47,903,449, with wash-trade accounting for 45.6%; X2Y2's cumulative trading volume was $36,039,982, and wash-trade accounted for 69.6%. This wash-trade-based transaction mining activity has brought continued selling pressure on the platform Token amid sluggish demand in the bear market. LOOKS and X2Y2 have performed unspeakably over a long period of time, especially for X2Y2, which lacks market makers.

Data sources:https://dune.com/hildobby/nfts-wash-trading

Token prices have declined without support for a long time, bringing a lot of negative sentiment and FUD to the community. This is particularly evident in communities with Chinese people as the main position. However, even if it falls, unless the project side reinvents token economics, it will be difficult to immediately abandon this transaction mining model in the short term, because the project side's revenue source is almost entirely dependent on the costs of captured tokens that have been retained. Therefore, if you fail to reshape the utility of tokens in terms of token economics and blindly cancel transaction mining, it is certainly cutting off your own revenue stream.

However, as more tokens are produced and distributed to the market, the more difficult it is to revise token economics. According to Token Unlock data, LOOKS currently has 81.35% in circulation and is expected to be fully produced on March 1, 2024; X2Y2 is 72.17% in circulation and is expected to be fully produced on April 3, 2024. With less than a year left in output, that is, there is less than a year of incentives for mining, and with production reduction rewards constantly decreasing, the two major exchanges that focus on trading mining urgently need to find new survival opportunities and development directions to regain market share.

In a situation of internal and external worries, the two may be on a different path. X2Y2 is rethinking its market positioning, moving from a single spot trading platform to an all-financial ecosystem based on NFTs. X2Y2 Loan is the first step and an important layout in NFTFI. Currently, in the field of NFT lending, X2Y2 Loan accounts for about 10%-15% of the market share. The second step is to expand allies and expand the ecosystem with X2Y2 as the core. Dew, a Polygon-based transaction aggregator for NFT traders, is the first partner, and it is expected that more partners representing a segment of the NFT circuit will join in the future. NFT futures contract trading may also be introduced in the future. However, there is a lack of communication with community users, and users may not be able to understand this shift in strategic thinking, leading to a large number of community FUD which the X2Y2 team urgently needs to reverse.

Data sources:https://dune.com/yaloong/x2y2-loan

LooksRare is different; it's still more specific to the platform itself. It's in a better position than X2Y2 at this stage, so it's also relatively flat. This is primarily due to LooksRare's long-standing commitment toDeFiThe OG user base is well-maintained, as can be seen from BitMEX CEO Arthur Hayes's frequent blog posts, deliberately or unwittingly calling for orders. Also, in the author's opinion, in the royalty war, LooksRare kept a relatively low profile, preserved its strength very well, and did not lose much user favor. Here's a profound example. When Blur released an airdrop and posted a blog post officially declaring war on OpenSea, X2Y2 untimely intervention made it an object of ridicule. This was supposed to beBlurThe head-to-head confrontation with OpenSea made users choose one of the two, and there was no direct collision with other platforms. However, at this point, X2Y2 suddenly stuck in and said, “They can choose neither of them, choose me.” Blur dares to argue at this point because most of the core data layers are close to or surpass OpenSea, and the core users are inseparable to some extent, so they have the power to challenge. However, transaction mining was already in decline at the time, and all data was far behind. Frankly speaking, X2Y2 wasn't on the same level as Blur and OpenSea back then. Inclear market positioning and blind intervention have had negative effects. LooksRare did a better job of “watching” and choosing, and was certainly right that it didn't participate in the final battle between Blur and OpenSea. Later, LooksRare and Blur jointly announced that they would not display third-party platform tags (including OpenSea blacklist tags) in the UI by default, which attracted the favor of many users. Today, LooksRare has also followed OpenSea to develop an app, and a transaction aggregator similar to Blur is also in closed beta.