NFTGo | NFT Trading Platform: Blue Ocean or Red Ocean Market?
This article is authorized to be reprinted from NFTGo
Table of Contents
Key Takeaway
- The Blue Ocean market is a new and high-profit market with no vicious competition; while the Red Ocean market is a known and fiercely competitive market with higher barriers and strict industry competition rules.
- Between markets of different sizes and types, some markets can bring innovative value to both parties, while others simply replicate revenue models from other markets.
- Some token-based platforms provide new value to users through incentive designs, such as LooksRare and Magic Eden.
- As of May 16, 2022, Magic Eden, abbreviated as ME, had a daily trading volume of $47.22 million, while OpenSea, abbreviated as OS, had a trading volume of $32.88 million, with a trend of surpassing OS in daily active users.
- With OpenSea adding support for Solana, cross-chain and all-chain NFT markets may be one of the future trends. According to Magic Eden's data, the sales of Solana NFTs on OpenSea account for approximately 9% since Magic Eden's launch.
- As the NFT secondary market and derivative trading mature, the NFT trading market needs to rethink the ways and user experiences of NFT index trading, fractional trading, and derivative trading.
The Blue Ocean Strategy concept was first proposed by W. Chan Kim and Renée Mauborgne, which refers to companies proactively exploring new and uncontested markets. This strategy does not focus on segmenting markets or satisfying user preferences, but rather changes the industry, resets the rules of the game, integrates segmented markets, and integrates demand to achieve value innovation. In contrast, the Red Ocean is a market where everyone is a competitor, and there are strict barriers between markets.
The early NFT market was a Blue Ocean market. With the launch of the NFT trading platform OpenSea, the NFT market rapidly expanded like mushrooms after rain. Initially, OpenSea had no competitors in the entire NFT trading field, but with the entry of new trading platforms such as SuperRare and Nifty Gateway, the competition officially began.
In recent months, new trading platforms like X2Y2, LooksRare, and Coinbase NFT have emerged continuously, and the secondary market is gradually becoming saturated. This leads to what we mentioned earlier—the Red Ocean: a crowded market with a lack of growth momentum, continuously decreasing profit margins, eventually leading to intense competition. In other words, the Red Ocean signifies a battle of interest among project parties. With many competitors and limited resources, driving innovation and finding the right market positioning will be the key to success.
Market Value
As emerging competitors enter the market, many project parties are seeking value innovation and exploring development models for open-source and cost-saving. Existing markets have clear boundaries, and markets emerge to meet the specific needs of users. For example, some investors prefer niche NFTs with artistic value and 1/1 art pieces, and platforms like Foundation or Nifty Gateway that sell unique NFT works cater to this user segment.
Despite the multitude of platforms offering NFT trading services, project parties are still striving to provide users with new interactive experiences. A recent example is the newly launched Coinbase NFT, which added social features to its existing trading website, allowing users to leave comments within the NFT interface and share experiences related to NFT investments.
Through the Pioneer Migrator Map, we can easily distinguish which websites are creating value for users and improving user experiences, and which websites may simply be replicating existing operational models.
There are many platforms providing NFT trading services, but these platforms' overall operational strategies tend to converge. We can use the Market Evaluation chart to measure the core competitiveness of different platforms. The y-axis represents the performance of each platform on different competitive factors. In addition to the indicators shown on the chart, we have added indicators such as "Cost Structure," "Multi-Chain Aggregation," and "Complex Operations." The higher the score on the y-axis, the more value the platform brings to both parties, and conversely, the lower the score, the less value it creates.
While users enjoy similar services across different platforms, OpenSea remains undoubtedly the top project. With more and more trading platforms being launched, it is foreseeable that the data lines on the Market Value Evaluation Chart in the coming years will become more dense. Creating new value from NFT trading today will also be a question that platform developers need to consider.
Who Leads the Pack?
Creating value is the key factor for trading platforms to win in long-term competition. Marketplaces Total Sales and the Market Value Evaluation Chart are crucial indicators for measuring value, as the more value a platform provides to users, the higher the transaction volume achieved through that platform. In the following chart, we can see the total sales data of the top 5 trading platforms (LooksRare data excludes "wash trading" and "highest sales").
After its launch, LooksRare quickly gained a significant market share due to the new value it brought to users, becoming the second-largest NFT trading platform on Ethereum.
Away from the behemoth that is OpenSea, it is evident that due to the similar services provided by Rarible, Foundation, and SuperRare, the competition between platforms is more intense.
LooksRare has brought new product value to users and is the platform with the highest market share among the four trading platforms, excluding OpenSea.
Token-Driven Market Model
OpenSea has earned substantial revenue through high transaction fees and service fees, but has not reciprocated these earnings to users. It is noteworthy that Magic Eden has already shown a trend surpassing OpenSea in terms of daily active users.
Both LooksRare and Rarible have issued tokens LOOKS and RARI, respectively, to a certain extent binding the platform with user benefits. For example, users can earn a share of transaction fees by staking LOOKS; the more they stake and the more active the platform's trading, the more rewards in WETH they can receive. The introduction of tokens allows users and platforms to grow together. In the Web3 era where communities are prioritized, how to integrate user benefits into the platform is a crucial consideration for major NFT markets.
Yuga Labs: The Next Trading Platform?
Imagine an NFT trading market without the following 6 Collections:
- Bored Ape Kennel Club
- Bored Ape Yacht Club
- Mutant Ape Yacht Club
- Otherdeed
- CryptoPunks
- Meebits
Yuga Labs' ambition extends beyond MetaRGP games and PFP. As a top competitor in the NFT market, the projects it has released have gained widespread trust and support from the public. Moreover, these projects have achieved long-term growth in transaction volume and value. The launch of the APE token was a crucial step in Yuga Labs' success. Currently, Yuga Labs has a total market value of $40.3 billion, compared to LooksRare's market value of $4.41 billion. The potential market size of Yuga Labs may rank second among all Ethereum trading platforms.
All Time Volume calculates the total trading volume in US dollars since each Collection was released.
From the Top Marketplaces statistics chart, we can see that although Yuga Labs has just completed one year of development, it is already a strong competitor compared to other trading platforms.
Based on the data analysis above, it is clear that Yuga Labs has capitalized on the top traffic in the NFT market and through growth models like airdrops, whitelists, has brought significant returns to NFT holders, empowering future product models in a "bottom-up" fashion.
Conclusion
With a decrease in market trading volume and overall liquidity, the market's instability is prompting people to invest in more stable blue-chip NFT assets. Ethereum remains dominant due to top projects, with single transaction amounts consistently ranking first. However, NFT markets on other chains exhibit a trend of small transactions in large quantities. Multi-chain markets can bring more liquidity to the market dominated by blue chips, driving innovation and growth.
Additionally, platforms need more original activities to attract users. For example, the newly launched market Blur has achieved some success in marketing strategy formulation. The platform has established a preferential model for early investors and allowed each OG to invite 5 friends to experience the platform's beta version, earning points for using the beta version to redeem practical tools within the platform. The success of Blur's marketing strategy lies in transforming users into platform advocates, having them speak for the platform and attract other NFT investors.
In the fierce Red Ocean competition, users are always the beneficiaries. However, in the competitive Red Ocean, the boundaries between NFT trading platforms are becoming clearer, and the trading models of Web3 platforms will change imperceptibly. Traffic, discourse, and community will also be the propositions that NFT trading markets need to continuously focus on.