Deception in Web3: How Blur’s NFT Marketplace Reveals Ethical Concerns Regarding Transparency
Blur, a NFT Marketplace, has misinformed users to prioritize profits and onboard users. Imagine being promised rewards for your use and loyalty to a digital marketplace, only to discover at the very end you’re not eligible to claim these rewards because of your location. For anyone who was a United States trader using the marketplace, this was the case. Seeing many U.S. traders confused and feeling scammed, including myself, revealed ethical concerns involving transparency. I researched more on the matter and noticed many other details left in the dark involving Blurs roadmap to the top.
On February 14th, 2023, Blur released its token through an airdrop process, leaving traders from the United States very confused when they received a message displaying “Not Available In Your Location”. It was discovered that it was specifically traders in the U.S. who could not claim the airdrop when people outside the U.S. started to post on twitter the box they had to check at the very end of the process: “I certify I am not a U.S. Person”. I was surprised this was the reason, for I had not seen any information stating there were restrictions. Maybe I missed something? Then I thought about how I ended up here…
For those new to NFT’s, I’ll start with an analogy, where NFT’s are clothing, and Blur, the NFT marketplace is a new clothing business that has opened up many stores around the world. Imagine this new business in your area reaches out to you, they sell all brands of clothing. They entice you by mailing you multiple rewards that state “redeemable in the near future” for all the clothes you’ve bought from other clothing stores prior to their opening. They mention they will give additional benefits based on how many people you invite, if you shop at their store before the rewards are available, and are given a loyalty score, which stays at 100% if you only shop for clothing there. Not only do you stop shopping at other clothing stores, you spend more money than you would have on clothes because you know you’ll be getting a decent amount back on the large amount of rewards they gave you for free. The time comes and they announce you can now redeem your rewards, only to find out these rewards cannot be claimed in your area. Not even stated in the fine print. Not a great feeling.
In October, digital “care packages” were given out to any who traded Ethereum NFTs in the last six months, including U.S. traders. The platform encouraged “all” traders with more rewards when using their marketplace. Profiting and on-boarding more users by “word of mouth” with no disclosure about United States traders not being able to claim these rewards when the time came. Even at the time of claim, through the process nowhere does it state that U.S. citizens are not allowed to claim. Blurs main tools of engagement were Twitter and Discord. Using vague language such as “all traders across all marketplaces”, “everyone”, and letting U.S. users participate in airdrops. Blur’s cryptocurrency after months of earning rewards was finally announced, “all” traders could now claim their BLUR tokens as of Feb 14th. On release date at 1:40pm EST, I rushed to claim my tokens fast to avoid high fees from transaction cost on the blockchain, hoping to sell right away speculating that the price of Blur would go down since most viewed it as “free” money, I ended up on the refresh page and decided to check out discord and twitter for more information. Many others were confused also, thinking the website crashed from too many people trying to claim on their site. They mention: “If you’re using a VPN, try disabling it.” In the case you were using a VPN, you bypass the geoblocking and continue through the steps, in the end coming to the most clear message they were not allowing U.S citizens to claim. This was quite amusing, leading to many Twitter users tweeting “In the event of an investigation by and federal entity or other government agency, I did not claim any Blur tokens….”, “It’s hilarious and ridiculous to me that blur blocked claim for their token in the US without really saying anything about it before hand.”
There has to be information stating United States traders could not claim the airdrop somewhere right? The further I searched, the more concerned I became with the Marketplace as a whole. The Blur Foundation website shares information such as governance, tokenomics, analytics, and other important documentation. It’s been a month since the airdrop, and Blur has not clarified why U.S. traders were not allowed to collect. I noticed in their disclaimer it states, “You assume all risks associated with using the Site, and digital assets and decentralized systems generally, including but not limited to, that: ( c ) you may not have access to digital assets” and “You agree that you will have no recourse against anyone else for any losses due to the use of the Site. For example, these losses may arise from or relate to: (iv) unauthorized access”. These were the only things I found related to the drop, mainly ways they protect themselves, rather than specific information on the situation.
Blur has scaled quickly as a NFT Marketplace that just launched October 2022. Over the last couple months, Blur has made its way to the top in trading volume and twitter engagement, leaving other NFT marketplaces such as OpenSea to reconsider their strategies. A big factor in their success is through misinformation and anonymity, using twitter as their main source of engagement. There was an article I read, Media Manipulation, “defining media manipulation as the socio-technical process”. This stuck out to me because, to my understanding, Blur fits in the category of a socio-technical system. Blur used a combination of social and technical elements to become such a success in Web3. The social aspect of this was through misinformation and lack of transparency, their tactics involved withholding crucial information. The manipulation of information affected the social dynamics of the platform, before and after, putting it at the top before it led to mistrust and frustration among its traders. Media manipulation was leveraged to disseminate vague and misleading messages, creating hype and engagement while leaving out critical information. This manipulation influenced the social interactions and perceptions of the platform and its offerings. Blur has many well known influencers and investors in the Twitter space, adding more hype to the exciting parts of Blur and disregarding the negatives. On the technical side, the airdrops and token distribution adds more to the confusion and frustration I and others experienced. Geoblocking and VPN usage adds to the social issue of traders feeling misled. Also sharing that U.S. citizens could claim the airdrop unethically using a VPN, lowering the number of people upset and also keeping Blur out of legal concerns. One tweet relating to this had over 72,000 views.
The release of the $Blur token which was partially distributed through the airdrop, acts as a governance token. Blur’s DAO (Decentralized Autonomous Organization) now expands its entity to traders as part of the Committee, allowing them to govern certain activities of the DAO. With many people focused on “farming” token rewards, it seems most people have ignored the fact that Blur’s recent changes to the marketplace have created a new form of wash trading lowering their royalties to 0%. It is hard to prove this form of wash trading, in my opinion, it is certain. Not only did they lower their royalties to 0% but the royalties/commission artist set for their work. Artists are no longer getting their cut when traders buy and sell their work. Betty, a well known artist in the NFT space for her DeadFellaz collection, speaks up about the issue.
My speculation from what I gathered: Crypto airdrops in the United States is a complex issue, I believe Blur did not want to draw attention in terms of laws and regulations. The Securities and Exchange Commission (SEC) has been more active in the space, witnessing many signs of misconduct. I’m not sure how Blur is profiting with 0% royalties, nor is there much transparency in how they operate. To me they are focused on keeping the dopamine levels high and trying to avoid self blame by leveraging users. An article titled “Fake news. It’s complicated.” gives great examples of types of Mis- and Disinformation that make connections to Blurs tactics in the space. I view it as the check-mark correlated with Profit and False Connection in the Misinformation Matrix (image shown below), the only foreseeable benefit from their tactics is to have dominance in marketshare and engagement to attract funding from Venture Capitalists. Harming most traders with manipulated markets and possible legality concerns, impacting artist’s negatively rather than empowering the value of their work, along with other questionable actions all together.
My experience with Blur’s NFT marketplace and the ethical concerns around the Web3 business are shared with many others on Twitter who expressed their frustration and disappointment. The platform’s failure to communicate effectively with its users about these restrictions damaged its reputation and may have lost many potential customers. Let this be the example for new businesses building in Web3 that transparency and honesty are key to building a loyal and engaged user base, and any attempts to mislead or deceive users are likely to backfire at some point.
