LooksRare is the 2nd largest NFT marketplace by volume. Although 95% of its trading volume is coming from users selling and buying their own NFTs.
LooksRare was launched on January 10th this year, within that time frame it has amassed over $22.5 billion in sales over 109,000 transactions according to Dune Analytics.
NFT analytics site CryptoSlam! reported in January that over $8 billion worth of NFT sales can be classified under wash trading. Since then, around 95% of sales on the site, or around $20B can be linked to wash trading.
LooksRare was launched by two anonymous developers, Zodd and Guts, in January of 2022. Since its launch, LooksRare has grown to become the biggest alternative to the leading NFT marketplace, OpenSea. Despite the decline in NFT sales this year, users are still finding ways to make a quick profit, ethical or not.
LooksRare Intentional Setup Of Wash Trading
LooksRare came up with a genius trading rewards model to help grow their site. LooksRare will offer token rewards in LooksRare Token ($LOOKS) to users who buy and sell on their platform.
With this users can cheat the system. NFTs can be wash traded where the prices of the NFT would be inflated to the point that the $LOOKS reward would be enough to cover the Ethereum gas fees and LooksRare’s 2% marketplace fee. With this fact, LooksRare also provides staking rewards for users who stake $LOOKS on the platform, paid out in Wrapped Ethereum ($WETH), this is an even larger reason for users to keep using the site.
LooksRare is aware of the fact this is happening. They retweeted a tweet that called these tactics “genius” back near their launch in January, they also did not institute any methods at their launch to deter users from buying and selling their own NFTs at inflated prices.
“It seems that organic trading is indeed increasing in LooksRare. The difference between selling expensive NFTs like BAYC on LooksRare rather than OpenSea can become a 1-2 Ether difference that the seller saves. So it appears that the NFT community is slowly adopting other options outside the incumbent.”
Pedro Herrera, Senior Data Analyst at DappRadar.
Although this success may not be long-lived. Wash trading in other markets is considered an illegal act. Chainalysis made a point of this in a report and recommends LooksRare to discourage the activity of wash trading. As regulators start taking closer looks into markets, these moves which seem fine now may eventually come back to hit the users even harder.
