Data reveals rampant wash trading on LooksRare as users try to boost their trading volume to earn rewards.
Top Non-fungible Token (NFT) marketplace, OpenSea seems to have a formidable rival in LooksRare. The new platform was launched in January 2021 with the goal of outperforming its more illustrious competitor while addressing its shortcomings.
So far, LooksRare appears to be off to a good start, even surpassing OpenSea’s trade volume on certain occasions. However, a closer look at the trading volume and daily users reveal rampant wash trades that have boosted the platform’s metrics.
Source: Arcane Research
Incentives On LooksRare Fuels Wash Trade
Despite OpenSea having 350% more daily users and 325% more transactions, LooksRare has managed to outpace it in terms of volume. According to Dunanalytics, LooksRare has less than 32,000 users and about 45,000 transactions. OpenSea, on the other hand, boasts over 500,000 users and over 3.1 million transactions recorded.
Since its launch, the new marketplace has recorded a trading volume of about $4 billion. Despite the small number of users, this output is a result of rewards given for using the platform.
Firstly, at its launch, LooksRare distributed its native token, LOOKS to eligible users in a vampire airdrop. OpenSea traders who traded at least 3 ETH worth of NFTs met this criterion and received the tokens. This caused the volume to spike just immediately after its launch.
Secondly, LooksRare rewards users for interacting on the platform, unlike OpenSea. Despite charging the same 2% of the transaction fee, LooksRare passes this chargeback to its users in the form of LOOKS and encourages them to stake it to earn even more rewards.
Consequently, some users on the platform have taken to wash trading to boost their trading volumes and increase their earnings. This act entails performing a transaction where the seller is on both sides of the deal to present a false impression of an asset’s value and liquidity.
A Chainalysis report in which the company tracked several NFT transactions and address reveals traders conducted hundreds of wash trades. The investigation followed 262 users who sold an NFT to a self-financed address more than 25 times.
Source: Chainalysis
Although most of the wash trades were unprofitable, the successful ones more than made up for the loss. The 110 profitable wash traders made over $8.9 million from this activity, dwarfing the 152 traders that lost $416,984.
Also, NFTs, which do not generate royalty fees when sold on OpenSea or other secondary marketplaces, account for most wash trades. A CryptoSlam analysis revealed wash trades brought in $4.4 billion for Meebits, $2.9 billion for Terraforms, $7.05 million for Loot, and $251 million for CryptoPhunks.
NFTs Flip Crypto
According to Google Trends data, search Trends for NFTs has surpassed Crypto for the first time. NFTs have continued to garner interest despite the general slump seen in the market.
Source: Google Trends
The increase in awareness has been boosted by several celebrities announcing NFT collections or even purchasing NFTs. Justin Beiber, John Legend, Kevin Hart, Tom Brady, Neymar, Robert Downey Junior are some of the famous names recently involved in NFTs.
Institutional investors are not also left out. Several companies including, Immutable X, are making concerted efforts to create an NFT marketplace. With OpenSea as the dominant force in the space, these companies would be hoping to slice off a decent share for themselves. This further reaffirms the bullishness of institutional investors in the sector.
Do you think LookRare will eventually get a decent slice of OpenSea’s marketplace dominance? Let us know your thoughts in the comments below.
Chris is a crypto enthusiast and a firm believer in the blockchain’s ability to create a new financial paradigm. Through writing, Chris hopes to expose the intricacies of this disruptive technology and how it is beneficial to Africans and developing countries. He aims to give readers a rational and unbiased outlook of the industry by equipping them with the necessary information to make enlightened investment decisions.
