LooksRare’s trading volume exceeded $8 billion today. It’s safe to say that OpenSea’s competitor has been highly successful after only a few weeks in the game. However, many in the NFT space are concerned that LooksRare’s volume is only increasing due to wash trading.
What is LooksRare?
LooksRare is a peer-to-peer NFT marketplace that’s community-driven. One of its unique selling points is its LOOKS token. This is rewarded to users who buy and sell NFTs from eligible collections.
Users who stake LOOK get 100% of the platform transaction fees. Additionally, creators who sell items on LooksRare get royalty payments in LOOKS tokens.
Upon its launch, LooksRare targeted OpenSea users who were active between June 16th and December 16th, 2021 by airdropping LOOKS tokens to 185,000 wallets.
LooksRare’s wash trading controversy
The daily US trading volumes of LooksRare greatly exceed those of OpenSea. However – many are questioning how the nascent marketplace is managing to do that, considering that it only has a small fraction of the number of daily users that OpenSea has.
The answer probably lies in the fact that users who trade NFTs on LooksRare earn LOOKS tokens as rewards. Buyers and sellers can therefore earn a lot of tokens by simply generating volume.
Wash trading indicators
It’s safe to say that this system is rife with wash trading; an illegal type of trading where users sell and buy NFTs to themselves, creating artificial interest in an investment.
Another indicator of wash trading is that the majority of LooksRare’s sales volume is driven by zero royalty NFTs. Verified creators get LOOKS tokens through secondary sales of their work. However, with zero royalty NFTs, the original creator doesn’t get any rewards from secondary sales.
LooksRare is trying to mitigate wash trading. In fact, the team insisted that: “The trading rewards system has been designed and iterated upon to heavily dissuade users from trading for the sole purpose of farming LOOKS rewards.”
LOOKS holders are earning staking rewards
Despite the controversy, LooksRare’s high trading volume has made the platform popular – and users are raking in the rewards. LOOKS token holders can stake the tokens and earn rewards in wrapped ETH, with a current annual percentage rate of over 500%. On January 29th, the platform distributed 3,419 $WETH ($8.7M) in rewards and a day earlier expanded its trading rewards to all NFT collections.