- Launched in January by two anonymous co-founders, who go by the nom de guerre Zodd and Guts, LooksRare was intended as an alternative to leading NFT marketplace OpenSea, at the height of the NFT boom.
- But the only “alternative” that LooksRare is offering is a different platform for wash trading as about 95% of the US$18 billion of trading volume according to CryptoSlam is from NFT owners trading with themselves.
In traditional financial markets, rules exist to protect investors from market manipulation through self-dealing, but in the world of cryptocurrencies, no such rules exist. These are their stories. (Cue Law & Order “dum dum” sound).
To understand how “crypto bros” can make an NFT or non-fungible token look a lot rarer and more actively traded than it actually is, take a look at the aptly named “LooksRare” platform that has quickly become the leading NFT marketplace by trading volume.
LooksRare is aptly named because many of the NFTs being traded on its platform really just look rare, because a closer examination of blockchain activity reveals that most of the trading activity is actually from users selling the tokens to themselves to earn rewards in the form of more LooksRare tokens.
Launched in January by two anonymous co-founders, who go by the nom de guerre Zodd and Guts, LooksRare was intended as an alternative to leading NFT marketplace OpenSea, at the height of the NFT boom.
But the only “alternative” that LooksRare is offering is a different platform for wash trading as about 95% of the US$18 billion of trading volume according to CryptoSlam is from NFT owners trading with themselves.
These wash trades serve several purposes, LooksRare incentivizes NFT owners to trade with themselves and receive tokens in return, while the platform receives fees generated by each transaction.
In return, LooksRare gets a lot more trading volume than actually occurs.
The side effect of all of this is that LooksRare is masking a rapidly cooling NFT market.
Total sales on OpenSea have declined every month since January, according to data from Dune Analytics and the site’s sales volume is down 67% in the last 30 days according to data from DappRadar.
To be fair, earning tokens for performing tasks is not new and is one of the prominent aspects of DeFi, where the provision of liquidity is rewarded with platform tokens.
But the introduction of token incentives into NFTs is a relatively new invention, with Rarible among those NFT platforms to pioneer the concept last year.
Unlike traditional financial assets such as stocks and bonds, wash trading is not illegal in the cryptocurrency markets, but if it becomes a persistent enough problem, could invite greater scrutiny from regulators.
For now, LooksRare really is just that, something that looks rare.
