Since LooksRare quickly positioned itself as OpenSea’s biggest rival after launching just three weeks ago, questions have been asked about the platform’s trading figures.
Users have been buying and selling non-fungible tokens (NFTs) between wallets they control in an effort to manipulate daily rewards, a practice known as wash trading.
LooksRare Generates $8.3 Billion Volume in Three Weeks
NFT analytics firm CryptoSlam has now reported the extent of the practice, noting that LooksRare has generated more than US$8.3 billion since launching on January 9, the vast majority of that volume in wash trading. Although the full extent is yet to be officially confirmed, initial estimates are extraordinarily high:
Most of it appears to derive from royalty-free collections, which means sellers don’t have to pay creators a secondary sale fee. Larva Labs’ Meebits tops the wash-trading list with US$4.4 billion, followed by Terraforms (US$2.9 billion), Loot (US$705 million), and CryptoPunks derivative CryptoPhunks (US$251m), with another $US62m attributed to other projects.
Why Users Are Selling NFTs at Vastly Inflated Prices
Users who buy and sell NFTs on the LooksRare site are offered a percentage of the day’s total sales via the site’s own LOOKS token. Those users then game the system by selling NFTs back and forth between their own Ethereum wallets via artificially inflated prices, with the aim of earning more in LOOKS rewards than they’d spend on LooksRare’s 2 percent marketplace fee and the Ethereum network’s own gas fees.
LooksRare also provides Wrapped Ethereum (WETH) rewards for users who stake their LOOKS tokens in the platform, providing further incentive to accumulate and then hold a large number of them. The community reward models set LooksRare apart from OpenSea, but with trading rewards at their highest level during the platform’s first 21 days, some users are clearly abusing the system.
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