Will LooksRare become the largest market for NFT in 2022?

Welcome to the world of NFTs, a new type of crypto asset that can represent digital and physical things like photographs, films, lands and wearables on the blockchain.

It has exploded in popularity over the past few months as part of the much-touted metaverse, and with the advent of the digital economy.

In 2021, NFTs became widely mainstream, with OpenSea becoming the largest and most popular NFT marketplace allowing almost anyone to buy, sell and manufacture NFTs on the Ethereum and Polygon blockchain networks.

Recently, other markets, such as LooksRare, entered the NFT segment, and on January 10, 2022, the LooksRare NFT market opened, launching its native currency LOOKS and claiming to be:

“The NFT Marketplace is community-driven and actively rewards merchants, collectors, and creators.”

Since its introduction, LooksRare has consistently outperformed OpenSea, with the largest daily volume of $842 million on January 19, compared to OpenSea's $202 million. LooksRare received $519 million, and OpenSea received $273 million on January 26.

LooksRare came out of nowhere to become the biggest opponent to date of the main NFT market OpenSea, but there's a big tick next to the platform's impressive trade stats.

CryptoSlam, an NFT analytics startup, announced today that it has discovered more than $8.3 billion in laundering trades on LooksRare, accounting for the bulk of the trading volume on the platform to date.

The majority of the wash trade occurs with royalty-free groups, which means sellers are not required to pay a secondary selling fee to the artists. Meebits, a Larva Labs venture, is the most traded at $4.4 billion, followed by Terraforms at $2.9 billion, Loot at $705 million, CryptoPhunks (a venture derived from CryptoPunks) at $251 million, and $62 million other ventures.

LooksRare has generated more than $9.5 billion in total Ethereum trading volume since its introduction, according to public blockchain statistics compiled by Dune Analytics. However, if the results from both sources are correct, LooksRare's trading volume to date matches Crypto Slams benchmarks by almost 87%.

Data from CryptoSlam revealed that LooksRare users were selling Meebits, Loot and other royalty-free NFTs back and forth between the same wallets for upwards of $50 million in ETH each way shortly after launch.

The site did not implement measures to discourage users from buying and selling their NFTs at exorbitant prices, which made LooksRare's staggering early trade volumes suspicious. LooksRare even retweeted a thread from an investor who referred to these technologies as "cool". Decrypt had already reached out to LooksRare for comment, but they did not respond.

CryptoSlam founder and CEO Randy Wassinger told Decrypt via email that the company is now using both automated and human methods in a multi-step process to detect the laundered trading. To start, a transaction of NFT sold and then repurchased by the same wallet for the past seven days is automatically classified as a laundering transaction by CryptoSlam.

Furthermore, any pip shaded wallet which buys and sells an NFT after holding it for less than 30 minutes is a laundry deal. Furthermore, CryptoSlam manually checks any NFT transactions that are “obviously above average and not authentic,” according to Wasinger. As the platform's algorithm improves, this last step may eventually be automated.

LooksRare Rewards System

Its bonus mechanism consists of giving tokens to day traders based on their share of the total sales volume.

According to a LooksRare representative, these tokens, called LOOKS, can then be used in a process known as “staking” to claim a portion of the platform’s profits from the 2% fee charged on all trades.

Asked if the deals reviewed by Reuters were artificially inflating trading volumes, the spokesperson said such methods were too risky because traders would have to pay transaction fees that they could not be sure of getting back.

Traders do not know if they have traded enough to earn LOOKS tokens or how many until the end of the day because they do not know what others have traded.

OpenSea is perhaps the strongest competitor in the NFT market, along with LooksRare.

OpenSea has made an effort to reduce the number of spurious NFTs on the platform. It announced that unlimited free coins would be phased out and that each user would be limited to five sets of no more than 50 NFT each.

While OpenSea holds more than 90% of the Ethereum NFT market, LooksRare has demonstrated that competitors may challenge this dominance by adding new capabilities such as reduced gas fees. Thus, LooksRare may become the largest market for NFT in 2022

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