Quick take:
- LooksRare recorded the highest-ever monthly transaction volume by an NFT marketplace.
- The highly incentivised platform has attracted NFT whales pushing its transaction volume above $11billion in its first month.
- It toppled the largest NFT marketplace OpenSea, which also broke its monthly record with nearly $4.2 billion.
The newly launched non-fungible token (NFT) marketplace LooksRare has taken the industry by storm. The platform’s trading volume rocketed to over $11 billion in the first month since going live, setting a new record for the industry.
The record was previously held by OpenSea, still the world’s largest NFT marketplace by registered users, daily transactions and cumulative sales volume. LooksRare’s volume nearly tripled OpenSea’s this month, as it marked a triumphant entry into the space.
However, eagle-eyed NFT traders have noticed some peculiarity about the new NFT marketplace’s surging trading volume.
According to data compiled by Dune Analystics’ @hildobby, OpenSea continues to be the most active platform in terms of the number of daily and hourly transactions.
For instance, although LooksRare’s daily volume on Tuesday topped $500 million with OpenSea recording $170 million as of this writing, LOOKS’ daily transactions were less than 1,500 while OpenSea had nearly 110,000.
Market experts have attributed LooksRare’s unusual trading data to a few NFT whales that have bought into the platform’s highly incentivised marketplace.
A recent report by cryptocurrency insights and analytics platform DappRadar zooms in on the likelihood that LooksRare’s rewards may be attracting whales.
The report cites the NFT marketplace’s fixed transaction fee of 2% and its community-driven approach as a major factor bringing NFT whales to the platform.
In addition, it also points to the impact of artificial transactions carried out by specific users in a bid to stimulate LOOKS token rewards. LooksRare users earn rewards by trading NFTs that have achieved at least 1,000 ETH in trading volume, bar a select few.
For reference, the average transaction size on LooksRare is about $205,000 compared to OpenSea’s equivalent of about $930. LooksRare’s reward model entices NFT traders to increase staking and trading activity, which in turn boosts the auto compounding yield earned.
Some of the most traded collections on LooksRare include Meebits, CryptoPhunks, and Loot. LooksRare’s incentivised model rewards buyers with an NFT and the LOOKS token, as compared to OpenSea where they only receive the NFT. In addition, there are also trading rewards, which help reduce the overall trading fees and royalties.
However, according to the data provided by Dune Analytics, the model rewards wash traders more than the smaller retail traders.
Traders earn more daily rewards within the first 30 days after the collection hits 1,000 ETH which encourages skewed trading activity. Data compiled by Dune Analytics’ @elenahoo narrows down on the impact of wash trading, highlighting two wallets with volumes of more than $90 million.
The wash trader concentrated on royalty-free collection Terraforms, thereby only incurring the 2% platform fee and gas fees. The data shows that the trader bought and sold Loot multiple times on Jan. 19, the day LooksRare also recorded its highest daily trading volume.
Although the reward-based model has been embraced by NFT whales, smaller retail NFT traders have accused the platform of encouraging wash trading.
Nonetheless, with the 30 days lapsing soon before the rewards model enters the second phase, this month could offer a more interesting perspective on how long wash trading can go on on the platform.
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