Marketing Genius or Foul Play: Two Wallets Generate $1.1 Billion on LooksRare



We share our opinion

Ethereum NFT marketplace LooksRare has generated $4.7 billion since launching on January 10, surpassing OpenSea by a big margin. However, DappRadar’s analysis between January 10 and 17 shows that 23% or approximately $1.1 billion came from what appears to be artificial trading between two wallets. 

LooksRare is an NFT marketplace for Ethereum based-collections. The dapp’s central premise is to reward the NFT trading community that uses the platform with an underlying token – LOOKS,  stimulating trading activity and at the same time leading to traders performing artificial trades to earn LOOKS. 

In a nutshell, the owner of an NFT sells it to another wallet controlled by them, simulating a trade, and thus earning a reward. An individual that becomes both buyer and seller of an NFT in the same transaction will instantly optimize their profits and, in this case, be rewarded with LOOKS tokens. 

Two wallets traded $1.1 billion in NFTs

In a recent whale analysis report, we analyzed the top 100 most valuable NFT trades across the industry in the last 30 days. We found that 99% happened on LooksRare, and involved Meebits, Loot, or CryptoPhunksV2 – an unofficial version of the OG CryptoPunks collection. Interestingly, these three collections did not have royalties attached, so the original creators did not benefit from the trades. 

However, Loot was first to act on January 24, adding a 5% royalty fee to sales and bagging over 450 ETH for the treasury as a result. The motivation for the deep dive was that large transactional values such as those being observed on LooksRare right now trigger the possibility of NFT whale movement. 

The same two wallets were involved in the top 25 trades from the sample. These two wallets (wallet 1 and wallet 2) generated over 362,500 ETH or $1.1 billion from these 25 trades in eight days between January 10 and 17, 2022. 

It’s easy to see through the trading history of certain NFTs in the wallets that the NFT was sold back and forth between the wallets, generating LOOKS rewards. However, when looking in both wallets, there are no LOOKS tokens to be seen. Arguably, the person can trade them, purchase more NFTs or simply send them to another holding wallet. 

Artificial trading in the traditional finance world is also called wash trading and is usually employed to make a financial gain or artificially inflate the value of something. In the case of LooksRare, the system’s mechanics allow – and perhaps even stimulate – this type of trading, with the platform itself seemingly not taking action to stem the flow of such trades at this time. 

Rapidly rising trading volume has helped LooksRare grab the industry’s attention, overtake OpenSea, and put itself on the map. It is not unlikely that the activity will calm down soon as rewards become less and the spotlight remains on those artificially trading, but for the time being, LooksRare is sitting atop the pile of leading NFT marketplaces.

LooksRare climbing the ranks 

The move has escalated an NFT marketplace just a few weeks old to almost the same standing as leading marketplace OpenSea. In essence, the formula, when used correctly, can be very beneficial to NFT traders, and it makes financial sense to trade NFTs on LooksRare right now. 

The example above shows how an average trade can look and how a trader benefits from using LooksRare over OpenSea. In this instance, the seller gained $1,789 by using LooksRare, and the buyer got the NFT they wanted, plus around $5,000 in LOOKS tokens. When not abused, the system is working well. However, it is clear why some are taking advantage. 

No industry is a stranger to aggressive marketing, but with our space being so dynamic and competitive, we’re pretty accustomed to it. Is LooksRare’s go-to-market strategy a stroke of genius or foul play? That’s not for me or DappRadar to judge – our role is to provide a comprehensive, objective, and data-led view of the dapp ecosystem,” said Skirmantas Januškas, CEO & co-founder of DappRadar. ”What’s clear at the moment is that LooksRare is topping marketplace rankings in terms of volume. We’ll have to wait and see where their strategy leads them and those looking to replicate their model.

This is not the first time an NFT marketplace has tried to employ such a tactic to take market share. In 2020, a new marketplace called Rarible arrived on Ethereum, and its RARI token quickly followed. Every Monday, 75,000 RARI tokens are distributed to wallets that have been active on the marketplace during the previous seven days, split 50:50 in terms of sellers and buyers. In the same way as on LooksRare, traders engaged in artificial trading to earn more RARI. Except here, they didn’t need to do it with blue-chip NFT collections – they could just upload anything and ping it back and forth for excessive amounts. 

A significant difference on Rarible was that it allowed people to mint NFTs using their artwork or images, causing a slew of sub-standard art to flood the marketplace, taking down the overall quality and experience. A new user registration system came into force, whereby creators had to prove the art was theirs and the motivation for creating it, putting a lot of profit hunters off using the platform.



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