LooksRare NFT trades are inflated, but the project doesn’t seem to care

The non-fungus token (or NFT) market has shaken up this week, with the recent arrival of LooksRare as it began to record impressive NFT trade volume figures built in Ethereum.

But as trading in the anti-OpenSea market is on the rise, it’s become clear that some traders are manipulating LooksRare’s token-based reward system through a “clean-up trading” mode and the platform doesn’t seem to matter.

LooksRare is built around the LOOKS token, which the platform distributes OpenSea to 185,000 eligible user portfolios in an attempt to attract it to the platform.

The platform also pays accumulated transaction fees on a daily basis to all users who participate in the LOOKS token ether (WETH) mode.

LooksRare also includes some LOOKS tokens that will be distributed to users selling NFTs in selected and verified collections, including Bored Ape Yacht Club (or BAYC) and Doodles.

With a current price of $ 4.67 per token, the market distributes more than $ 12.1 million in LOOKS tokens every day, though that number will go down next year.

For now, some traders seem willing to manipulate the reward model.

Over the past day, LooksRare has had several NFT trades between its two identical portfolios back and forth, including NET Meebits, which sold WETH twice for about $ 50 million. There are $ 100 million in both transactions.

Sales data shows Meebits back and forth trading (Image: CryptoSlam)

Dozens of other Look and Meebits NFTs were sold for about $ 3 million each in WETH in “back and forth” transactions, according to CryptoSlam’s NFT Top Sales List.

In contrast, the average selling price of a Meebits in the last week was 4.1 ETH (or $ 13,800 at current prices), and Looks sells for less than 2.2 ETH (or $ 7,400).

“wash trading” is a way of referring to market manipulation, which seems to have more activity than it does organically.

“Wash trading” can be used to promote the demand for a financial asset or to hide the profits from illegal activities, for example. Critics accuse the NFT market of saving a large amount of “clean-up trading” and money laundering.

Apparently, in this case, it is doing “wash trading” to significantly increase the potential share of the trading rewards that users receive for buying and selling NFTs on the website.

Retailers still have to pay a 2% transaction fee, as well as standard Ethereum gas fees (network transaction costs), but Meebits and Look are collections that do not charge copyright to creators in addition to these fees.

In other words, merchants who aim to manipulate the LooksRare reward system bet that the rewards they receive on LOOKS and WETH tokens will be worth more than the LooksRare transaction fees and Ethereum gas fees they spend in the process.

The LooksRare team seems indifferent to manipulation tactics and may even encourage them.

LooksRare has not officially commented, not on its Twitter or Discord, but one collector has retweeted several tweets. apparently a seed investor in LooksRarehe says the “cleaning trade” is “intentional … probably” happening and that the approach is “inventive.”

Strange appearance retweeted again this week, just “Discuss.”

Documents on LooksRare’s website suggest that its market model makes cleaning trading tactics “very disadvantageous” due to fees, but that hasn’t stopped some traders from trying to avoid selling NFTs that go in and out of their wallets to avoid the system.

incorrect data

“Wash trading” is significantly increasing the amount of total trading volume on LooksRare. Dune Analytics reports that $ 249 million in volume has already been traded on LooksRare today, after $ 509 million was released on Wednesday.

Compared to OpenSea, it recorded $ 192 million on Wednesday and $ 135 million so far this Thursday.

These cleansing tactics for manipulating token award distributions will not be illegal, but they are distorting market data.

LooksRare can promote these numbers which show a much higher volume than OpenSea, but many of the major trades seem to have been implemented only to avoid the system, the data has little value.

Moreover, by enabling these tactics to allow users to sell the same NFT at prices thousands of times higher than the market average, LooksRare affects the level of rewards that other users of the platform receive.

Again, LooksRare has not stated that it will attempt to penalize or restrict the conduct of commercial cleanup.

Increasing valuable rewards and trading volume can be beneficial for short-term marketing for LooksRare, but it remains to be seen whether the LOOKS token will maintain or increase its value over time and be saved by users instead of selling and earning.

What’s more, among the big commercial numbers, will LooksRare really steal the OpenSea show?

Only time will tell, even if OpenSea has a daily drop in trading volume, from $ 261 million on Sunday (9) to $ 169 million on Monday (10) and $ 176 million on Tuesday (11).

OpenSea is still on track to record a record month-long trading volume for NFT, which has so far traded nearly $ 2.44 trillion in January compared to $ 3.4 billion in August 2021.

CryptoSlam, a leading blockchain analytics platform, said decipher this is evaluating the LooksRare blockchain data stream and may need to change the categorization mode.

“We are closely following the rise of LooksRare and are actively exploring how to better manage these types of transactions as we gather feedback from the community,” said Randy Wasinger, founder and CEO of CryptoSlam.

“In the short term, we will not remove transactions because we believe that Meebits, Looks and other inflated sales volumes are a big story and our data is giving full transparency to what is happening in blockchain activity.”

“If these“ long-term ”clean-up trades continue to happen, we will probably report them individually to maintain the same comparisons between projects, providing full transparency about what is happening on the blockchain,” he added.

* Translated and edited by Daniela Pereira do Nascimento with permission from Decrypt.co.

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