LooksRare intends to be a rival to OpenSea; however, the quantity of wash trade on the site raises doubts about whether people see it as such. LooksRare debuted on January 10. The new NFT marketplace got a lot of attention; not only because its daily transaction volumes were more than double those of Opensea on the second day of trading but also because it has become the new playground for wash traders.
Wash Trading
Wash trading is a sequence of trading actions. In it, the same trader buys and sells the same item simultaneously. This results in a manipulated market price and artificially high trading volume. Wash trading in traditional financial markets is illegal in the United States since 1936; the most recent widely publicized controversy involves wash trading being the rigging of LIBOR in 2012. Wash trading has long been regulated and rigorously watched by exchanges and authorities. Hence, it appears to have found a new home in the unregulated crypto sector, particularly on non-traditional trading platforms like LooksRare.
In essence, the data reveals a tiny group of people that execute deals worth hundreds of thousands of dollars. This does not appear to be a fun place for regular NFT shoppers.
LooksRare’s trade incentives are delivered in four parts over 721 days. In Phase A, the daily reward is the greatest for the first 30 days, and in Phase C, the overall reward is the highest.
LOOKS Trading
The product of the predetermined daily LOOKS trading reward (2,866,500 LOOKS) and the ratio of the individual trader’s trading volume to the overall trading volume of the day determines the number of trading rewards a single trader may earn on any given day. As a result, the greater the trader’s trading volume, the greater the compensation. This method provides significant incentives for large-scale wash trading.
Regarding user numbers and non-zero royalty NFT transaction volumes, LooksRare still has a long way to go to catch up to OpenSea. When the trading incentive is half in Phase B, which begins on February 10, 2022, it will be fascinating to observe how the dynamic changes.
