While sales volumes on NFT marketplaces thrive, new data show much of this comes from manipulating sales — painting the whole industry in a different light.
A community-owned marketplace is a double-edged sword
LooksRare started with good intentions to share profits within the community. The token incentives and the trading rewards were essentially the secret weapon that attracted high volumes and beat OpenSea in light-speed fashion right after its launch, but these same factors have also become the very weapon wash traders are using to flood the marketplace.
LooksRare appears to have foreseen the possibility of wash trading that could be induced by the lucrative trading rewards, but according to LooksRare Docs, it believed that the cost of trading from platform fees and royalty fees would be too high to create any incentives for wash trading. Interestingly, reality shows the opposite.
The graphs above show that daily users and daily transactions from LooksRare are only a tiny portion (2%–3%) of OpenSea, but the volumes are more than triple or even quadruple OpeaSea’s.