LooksRare NFT Marketplace: A Serious Challenger to OpenSea?
Throughout 2021, OpenSea has established itself as the number one NFT marketplace in terms of trading volume and mindshare. Many have attempted to challenge its reign (such as Rarible, Mintable, Nifty Gateway, etc.) but few have captured the attention of the NFT space quite like LooksRare.
Unlike those that came before it, LooksRare NFT marketplace was poised to take on OpenSea with its “community-first” approach. A successful launch then had everyone in the Crypto Twitter space talking, and the numbers speak for themselves!
However, the dust has since settled and some of its flaws have become apparent. In this blog, we’ll examine LooksRare to see what worked, what didn’t, and what made them look rare (pardon the pun) in the eyes of the community.
What is LooksRare NFT marketplace?
LooksRare launched on January 11th, 2022 to much fanfare. Using what’s called a “vampire attack,” it drew users away from OpenSea by offering them LOOKS (LookRare’s token) for free when they start trading on LooksRare.
These free token offerings (AKA airdrops) were often generous, netting power users of OpenSea thousands of dollars worth of LOOKS. This got people’s attention and generated a lot of buzz for the platform.
Now that LooksRare got users on the platform, the next step was to retain users and keep them coming back. This is where its unique fees distribution comes in. While platforms like OpenSea keep all the trading fees they charge users, 100% of LookRare’s trading fees are distributed to those who stake LOOKS.
How to get LOOKS
To get LOOKS and start staking, there are 3 main ways:
- Use LooksRare to trade NFTs
- Buy LOOKS on decentralized exchanges (e.g. Uniswap, Sushiswap, etc.)
- Buy LOOKS on centralized exchanges (e.g. FTX, Gate.io, etc.) and withdraw LOOKS to your crypto wallet
From there, you can go to LooksRare’s website and connect your crypto wallet to start staking.
At launch, stakers were treated to over 1000% APR. After 2 months, however, the APR decreased substantially to around 150% (with slight fluctuation) at the time of writing. This is to be expected with protocols that have staking features. Initially high APRs and generous token airdrops are common marketing tactics in crypto and were well-executed by the LooksRare team.
However, the LooksRare team also understood that just paying people in LOOKS would not be sustainable long-term. Too much token emission tanks the price and make the rewards less enticing (and indeed LOOKS’ price has, which we’ll go over in just a bit), so LooksRare also reward stakers with wrapped ethereum (WETH), a more flexible version of native ethereum that acts as a stand-in for the token.
Role of the WETH token
The Ethereum blockchain and its token is a long-standing and generally well-respected project in crypto so rewarding stakers with ethereum serves to alleviate some of the sustainability concerns, adding an additional draw to LooksRare.
Its WETH rewards come from the 2% trading fees that the platform collects from traders, and all of it is then distributed back to stakers over time and in proportion to their share of the total number of LOOKS being staked on the platform. For traders who don’t want to stake, the 0.5% lower fees when compared to OpenSea’s 2.5% is also a potential draw, especially those dealing in high volume.
So what’s the catch?
So far, it sounds all fine and dandy for LooksRare NFT marketplace, but there’s more to this story. As mentioned before, the hype has died down quite a bit for the platform: LOOKS’ price is down 85% from the all-time high and is still down 65% at the moment, and the once attention-grabbing 1000% APR is now merely a tenth of that.
And to make matters worse, the vast majority of its trading volume was fake at launch, done by a small group of users to take advantage of the trading rewards. Traders can set up multiple crypto wallets and trade their NFTs between themselves to create the illusion of volume. Looking at trading activity done by real traders on OpenSea vs LooksRare tells a different story:
This method of inflating sales numbers is called “wash trading” and is illegal in most regulated markets, which NFT is not in its current state. By generating “high sales volume,” they can earn more LOOKS tokens which can then be exchanged for other cryptocurrencies, putting heavy selling pressure on the price of the token.
Recognizing its mistake, the platform has since implemented a few measures to help combat this issue. LooksRare now rewards trading done on all NFT collections instead of only the most popular ones. This encourages real volume coming in from traders of more niche collections, which spreads the limited daily LOOKS rewards among more traders—making wash trading a much less profitable practice.
Is LooksRare NFT marketplace really ready to take on OpenSea?
LooksRare’s future is still quite uncertain going forward. As a fledgling platform with much bigger competitors like OpenSea, it still has a lot to prove, but the early signs have been promising. LooksRare’s biggest “edge” is its positioning compared to other platforms. Its decentralized and community-owned approach, built by pseudonymous founders who’ve proven their mettle and ability, fits a popular narrative that greatly appeals to crypto purists and idealists.
Aside from flashy marketing, one thing that not many people give them credit for is the innovation LooksRare NFT marketplace brings to the space. The ability to set a bidding price that applies to a whole collection is a unique feature that helps traders score occasional bargains which happen due to hackers selling stolen NFTs for cheap to quickly cash out, a quite unfortunate but regular occurrence.
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