LooksRare aimed to be an alternative to OpenSea but the high levels of wash trading on the platform have raised several questions on whether the user should really look at it as a proper competitor.
LooksRare made its debut on January 10, and the recently launched nonfungible token (NFT) marketplace has drawn a lot of attention, not only because its daily trade volumes were more than double OpenSea’s on the second day of trading but also because it has become the new playground for wash traders.
Wash trading is a series of trading activities involving the same trader buying and selling the same instrument simultaneously, creating artificially high trading volume and a manipulated market price for the asset in play.
In the US, wash trading in traditional financial markets has been illegal since 1936, and the most recent highly publicized scandal related to wash-trading is the manipulation of LIBOR in 2012.
LooksRare Had Good Intentions To Begin With
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.