Ethereum

LooksRare Has Reportedly Generated 8B in Ethereum NFT Wash Trading – Decrypt

Looksrare appears to have come from nowhere to become the biggest rival to nft market leader opensea earlier this month, but there’s a big asterisk in the astronomical trading numbers emerging from the platform.

is marred by rampant wash trading, as users buy and sell nfts between wallets they control in an effort to manipulate daily trade rewards. We now have an idea of ​​how serious the wash trade has become since looksrare launched on January 10th.

Reading: Looksrare has reportedly generated 8b ethereum

nft analytics firm cryptoslam reported today that it has identified over $8.3 billion in looksrare laundering trades, accounting for the vast majority of trading volume in the market to date.

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Most wash trade comes from royalty-free collections, which means sellers don’t have to pay creators a secondary selling fee. larva labs’ meebits have seen the biggest wash trade at $4.4 billion, with terraforms at $2.9 billion, loot at $705 million, and cryptophunks (a cryptopunks spinoff project) at $251 million, plus $62 million from other projects.

According to public blockchain data compiled by dune analytics, looksrare has amassed over $9.5 billion in total ethereum trading volume since its launch. if figures from both sources, which pull data from the public ethereum blockchain, are accurate, then roughly 87% of looksrare’s transaction volume to date matches cryptoslam’s transaction laundering criteria.

See also: Crypto Price Analysis April-1: Ethereum, Ripple, Cardano, Solana, and Shiba Inu

why do some looksrare users sell nfts at highly inflated prices? it all comes down to the trading rewards model of the platform. looksrare offers token rewards for users who buy and sell nfts on the site, giving them a percentage of the day’s total sales through the site’s own look token.

users can game the system by selling nfts back and forth between their own ethereum wallets via artificially inflated prices, with the goal of earning more in rewards than they would spend at looksrare’s 2% market fee and the ethereum network gas itself. rates.

looksrare also offers wrapped ethereum (weth) rewards for users who stake their looks tokens on the platform, providing an added incentive to accumulate and then hold a large number of them. Community reward models differ from those on the open sea, but with trade rewards at their highest level during the first 30 days of the platform, some users are abusing the system.

Shortly after the January 10 launch, cryptoslam data showed looksrare users selling royalty-free meebits, loot and other nfts between the same wallets for more than $50 million worth of eth in each direction. at the time, the average selling price of a meebit nft over the previous week on the open sea was 4.1 eth ($13,800 at the time).

Looksrare’s staggering initial trading figures seemed suspicious, and the platform did not institute measures to discourage users from buying and selling their own nfts at inflated prices. in fact, looksrare retweeted an investor thread that called such tactics “cool.” looksrare did not respond to previous requests for comment from decrypt.

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cryptoslam, which recently raised $9 million from mark cuban and others, removed wash trading data from its total sales metrics last week and has implemented a tracker for each nft collection that shows the total amount traded washing to date. today, the company shared a lengthy post about why it made the moves and how it approached the situation.

randy wasinger, founder and CEO of cryptoslam, told decrypt via email that the company currently uses both automatic and manual methods to detect laundering operations in a multi-step process. First of all, Cryptoslam automatically classifies a transaction of an nft that was sold and then bought back by the same wallet in the last seven days as a wash transaction.

Furthermore, if any wallet marked for the first point buys and sells an nft after holding it for less than 30 minutes, those transactions are also classified as wash trades. On top of all that, cryptoslam manually reviews any transaction for nfts that are “clearly way above the norm and not legitimate,” wasinger explained. eventually, that last step can be automated as the platform’s algorithm is refined.

looksrare has generated a lot of buzz from the start and has routinely delivered $20 million or more in total daily rewards to users since its launch. It comes as opensea enjoys a record sales month, with ethereum nft trading volume now exceeding $4.3bn for all of January, surpassing the previous record of $3.4bn from August 2021.

but given looksrare trading rewards will drop significantly at the 30 day mark after the jan 10 launch, we’ll see if it’s still profitable for laundering traders to play around with the rewards model, and if growing trading numbers of the market collapse. turn.

See also: The man who got fired by his DAO – by Casey Newton

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