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LooksRare: Everything You Need to Know

 Recently Reviewed   on 6 September 2022
Feature image for the blog post "LooksRare: Everything You Need to Know"

Everyone is talking about LooksRare and you don’t know what it is?

Or maybe you’ve heard it’s a hot new NFT marketplace but you don’t really know why?

Worried about wash trading and other FUD?

Don’t worry, we’ve got you covered.

In this guide, we’ll explain to you exactly what LooksRare is, how its reward systems work and why you shouldn’t be concerned about the wash trading that is currently going on.

Anyway, let’s get right to it.

Key Points (tl;dr)
  • LooksRare is a new NFT marketplace with a community-first approach that was launched in January 2022.
  • You can earn LOOKS token rewards by trading NFTs on the platform, staking LOOKS tokens or providing liquidity for LOOKS tokens.
  • There has been extreme levels of wash trading due to how the LOOKS token release schedule was designed. Private sales are excluded from LOOKS rewards.
  • The team has insistend that wash trading should normally be extremely unprofitable.
  • The founders are anonymous and so are the seed investors. Despite these obvious red flags one must admit that the team has been listening very closely to community feedback.
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What Is LooksRare?

LooksRare is a community-first NFT marketplace that launched in January 2022. It aims to become a serious contender to the currently dominant OpenSea and is trying to achieve this by adopting a strong Web3 ethos. That means earnings generated by LooksRare are distributed back to the community in the form of rewards.

Screenshot of the LooksRare NFT Marketplace
Screenshot of the LooksRare NFT Marketplace

This new NFT marketplace literally popped up out of nowhere.

Not all of these influencers have a particularly good public reputation.

Nevertheless, it made quite a splash with their LOOKS airdrop.

LOOKS is the NFT marketplace’s native governance token which is also used for rewards distribution.

Anyone can take up the offer. First come, first serve.

If that’s not exciting, then I don’t know what is.

How to Earn Rewards on LooksRare

You can earn LOOKS rewards on LooksRare by trading on the platform, staking LOOKS tokens or providing liquidity for LOOKS via LP staking. Regular staking comes with the added benefit of earning WETH rewards which come straight from the platform fees generated by trading.

Infographic showing LOOKS token allocation.
Infographic showing LOOKS token allocation.

LOOKS rewards are the founders’ way of giving back to the community and enabling users to also become owners of the NFT platform.

There is a 2-year distribution schedule for LOOKS tokens.

They are spread across various categories, such as the treasury, founding team and strategic investors.

The categories mentioned above are also subject to a vesting schedule, to limit the risk of a “dump” by early investors.

However, the most important category by far is the community tokens.

A whopping 75% of the tokens will be distributed to the community via airdrop, staking and trading.

The distribution of these tokens tapers off over time, which is why being an early adopter of the NFT marketplace may prove incredibly lucrative.

There are 3 ways you can earn LOOKS rewards:

  1. By trading on the platform
  2. By staking LOOKS tokens
  3. By providing liquidity for LOOKS tokens (LP staking)

LOOKS Trading Rewards

Infographic showing the LOOKS token release schedule.
Infographic showing the LOOKS token release schedule.

It’s really quite simple.

LooksRare will reward you with LOOKS tokens based on your buying and selling activity.

Trading rewards are calculated on a daily basis and depend on your relative share of the trading volume during the previous day.

The nice thing is that both buyers and sellers are being rewarded for their activity.

Both sides have a strong incentive to use the platform for their trading.

LOOKS Staking Rewards

Infographic showing how much APR you can earn by staking LOOKS.
Infographic showing how much APR you can earn by staking LOOKS.

That means locking them up in a type of DeFi smart contract.

As you stake, you earn additional LOOKS tokens based on your share of the overall tokens staked on the previous day.

However, the biggest potential by far lies within the WETH rewards that you’ll receive.

That’s right, you don’t just earn LOOKS but you also earn collectible WETH.

The WETH that you earn is based on the platform fee that LooksRare charges on each trade.

You have to see it to believe it but it’s really quite remarkable.

Imagine how much potential this has if the NFT platform grows its market share.

LOOKS LP Staking Rewards

As with every new token that is launched, you need liquidity providers that help make sure that the token remains sufficiently tradable.

For well-known tokens, this is usually done by exchanges.

If not enough exchanges list the token, you need liquidity providers to help out via a DeFi platform such as UniSwap or SushiSwap.

No one provides liquidity for free, which is why LP stakers on LooksRare also earn LOOKS rewards.

Why Is LooksRare’s Trading Volume So High?

LooksRare is currently experiencing extremely high levels of wash trading because the LOOKS rewards incentivize trading volume in their distribution schedule. In other words, wash traders are trying to get a bigger piece of the pie. In theory, this practice should be extremely unprofitable because private sales are excluded from trading rewards.

There was quite a bit of confusion and maybe even controversy around some of the massive wash trading going on.

Wash trading is when someone sells something to themselves in order to artificially inflate their trading volume.

There are many reasons this is done in traditional markets and all of them are illegal in regulated markets.

In this particular case, it is the attempt to gain a higher share of the overall trading volume on LooksRare.

This in turn impacts how many LOOKS rewards you receive.

Many people voiced concerns around this because on paper LooksRare suddenly had 5-6x the trading volume of OpenSea.

Obviously, that is unrealistic.

The team has stated several times that private sales are excluded from the rewards mechanism.

And in theory wash trading should be extremely profitable due to the high fees associated with the excessive volume.

Nevertheless, the wash trading still has not subsided.

Our take is that as long as the legitimate trading volume continues to grow, this should not be a problem.

Is LooksRare Safe?

The team behind LooksRare has chosen to stay anonymous. This is a red flag. We suspect there are regulatory reasons for this. Despite the opaqueness, we believe that LooksRare is acting in good faith. The team has demonstrated more interest in its community in less than 30 days than OpenSea has in over a year.

Unfortunately, the founding team has chosen to stay anonymous so it’s not entirely clear who you are dealing with.

Some of the early investors also have a questionable reputation in the industry, so it’s a fair concern.

We believe the reason the team has not doxxed is mainly due to the lack of regulatory clarity around the classification of LOOKS tokens.

Since they are effectively a form of revenue share chances are they’d be considered a security.

The SEC isn’t someone you necessarily want to deal with, so it would be understandable that the team prefers to stay anonymous for now.

That being said, from every we’ve seen so far and particularly how closely the team listens to the community, it is hard to believe that they may be bad actors.

We are going to give them the benefit of the doubt until further notice.

Conclusion

LooksRare is not only a breath of fresh air in a market that is dominated by the likes of OpenSea.

The team has also put its money where its mouth is by designing a rewards system that is truly focused on its community.

Despite all of the wash trading, its real trading volume has continued to grow in the last few weeks.

LOOKS and WETH rewards are also being poured back into the market so there is quite a virtuous circle at play here.

We are giving LooksRare the thumbs up right now and we highly recommend you at least have a look at it as well.

But remember, none of this is financial advice and please do your own research!

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