LooksRare platform users are selling tokens to themselves to help gain incentives in the form of extra coins. The platform has swiftly become the biggest NFT marketplace by trade volume.
During the height of the NFT boom, two anonymous co-founders — Zodd and Guts — started the platform in January as a competitor to industry leader OpenSea.
According to a blog post at the time, the site aimed to offer additional features to entice NFT fans. Almost all of these projects have centered on the incentive scheme based on the Looks token, which is given to active platform users.
Wash trading is when a trader sells an asset that belongs to them to a wallet that they control.
It’s frequently an attempt to increase the asset’s price while simultaneously creating the illusion of demand. However, it isn’t the only reason LooksRare merchants do it.
LooksRare gained quite the reputation
According to statistics provided by NFT tracker CryptoSlam, over $18 billion of the platform’s trading volume, or nearly 95% of all activity, can be attributable to what’s known as wash sales.
When it comes to legislation, transactions are considered one of the numerous grey areas in crypto.
The sales are made in this situation to earn fresh tokens rather than to inflate nonfungible token values to entice naive purchasers. The fees collected by each transaction support the marketplace.
The popularity of wash trading on the marketplace is related to the platform’s incentives for active trading. While many people dislike the notion of wash trade, there are no laws against it.
Even if the wash traders’ goal is to gain tokens rather than pump prices, there’s little question that their actions conceal the actual status of the NFT ecosystem. As a result, many people have labeled it as market manipulation.
According to David Silva, a lawyer with knowledge of crypto subjects, it doesn’t matter if it’s stocks, bonds, or NFT.” Wash trading is a form of market manipulation in which an investor simultaneously sells and buys the same instrument to create misleading, artificial activity in the marketplace.”
Outside of trade, LooksRare is a tiny marketplace for NFTs compared to OpenSea, which has around ten times more daily active users, according to tracker Nansen.