Highlights:
- Reach: When comparing Opensea, LooksRare, and X2Y2, Opensea continues to dominate the NFT market in terms of the number of NFT sales and volume. If the number of NFT sales from these three marketplaces is totaled from January 2022 until now, Opensea holds 97% of sales, while LooksRare and X2Y2 account for less than 2% each. In terms of volume, LooksRare does have significant volume, however, a large portion of it is suspected to be from wash trading.
- Reach: Opensea is the healthiest NFT marketplace in terms of the number of buyers and sellers. Data from the last quarter shows that Opensea has an average of 50% sellers and 50% buyers. On the other hand, LooksRare has more than 60% sellers and less than 40% buyers, and X2Y2 has more than 70% sellers and less than 30% buyers. Both LooksRare and X2Y2 have had more sellers than buyers in the last quarter.
- Retention: Opensea has the highest buyer and seller retention rates compared to LooksRare and X2Y2. However, the seller retention rate of Opensea is on a downtrend. In January 2022, it had a score of 13%, and 7% in November 2022. X2Y2 holds the second position, with both seller and buyer retention rates for this marketplace in the range of 6–8 %. The lowest is LooksRare, with both seller and buyer retention rates in the range of 4–6%.
- Retention: Based on this year’s data on buyer/seller volume distribution, LooksRare lost more than 80% of its buyers and sellers between June-August 2022, as they moved to X2Y2 and Opensea. Conversely, Opensea had its peak loss in January 2022, when around 70% of its buyers migrated to LooksRare, and in September 2022, 50–60% of its buyers moved to X2Y2. However, this loss appears to be temporary.
- Revenue: Based on data from this quarter (beginning 1st October 2022), LooksRare has the highest revenue per buyer, averaging more than $100. Meanwhile, the revenue per buyer for Opensea and X2Y2 is around $5 and $6, respectively.
- Revenue: LooksRare is the least healthy NFT marketplace in terms of volume, with 43% and 41% of its volume belonging to the Meebits and Terraforms collections, respectively. On the other hand, Opensea is the healthiest, with the highest volume of more than 60% belonging to other collections (see figure: Volume by Collection). BAYC on Opensea is in second place, contributing 12% of the shared volume.
- Revenue: LooksRare is the prime location for wash trading, due to its trade mining feature. Trade mining on LooksRare becomes advantageous when trading rewards (LOOKS) exceed the 2% platform fee, resulting in traders artificially inflating volume by transacting between their own separate wallets to earn LOOKS. This suspicion is confirmed with examples including the Meebits and Terraforms collections, where the number of transactions is low, but the volume is extremely high.
Note: to understand the terms (reach, retention, revenue, and stickiness ratio), I explained those terms and how to calculate them in this post.
Background
Starting from 1st January 2022, the profit from revenue fees for Opensea has exceeded $500m, while LooksRare’s revenue fees amount to around $480m and X2Y2’s to less than $20m. Who wouldn’t want such a large sum of money? Hence, in 2022, the year of the NFT boom, a multitude of NFT marketplaces have emerged! The figure above shows the timeline of popular NFT marketplaces in the crypto industry since 2017.
In this article, I am going to present my analysis of one such NFT marketplace called LooksRare. In order to provide comprehensive results, I will also compare LooksRare with two other major NFT marketplaces: Opensea and X2Y2. Let’s delve deeper into what they are, what they do, and how they generate revenue.
Opensea vs. LooksRare vs. X2Y2
Opensea is akin to Coinbase for NFTs, functioning as a centralized platform where anyone can buy and sell NFTs. Opensea plans to follow in Coinbase’s footsteps by launching an IPO, but given the current market conditions, this may not happen anytime soon. Being a centralized business, this startup is backed and funded by a number of well-known venture capitalists. Therefore, it can be inferred that all profits made by this business go to them, without giving back to the community, a principle central to the spirit of Web3!
LooksRare was created as a counterpoint to Opensea, with 100% of the revenue fee shared amongst LOOKS token stakers, and it initiated a massive airdrop to NFT traders. If you recall the Vampire Attack conducted by Sushiswap on Uniswap, LooksRare executed a similar tactic against Opensea. A Vampire Attack in DeFi involves one protocol copying another, then offering better rates, thus poaching their customers and investors. At the start of this year, LooksRare issued a substantial airdrop to all NFT traders who had conducted at least 3 ETH worth of transactions on OpenSea within the previous six months. The higher the number of transactions on OpenSea, the more $LOOKS tokens a trader could claim. What makes LooksRare intriguing is its trade mining feature. Traders can farm $LOOKS tokens by trading on the LooksRare marketplace, and when trading rewards (LOOKS) exceed the 2% platform fee, it attracts whales and wealthy wallets to engage in wash trading (buying and selling NFTs between two different wallets owned by the same person). However, we suspect that as trading rewards continue to halve in the coming phases, trade mining may no longer be profitable, posing a potential threat to LooksRare.
X2Y2 embarked on a different strategy. The project initiated an inclusive airdrop without private sales or trading rewards and claims to avoid wash trading. X2Y2 offers a significantly low trading fee of just 0.5%, compared to Opensea’s 2.5% and LooksRare’s 2%. Similar to LooksRare, X2Y2 redistributes all revenue fees back to the community. To facilitate this, the project has a feature called ‘listing as staking’. When users list NFTs on X2Y2, they can regularly receive a certain percentage of X2Y2 tokens as rewards. If a trader lists a blue-chip NFT (one with a high transaction volume and market recognition) at a low enough price, they can earn higher rewards.
The figure below outlines the differences between these three NFT marketplaces.
Let’s get started with what I found…..
Reach
Reach refers to the total number of people who have seen and used the product. In this case, the number of NFT sellers and buyers, and the number of NFT collections are part of this metric.
The number of NFT sales is one of the important metrics to understand platform reach! The figure shows the most traded NFT collections on three NFT marketplaces. The number means the number of trades of NFTs during this year.
If we combine all trades from those three marketplaces, Opensea eats more than 95% of trades. Currently, Opensea supports 7 networks including, ETH, AVAX, OP, MATIC, Solana, etc. But the ETH networks still dominate the trades. So, in this analysis, I only consider ETH network only for those 3 NFT marketplaces.
Let’s move to the recent data (Last quarter: July/Aug/Sept).
Looking figure above, it seems that Looksrare is dead! the percentage of trades of Looksrare is so small, less than 2% on average compared to the Opensea which eats more than 80% of trades, and X2Y2 at around 15%.
Looking at the figure above, Opensea has the healthiest number of buyers and sellers compared to Looksrare and X2Y2. Opensea has 50% sellers and 50% buyers on average. In contrast, Looksrare has more than 60% of sellers and less than 40% of buyers and X2Y2 has more than 70% of sellers and less than 30% of buyers. Both Looksrare and X2Y2 have more sellers than buyers in the last quarter.
Retention
If a product has high customer retention, it means that customers return to continue using a product or service.
Looksrare has a peak number of new and existing users in January 2022 after launching and in May 2022.
Looking two figures above, we can see the percentage of new buyers and sellers coming to Opensea, Looksrare, and X2Y2. Both Looksrare and X2Y2 launched at the beginning of this year while Opensea was already here since 2018. New users pattern from both Looksrare and X2Y2 are quite similar to the pattern of Opensea at the beginning (in the year after launching 2018). The good news is, we see uptrends in the recent month! yeyeyee
Opensea has a downtrend pattern of stickiness score, 13% in January 2022 and 7% in November 2022. The second position is X2Y2, with both seller and buyer stickiness ratio for this marketplace in the range of 6–8 %. The bottom one is Looksrare, with both seller and buyer stickiness ratio in the range of 4–6%.
Based on this year's buyer and seller volume distribution, LooksRare lost buyers and sellers by more than 80% in June — August 2022, where the buyers and sellers moved to X2Y2 and Opensea.
Opensea has a peak loss in January 2022, where around 70% of its buyers moved to LooksRare, and in September 2022, where 50–60% of its buyers moved to X2Y2. The pattern of buyers and volume distribution is quite similar.
Revenue
Revenue means the total amount of money brought by the product, while in this case, how much Opensea, LooksRare, and X2Y2 make money.
This year, the profit of Opensea from revenue fees is more than $500m, while Looksrare’s revenue fees are around $480m and X2Y2 less than $20m. That is really huge Money! The detail can be seen in figures below:
In the last quarter, X2Y2 has a huge volume compared to its competitors. Another interesting thing here is, LooksRare has pretty much volume! Even though it has the lowest volume compared to Opensea and X2Y2. But, if we compare this Looksrare volume and the number of sales, Looksrare has around 15% in terms of shared volume, while the number of trades is just less than 2%. It means, Looksrare has very low trades, but that low trades still bring much volume.
Based on the data from this quarter (started from 1st October 2022), LooksRare has the highest revenue per buyer, its revenue per buyer is more than 100$ on average. While the revenue per buyer of the Opensea and X2Y2 is around 5$ and 6$ respectively.
LooksRare Volume is not healthy!
LooksRare is the most unhealthy NFT marketplace in terms of volume, 43% and 41% of its volume belong to Meetbits and Terraforms collections. Meanwhile, Opensea is the healthiest one, with the highest volume more than 60% belong to others (see figure Volume by Collection). BAYC on Opensea is the second one, it has 12% of the shared volume.
In this research, I collect the top 50% of BAYC buyer and seller wallets and see how the domination of those wallets to the total volume on Opensea, and here is the result.
From this figure, we can see that top 50% BAYC wallets only dominate less than 2% on average of total Opensea volume. Let’s compare this to what happened on LooksRare!
I collect the top 50% of Meebits buyer and seller wallets and see how the domination of those wallets to the total volume on LooksRare:
WoW! Look at the month of January, it’s crazy. So we can understand who controls this NFT marketplace, right?
LooksRare Wash Trading is Real!
The facts that make me conclude LooksRare is the best place for wash trading and it is about to die soon if the team does not do something extraordinary.
- The number of trades on LooksRare is very small compared to the competitors. Considering data from this year's buyer and seller distribution, in June — August 2022, most of the buyers and sellers on LooksRare moved to X2Y2 and Opensea.
- The volume on LooksRare is dominated by two collections: Meebits and Terraforms, and I suspect most of the wash trading happens on these collections. So we can assume that the volume of LooksRare is not organic and it’s artificial.
Look at this figure, the data is from November 2022 with aggregated hourly, and it’s very funny. LooksRare has a high volume at 9 AM every day! is this bot? We can compare it to the data from Opensea which seems more organic volume!
My recommendation to LooksRare:
- Giving more incentives to buyers. Reducing fees might one of the options, X2Y2 has a 0.5 % fee, which is very small and it makes the traders move from LooksRare to X2Y2.
- Having partnerships with more top collections! as we can see that LooksRare volume is dominated by Meebits and Terraforms.
- Considering NFT launchpad maybe? Based on blockchain data indexed by Covalent, currently, LooksRare has 5,584 collections, while Opensea has 34,279 collections.
- From my point of view, for the sustainability of the project, having organic volume is more important than being top in volume! find the best way how to minimize wash trading and improve the organic volume.
My Twitter Thread:
My Increment dashboard
https://www.covalenthq.com/platform/#/increment/pages/diteliti/is-looksrare-dead/
