LooksRare and OpenSea: NFT’s Own Case of David vs. Goliath?

LooksRare and OpenSea: NFT’s Own Case of David vs. Goliath?

Despite LooksRare’s controversial launch, they are indeed both attracting new users and retaining users on their platform. However, it remains to be seen whether such a trend would sustain.

Executive Summary

This research article aims to separate the hype from the reality for the recent LooksRare token ($LOOKS) airdrop.

LooksRare pride itself as a “community-first NFT marketplace that actively rewards traders, collectors and creators for participating.” Exploring its tokenomics and reward systems, we argue that despite the widespread concern around what may seem like wash trading, was instead, beneficial for opportunistic traders who maximised the LooksRare ‘Trading rewards’ system.

The article is divided into four parts:

  1. Part one explains LooksRare’s aim at benefiting the Non-Fungible Token (NFT) community and how this was achieved through their tokenomics design. Here, we compare the user retention rates between the two platforms: OpenSea and  LooksRare.
  2. Part two details the three segments of  LooksRare’s reward system: Staking rewards, Liquidity Provider rewards and Trading reward.
  3. Part three sheds light on the alleged issue of wash trading and what that means for the platform and users.
  4. Finally, part four leverages the Nansen dashboard’s insights to understand the broader trend on LooksRare.


Slightly over a week into the launch of LooksRare and its token airdrop, the marketplace entrant has recorded an estimated sale volume of 1.5 million ETH (approximately USD 5.15 billion). The platform was introduced to the Non-Fungible-Token (NFT) and broader crypto community on 10 January 2022, with an explicit intent to provide a “community-first NFT marketplace that actively rewards traders, collectors and creators for participating.” OpenSea has largely reigned the NFT market, accounting for 3.6 million ETH (approximately USD 12.5 billion) worth of the NFTs transacted in 2021. Perhaps due to OpenSea’s success, especially after its recent fund raising with a USD 13.3 billion valuation, other innovative competitors are attracted to this emerging sector. 

The Airdrop

Within the domain of mainstream marketing, the quest to attract buyers (i.e., funnelling demand) is not always a straightforward task. However, the blockchain has revolutionised this, offering new projects such as LooksRare the ability to interact with their targeted customers directly. At its launch, LooksRare announced that it was offering its native token, $LOOKS, to OpenSea’s users through an airdrop. Users who have transacted a minimum of 3 ETH of NFTs on OpenSea over a 6 month period to qualify for this airdrop. There were nine tiers to the airdrop of the $LOOKS token - the more a user transacted on OpenSea, the larger the number of $LOOKs token that could be claimed. Figure 1. details the tier levels of the airdrop campaign, where active OpenSea customers were incentivised to switch over to LooksRare.

Figure 1.  LooksRare rewards by tier

Source: LooksRare (2021)

Columnists have described LooksRare’s launch campaign as a “vampire attack” or “frontal assault”, where the new market entrant competes head-on with the dominant incumbent. In short, LooksRare's aggressive launch campaign had the goal of pulling liquidity away from their competitor, and into their platform. However, when there is a case of ‘David versus Goliath’ where the dominant player has a strong foothold in the NFT market, some commentators debate that LooksRare’s “disruptive” strategy is needed when garnering the interest of the status quo’s most active customers. 

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Figure 2. Comparison of daily active users on OpenSea vs. LooksRare

Figure 2. depicts the comparison between daily active users on OpenSea and LooksRare. Active users are defined by addresses making a purchase or a sale. New users are addresses that make their first transaction on the platform while retained users are those who have made at least one previous transaction. A close examination of the figures show that the rate at which LooksRare acquires new users in the first 9 days of its launch is slower than the rate at which OpenSea does (i.e, LooksRare’s 5.55% increase in the number of daily users during 10 to 19 Jan, compared to OpenSea’s 38.17%, see Figure 2a.) It becomes apparent that the initial boost of new users onto the LooksRare platform was short lived. However, when analysing the activity on retained users, LooksRare’s growth in retained users in the same period outpaced those of OpenSea’s (3658% compared to 14.86%, see table 2b.)

Table 2a. Comparison in the change of new users across both platforms

Table 2b. Comparison in the change of retained users across both platforms

Platform objectives and tokenomics

Further to the airdrop of the $LOOKS tokens that are redeemable, LooksRare, through its intentional focus on the community, design of tokenomics, and novel reward systems, added incentives for users to switch over to the new marketplace. 

Figure 3. LooksRare’s description of their platform

Source: LooksRare (2021)

Figure 3. outlines the core objectives of the LooksRare platform, where the NFT community is at the centre of the platform’s architecture design. The LooksRare founding team has ensured that the community is rewarded for their participation to achieve this goal. They declared that three-quarters (75%) of the tokens circulated were intended for the community. Among 75% of tokens allocated to the community, 12% of the tokens were reserved for the airdrop, 18.9% of the token supply are to be circulated through the issuance of staking rewards, and the final 44.1% of the tokens are distributed through their trading rewards system (see Figure 4.)

Figure 4. $LOOKS tokenomics

Source: LooksRare (2021)

A closer read into $LOOKS’ tokenomics revealed that the token supply was designed with an intent for the founding team to redeem the value of their allocated tokens 180 days after the platform’s launch. Observers have noticed a similarity in $LOOKS’ distribution model to Larva Lab’s launch of the Crypto Punks NFTs (see, for example, a tweet by moon (@MoonOverlord), an angel investor of the LooksRare platform). The rationale behind such a token release schedule is that the founding team has a personal interest to ensure the success of the project post-launch. The team’s redeemable value can only be realised if the platform’s launch is successful. 

Unique features

At a glance, the $LOOKS token issued by LooksRare is a distinct difference between the two platforms. This token was designed to incentivise the swap of NFTs using the LooksRare platform, which is akin to the practice of liquidity mining for NFTs. With each swap transaction, LooksRare collects a 2% margin. Currently, the OpenSea platform charges a 2.5% fee. Although the difference between the fees is marginal, a significant difference between the two platforms’ fees structure lies with “who benefits from the fees?” With LooksRare, the fees are paid out to $LOOKS token holders who stake their tokens. 

Other competing features on  LooksRare include the ability for users to make an open offer that applies to any piece within a single NFT collection. This feature is particularly useful for users who want to acquire a piece from a collection but do not have a specific piece in mind. Furthermore, the LooksRare platform’s royalties are paid out in real-time to the NFT creators. OpenSea, on the other hand, takes up to a week for creators to receive (secondary) royalties for their work. While such features elucidate the project’s focus on being “community-centred”, the platform’s success is still highly dependent on LooksRare’s ability to attract buyers and the sequent demand for their platform. 

To attract potential buyers,  LooksRare deploys attractive rewards systems that incentivise users. 


According to the  LooksRare website, they offer three unique rewards systems. 

  1. Staking 

Figure 5. The cumulative number of $LOOKS tokens staked

$LOOKS holders can stake their token to earn a passive yield. At the time of the writing, the staking return is reported at 819.31% APR. However, this is variable and adjusts accordingly depending on the number of participants staking their tokens on the network and the price of the $Looks token. At the time of writing, the cumulative number of $LOOKS token staked was approximately 120 million (see Figure 5.)

The ability to earn a passive yield from being a token holder acts as a motivator for participants to lock up their token supply. There are two main components to how this yield is derived: i) the tokenomics design has deliberately factored in staking as a rewards system, hence reserving a portion of the token supply (see above on tokenomics), ii) it is derived from the 2% fees collected on all swap transactions.  LooksRare breaks down the relevant staking rewards information on their website. 

  1. Liquidity provider

Figure 6. Cumulative amount of Liquidity provider tokens staked

A liquidity provider option may be attractive to users who do not want full exposure to the $LOOKS token, and instead, opt to mitigate possible volatility associated with the token by pairing their exposure to Ethereum (ETH). This reward distribution is too, variable, and adjusts accordingly as participants shift liquidity in and out of the network. Theoretically, the rewards paid out to liquidity providers should be more consistent since this is derived from the swap fees collected by the platform. In short,  on top of the pro-rata swap fees earned, by staking $LOOKS-WETH LP tokens in a smart contract by LooksRare, users are able to earn additional $LOOKS token. However, liquidity providers are exposed to the risk of impermanent loss, which is an added risk factor that users will need to consider.

  1. Trading reward

Perhaps one of the more controversial reward options among the three is LooksRare’s ‘Trading reward.’ Discussions surrounding the implications of this reward system have picked up momentum on social media (see, for example, a tweet by djo.eth (@dylanorrell) who explained the observation of wash trading with Meebits). LooksRare incentivises NFT swaps on their platform by offering rewards to buyers of eligible collections. This reward system enables buyers to earn more $LOOKs periodically (within a 24-hour interval). On the one hand, users have observed that this system was particularly attractive for those who have missed out on the airdrop, while boosting swap volumes on the platform. Yet, the trading reward system has sparked concerns around opportunistic users who wash trade on the platform as a means to accumulate more $LOOKs tokens. However, it is argued that in the mid- to long-term, the platform fees act as a mechanism to deter prolonged wash trading behaviours, especially when trading rewards are reduced over time. According to the rewards schedule promoted by LooksRare, the first phase of trading rewards will reduce significantly with time. Interestingly, it can be speculated that the realised profits of early, opportunistic wash traders, affirms the traders’ decisions of switching platforms. Figure 7. highlights some of the top addresses that have benefited from LooksRare’s rewards systems. 

Figure 7. The amount of $LOOKS reward claimed by addresses compared to the volume and fees paid to LooksRare (realised profit may vary depending on the prices at the time of the sale)

Exploring on-chain activity with Nansen

Figure 8a. LooksRare’s trading volume when compared to OpenSea’s (10 Jan to 19 Jan)

Figure 8b. LooksRare’s trading volume by transaction count when compared to OpenSea’s (10 Jan to 19 Jan)

The graph depicted in Figure 8a. represents the volatility in the volume traded on LooksRare over time. Two possible reasons for such volatility include: 1) LooksRare is a nascent platform and their user base is yet to stabilise, and 2) the Trading rewards’s schedule (i.e., 24-hours interval) may have influenced users’ behaviour around how they time their trades.

A time-based analysis reveals that trading volumes spike typically an hour before the trading reward cut-off time (i.e., 11pm to 12 am UTC).  When analysing trading volume by transaction count, the graph hints at a relationship between the two platforms.

On 10 January, while transaction count completed on LooksRare increased, the transaction count completed on OpenSea decreased. This can be interpreted as LooksRare’s strategic funnelling of OpenSea’s users to their platform.

However, on 12 January onwards, both platforms experienced a dip in transaction count (see also 20 Jan). Such a trend could be attributed to the broader cryptocurrency market conditions. 

Figure 9. What $LOOKS holders did with their airdrop tokens (calculated on a first in first out basis)

While the majority of airdrop recipients chose to sell their $LOOKS token, one in three recipients have staked their token, 4.1% have held and 0.85% has entered the liquidity provider pools. Figure 9 details on this breakdown. 

Figure 10. Comparison of daily active Smart Money on both platforms

Nansen’s Smart Money labels track the wallets that have a proven track record of making savvy investment decisions. Since LooksRare’s launch, there has been a drop in the number of Smart NFT Adopters and Smart NFT Hodlers that are active on LooksRare. Comparatively, the number of Smart NFT Adopters and Smart NFT Hodlers were relatively consistent on OpenSea in the last week. Although the number of Smart NFT Minters had initially dropped, this trend reversed on 18 January. Interestingly, the presence of Smart NFT Traders has remained relatively stable on LooksRare. Through this overview of Smart Money on both platforms, we can infer that LooksRare’s rewards systems did attract and retain Smart NFT traders to their platform. 

Concluding remarks

In this article, we reviewed LooksRare’s tokenomics design and reward systems to understand how it has positioned itself as a disruptive, “community-centred” competitor to OpenSea. We argue that despite concerns around what may seem like wash trading at first glance, has been an opportunity for traders looking to maximise their $LOOKS token by taking advantage of LooksRare’s ‘Trading reward’ system.  With a close reference to Nansen’s on-chain insights, we explored whether there are early signs of success with LooksRare’s proactive strategy of funnelling users and buyers to their platform. The data analysed demonstrated that despite LooksRare’s controversial launch, they are indeed both attracting new users and retaining users on their platform. However, whether such a trend would sustain, only time will tell.

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