Undeterred by the recent crypto price crashes, the NFT market continues to explore its growth limits. OpenSea, the flagship NFT marketplace, hit a record volume of nearly $5 billion in January with over 540,000 active traders. While the top dog is consolidating its monopoly position, smaller platforms have little chance of asserting themselves in the ETH-based NFTs market. However, LooksRare seems to have found a way – with the so-called vampire attacks.
What are vampire attacks?
Vampire attacks are a common practice to pull users and thus liquidity from one platform to another. Rewards serve as an incentive: for the change, newcomers usually receive an amount in tokens. So a vampire attack is basically platform piracy that lures users with a bonus system. Not illegal and not a stroke of genius, but a powerful method, as evidenced by LooksRare’s growth numbers.
LooksRare has the daily trading volume of OpenSea out of the box overtaken. At its peak on January 19, the young platform achieved sales of over 840 million US dollars. OpenSea made less than $200 million on the same day. So far, LooksRare has only accounted for six percent of active users on OpenSea. If you consider the short period of time since the platform launch, serious competition could be imminent.
A gift horse…
The vampire attacks may have contributed significantly to the rapid ascent. Users who achieved a trading volume of at least three ethers on OpenSea between June 16 and December 16, 2021 were paid a certain amount of the native cryptocurrency LOOKS when LooksRare was airdropped. Depending on the trading volume, the payouts were between 125 and 10,000 LOOKS tokens.
It was worth it: the LOOKS course has increased by 200 percent since the drop. With a market capitalization of around $1 billion, the token that can be traded via Uniswap has now worked its way up to number 95 among the largest cryptocurrencies – along with SafeMoon, Dash and Synthetix Network – proof that vampire attacks can have a major short-term effect.
LooksRare has tasted blood
But LooksRare wants more, and nothing less, than “setting a new industry standard for NFT marketplaces”. According to its own statements, it is the “first NFT marketplace that actively rewards merchants, collectors and creators for their participation”.
No empty marketing promise: Unlike OpenSea, which collects trading fees of 2.5 percent, LooksRare only charges two percent fees in Wrapped Ether (WETH), which are paid out in full to LOOKS stakers. Trading rewards in the form of LOOKS tokens are also available for NFT purchases and sales.
Less fees, more revenue
There are also no fees for private sales, i.e. NFT transactions processed directly between dealers and buyers. Royalties for resales are also paid out immediately, and not after two to four weeks as with OpenSea, which earns a lot of money from the license fees.
With the reward system, LooksRare wants to ensure long-term user loyalty. Three quarters of the total quota of one billion LOOKS tokens are to be distributed to the community via airdrop, staking rewards and trading rewards.
However, the strategy is not entirely altruistic. 10 percent and thus 100 million tokens are reserved for the founding team. And that is a mystery. Because none of the alleged twelve team members gave a real name on the homepage.
OpenSea feels vampire bite
Vampire attacks are not an invention of LooksRare. As early as October last year, the NFT marketplace Infinity tried to attract OpenSea users with an airdrop poach. However, after a brief rush, success fell by the wayside. The highest daily turnover was $2.2 million in December.
However, LooksRare’s numbers are of a different caliber altogether. With regard to processed transactions, the platform is already the second highest market share, ahead of Rarible or SuperRare. OpenSea, which has also built up its monopoly position through such prominent collections as CryptoPunks and Bored Ape Yacht Club, and has pushed through a centralized business model in a decentralized ecosystem, is likely to feel the pressure.
Also because all collections are transferable to LooksRare. The marketplace indexes NFT collections on the ETH blockchain, which means that in principle all ETH-based NFTs available on OpenSea can also be traded on LooksRare. The questionable but legitimate practice of vampire attacks may have reshuffled the decks in the NFT market.