LooksRare
A community-owned NFT marketplace
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Before we begin, a disclaimer – nothing here is financial advice. We’re analyzing projects that we find interesting in the hope that you’ll enjoy learning about them as well.
With that, let’s dive in.
If you’ve bought or sold an NFT on the Ethereum blockchain, chances are you’ve used OpenSea. It’s the largest NFT marketplace by volume and has already done over $4 Billion in NFT sales in the past month.
As NFTs cross the chasm into the mainstream, the space is ripe for competition. Enter LooksRare – a community-owned NFT marketplace. Nearly every day since its launch, on January 10th, LooksRare has processed more transaction dollars than OpenSea.
Before we dive into LooksRare’s strategy, let’s quickly review how marketplaces work.
Marketplaces 101
A typical marketplace aggregates supply and demand and facilitates transactions between them. In the case of NFT marketplaces, this means creating a platform where NFT buyers and sellers can easily transact.
A key issue for marketplaces is what’s known as the ‘chicken and egg problem’ – you need to have one side of the market attract the other. Without enough buyers, sellers will leave to transact on other platforms. Likewise, a deficit of supply will push choice-constricted buyers to alternative platforms.
Marketplaces that manage to balance supply and demand can build powerful network effects that keep users coming back and prevent competitors from entering the market
The LooksRare Strategy
So, how did LooksRare overcome its own chicken and egg problem so to pose a credible threat to OpenSea?
It’s still early days, but here are a few of strategic decisions that have given LooksRare an edge:
1. Transparency of supply on the blockchain
Unlike eBay, where sellers upload information about their products, NFT data is recorded on the blockchain for anyone to use. As a result, LooksRare was able to access the same data as OpenSea and match their supply on day one. This has allowed LooksRare to solve the supply side of the chicken and egg problem to retain buyers.
There’s a catch, though – while the NFTs are displayed, they don’t have price tags. Sellers need to add prices to their NFTs in order to sell them on the budding platform.
2. The $LOOKS token
LooksRare’s main weapon for incentivizing buyers and sellers is the $LOOKS token. Here’s how it works:
Step 1: Launch the $LOOKS token. Give founders 10% of the supply. Give the Community 75%. Split the remaining 15% between the treasury and other stakeholders.
Step 2: Airdrop $LOOKS to OpenSea’s power users based on how much they’ve spent on transactions (in this case, 3 ETH or more). Suddenly, OpenSea’s most active users stand to gain from the success of LooksRare.
Step 3: Allow people to buy and stake $LOOKS. Distribute all transaction fees to token stakers.
Step 4: Reward people with $LOOKS when they trade certain collections (those with over 1000 ETH in trading volume).Â
3. Platform user-friendliness
Lower transaction fees: OpenSea charges a 2.5% transaction fee which all goes to OpenSea. Meanwhile, LooksRare charges only 2%, all of which goes to stakers of $LOOKS. It’s like buying a product at a lower price in a supermarket where you’re a part-owner.
Quicker royalty payments: OpenSea’s royalty payments to sellers take multiple days to process. On LooksRare, they’re processed immediately.
Collection Offers: LooksRare allows buyers to make a ‘Collection Offer’, where they can make the same offer on every item in a collection. If one person accepts their offer, all offers on other items in the collection are removed. This is useful for people who just want to buy one piece within a collection but don’t care which one they get. It also creates more bids for suppliers who are looking to sell.
Will LooksRare win?
It’s too early to tell.
Although trading activity on LooksRare is already exceeding that of OpenSea, a large portion may be due to wash-trading – where users repeatedly make transactions among themselves to gain rewards.
As the figures above suggest, although LooksRare’s total trading volume is ~3X OpenSea’s, OpenSea still has 60X more transactions and 17X more users. This implies that LooksRare’s transactions are mostly conducted by crypto whales (folks with large amounts of crypto in their wallets).
OpenSea still has other moats that LooksRare has yet to attack including a robust API and direct integration into Twitter’s new NFT profile picture feature.
There’s also competition coming up, with Coinbase launching its own NFT marketplace in the near future. Coinbase has millions of users on its current platform and a history of executing extremely well.
Time will tell if the NFT market ends up being a winner-take-all space, or whether multiple players can coexist in different niches. Either way, the competition will be fascinating to watch.
Want to dabble in the LooksRare ecosystem?
Here are a few ways you can participate:
Explore the LooksRare marketplace to buy, sell, or trade NFTs.
Buy $LOOKS on Uniswap.
Stake $LOOKS and earn rewards in the form of Wrapped ETH and more $LOOKS.
Provide liquidity for $LOOKS on Uniswap and earn rewards.
Other projects we’re checking out
Crypto Coven – A female-created collection of 10,000 NFT witches
DeFi Kingdom – A DeFi game built on the blockchain, designed with usable NFTs
ThirdWeb – A low-code tool that makes it easy to build web3 applications
Invisible College Recommended Reads
What are Wrapped Tokens? | 1-minute read
A short read that explains the concept of wrapped tokens (like WETH and WBTC).
Status Monkeys | 25-minute read
A piece that analyzes NFTs as social networks using Eugene Wei’s Status-as-a-Service framework.
Throughlines | 27-minute read
Rex Woodbury explores 10 crypto buzzwords and paints a narrative that ties them all together.
Community Updates
📽 Community Update Video
Check out our latest community update video to get a pulse about what’s going on at Invisible College this week.
👽 Decentraliens Mint Guide
Last week, we recently released a guide with the details for the upcoming mint of our Decentraliens NFT collection. If you’re interested in participating, make sure to check it out.
🎟 Upcoming Events
Invisible College Builders Night – Mon (1/24) @ 4 pm PT (Discord)
The Legal Side of DAOs w/ Orlando Cosme – Tues (1/25) @ 1 pm PT (Discord)
What can DAOs learn from Co-ops? – Weds (1/26) @ 1:30 pm PT (Discord)
Invisible College Town Hall – Thurs (1/20) @ 12 pm PT (Discord)
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