- LooksRare has been accused of encouraging NFT wash trading with its LOOKS token reward system
- NFT analysis platform Crypto Slam found over $8 billion worth of wash trading occurred on the platform
- Users are repeatedly selling NFTs to themselves on LooksRare and pocketing the LOOKS tokens
New NFT marketplace LooksRare was accused recently of facilitating over $8 billion in wash trading through its platform after users abused the platform’s token structure to obtain LOOKS tokens. The issue revolves around how LOOKS tokens are distributed to users, with the methodology encouraging users to sell the same NFTs to themselves over and over again and pocket the rewards. NFT analysis platform Crypto Slam found that users were abusing the system to earn themselves billions in LOOKS tokens thanks to the way the LooksRare system works.
LooksRare Rewards Enticing Illicit Behaviour
As Crypto Slam reported, LooksRare launched as a “community first” NFT platform earlier this month, luring users away from giants like OpenSea with an airdrop and LOOKS token rewards to those who listed their NFTs on LooksRare, subject to certain conditions.
This led to a glut of former OpenSea users shifting their listings over to LooksRare and receiving the tokens, and the rewards appear to have been so good that these same people were joined by many others in swapping the same NFTs between two wallets on multiple occasions in order to continually benefit from the LOOKS token rewards.
Practice Will Continue Until Tokenomics is Changed
Crypto Slam studied one collection, Meebits, for one week and found staggering data:
As is clearly evident, wash trading accounted for a massive majority of Meebits trading on LooksRare during that period.
Crypto Slam explained that LOOKS tokens are awarded to “both buyers and sellers on the marketplace proportionally based on the percentage of overall platform sales they represent in a 24-hour period.” Recipients can either sell their LooksRare tokens directly or can stake them and earn even more, so the incentive to continue the practice is clear.
With over $8 billion worth of such wash trading already undertaken, unless LooksRare changes the way it rewards its users the practice will undoubtedly continue.