We get a similar result when doing the same comparison with OpenSea, which recently raised at a $13.3B valuation in January, or ~40x LOOKS FDV. The only LooksRare metric that comes within 5x of Magic Eden’s is volume, and this measure does not account for wash trading. Compare that to LooksRare over the same period, and find that the Ethereum NFT marketplace handled 41,000 transactions, representing $70M, for 15,000 users. In the past 30 days, Magic Eden has processed over 14 million transactions, accounting for $327M in volume across 272,000 users. Last month, the leading Solana NFT marketplace, Magic Eden, raised $130M at a $1.6B valuation, representing a valuation nearly 5x that of LooksRare. The total NFT market is expected to grow to $147 billion by 2026. Eventually, NFT marketplaces will need to verticalize, leaving behind the current one-marketplace-fits-all style of today. Therefore it is unlikely they will find more success in NFTs. Aggregators like 1inch in DeFi have not gained significant traction. The best hope for these marketplaces is for aggregators like Gem (acquired by OpenSea) and Genie (purchased by Uniswap) to gain more traction. NFT marketplaces like LooksRare and its competitor X2Y2 will lose out to OpenSea because their incentive structures are not sustainable.
For LOOKS to be a buy, it needs at least one of two things: 1) attract more users and daily transactions and 2) collect more fees than it pays in incentives.
This strategy is profitable when the incentive paid out is more than the 2% fee.Īt its current, fully diluted valuation of $325M, LOOKS is a risky investment in our opinion because it has yet to attract a significant user base, a large share of its volume still relies on wash trading, and it currently pays out more in incentives than it gains in fees. Wash trading is when someone buys their own NFT to earn the LOOKS reward. Many speculate that a majority of the volume on LooksRare is wash trading because the number of daily transactions and buyers on LooksRare has yet to eclipse that of OpenSea. Its market share dropped to 54% and 3.5% in the following two months, respectively. In its first month on the market, LooksRare accounted for 65% of the USD value transferred on Ethereum NFT marketplaces. 100% of the platform’s 2% fee on each transaction goes back to LOOKS stakers. Before June 13, the platform rewarded users for listing an NFT. LooksRare incentivizes users by rewarding buyers and sellers of NFTs with LOOKS after each sale. The platform airdropped LOOKS tokens to all users of OpenSea who had traded 3 ETH or more in volume. LooksRare is a decentralized NFT marketplace launched in January 2022 to combat OpenSea’s market dominance as a centralized entity. LooksRare Deep Dive – Investment Report Thesis
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