Blockstar Research Report: LooksRare
Blockstar Research Report: LooksRare
Research and analysis on one of the top decentralized NFT marketplaces
Contents
Project Overview
Protocol Description
Industry Overview
Token Utility & Tokenomics
Competition & Risks
Team, Partnerships, & Investors
Key Metrics & Evaluation
Project Overview
LooksRare is a revolutionary decentralized NFT marketplace where traders, collectors, and creators earn for participating in the ecosystem. The goal of LooksRare is to create a community-centric ecosystem wherein traders and collectors buy digital art and other NFTs directly from the creators, remaining true to the decentralized nature of blockchain technologies. The first-to-market decentralized NFT marketplace aims to give the power back to its users by rewarding traders and instantly paying creators in its native token $LOOKS.
Key Takeaways:
LooksRare is a decentralized NFT marketplace
Users that buy or sell NFTs on LooksRare earn $LOOKS tokens
100% of trading fees are earned by $LOOKS stakers
Creators get royalty payments in $LOOKS at the time of sale
Project Description
LooksRare was developed on Ethereum using EIP-719 and ERC-2981 on-chain standards. These standards were implemented to enable users to trade NFTs in a decentralized economy while providing the developers the flexibility to prioritize scale, speed, and security. LooksRare’s development team also highlights its focus on building smart contracts which contain custom modular systems – allowing the developers to roll out new features over time. Some of these new features include: collection offers, trait offers, and multi cancellation.
Collection Offers: Make an offer on all NFTs in a selected collection
Trait Offers: An offer to buy an NFT based on a specific trait
Multi-Cancellation: Cancels multiple orders with one transaction
LooksRare’s Ethereum Standards
EIP-719: This Ethereum standard is a procedure for the hashing and signing of typed structured data. It allows web3 wallets like MetaMask to display data when signing transactions in a structured and comprehensible format. This standard effectively translates the cryptographic code of transactions, making them understandable for most users.
ERC-2981: This Ethereum standard is built for NFT Royalties. It provides a standard procedure for returning royalties to NFT owners on decentralized NFT marketplaces, contrary to centralized ones. Without this standard, LooksRare would not be able to provide royalties to its NFT creators.
Staking, Listing, and Trading Rewards
Participants in the LooksRare ecosystem are rewarded in $LOOKS for partaking in staking, listing, and trading services.
Staking Rewards: 100% of fees accrued from trading are returning to LooksRare stakers in the form of WETH. The platform has 2 staking pools: Looks Compounder and Standard Staking.
Trading and Listing Rewards: NFT traders (buyers and sellers) are rewarded in LOOKS for participating in the marketplace. Rewards are distributed daily.
Industry Overview
Three important metrics provide valuable insight when evaluating the overall NFT industry: the number of NFT holders and traders, the total market cap of NFTs, and the volume of NFTs traded.
Number of NFT Holders and Traders: This stat illustrates the progress in general adoption of NFTs and how efficient and liquid the NFT market is at any given time.
At the time of this writing, there are 3,271,510 NFT holders.
Total Market Cap and Volume of NFTs Traded: Total Market Cap shows the value of NFTs listed, however this metric is meaningless if no one is buying what is listed. Therefore, total volume exchanged is equally as important when analyzing these metrics. Additionally, it is important to consider that NFTs are traded in ETH, so we must look at both the value in ETH and in USD, as ETH’s value is constantly fluctuating against the US dollar. As of September 2022, NFT market caps and volumes can be seen in the graphic below.
According to Verified Market Research (VMR), the NFT market was worth $11.3B in 2021. VMR projects the NFT market’s value to reach $231B by 2030 at a CAGR of 33.7% over the next eight years.
Token Utility & Tokenomics
Token Utility
The main purpose of the $LOOKS token is to reward users who are staking $LOOKS. Stakers are rewarded with fees incurred by transactions on the marketplace. Traders can earn rewards in $LOOKS or $WETH which accrue from trading activity and are paid out daily.
Tokenomics
75% of the tokens were distributed to the community
12% airdrop
18.9% allocated to staking rewards
44.1% allocated to trading rewards
25% of the tokens were distributed as follows
1.7% liquidity management
3.3% strategic sale
10% founding team
10% treasury
Competition and Risks
LooksRare’s competition is primarily from other NFT marketplaces, both centralized and decentralized. These platforms include OpenSea, x2Y2, and SudoSwap.
OpenSea
OpenSea is the world’s first and largest digital marketplace where users can buy and sell NFTs. OpenSea is a centralized marketplace owned and operated by Ozone Networks, Inc. They charge a 2.5% fee on all transactions. OpenSea offers a wide range of marketplace features and research tools for traders and collectors of unique digital assets.
These features include:
Ethereum NFT support
Solana NFT support
Art NFTs
Photography NFTs
Music NFTs
Sports NFTs
Trading Card NFTs
Utility NFTs
Virtual Reality NFTs
Key 2022 OpenSea Statistics, per Earthweb.com 2022 report:
Over 1 million users in 2022
121.7 million site views
United States makes up 23% of traffic to site
As of 2022, OpenSea registers more than $2B in trading volume
OpenSea generated $365m in revenue in 2021
X2Y2
X2Y2 is a decentralized NFT marketplace that is the closest protocol mechanically to LooksRare. Similar to LooksRare, X2Y2 is a community owned and driven NFT market where 100% of market fees collected are rewarded to X2Y2 stakers. Two features that differentiate X2Y2 from Looksrare are the gas rebates and loan services they offer.
At times, transacting on Ethereum can be costly due to high gas costs. X2Y2 offers a gas rebate for users of their marketplace in the form of their native X2Y2 token. For some traders, this rebate can be the difference between them trading on X2Y2 or on another marketplace.
With the “NFT Loan” feature on X2Y2 users who do not want to sell their NFTs can pick a loan offer from other users with the best terms. This allows users to receive ETH from a lender, while locking the NFT on X2Y2 until the loan is paid off. NFT holders can now receive liquidity for their NFTs while lenders can receive interest on the ETH they lend.
SudoSwap
Sudoswap is an NFT marketplace introduced in July of 2022 and has reached over $66 million USD in total volume since launch. Sudoswap is unique because it does not follow the traditional NFT marketplace design; instead they have created an automated market maker (AMM) protocol that facilitates NFT-to-token swaps. This design is similar to the liquidity pools found in popular DEXs like Uniswap, except they have been altered to facilitate swaps with NFTs.
The marketplace requires liquidity providers to deposit NFTs and ETH into a liquidity pool. Users can then buy NFTs or sell NFTs into these liquidity pools. Every time an NFT is bought or sold, the price to buy or sell an NFT changes.
This marketplace design has received mixed reviews from the community. Some praise it for its innovative design and ability to create on demand liquidity for NFTs, while others believe it undermines the industry due to the removal of royalties to creators.
Team, Partnership, and Investors
The LooksRare team consists of 36 anonymous members who actively develop the project under aliases. They are available for contact through most social channels and are actively hiring, however maintain a certain degree of anonymity for protection, which is not uncommon in the space. The team mostly consists of engineers, project managers, community managers, and data analysts.
Assembly Partners and Fisher 8 Capital are the two major early stage VC firms backing the project. LOOKS stakers are also included as investors.
Key Metrics & Evaluation
LooksRare launched in January 2022. All data and financials are as of Looksrare launch.
Revenues: OpenSea revenues consist of 2.5% royalty fees on sales of NFTs. Looksrare revenues consist of 2.0% royalty fees on sales of NFTs.
Looksrare: $26,855,035,275 * .02 = $537,100,705
Opensea: $23,069,396,787 *.025 = $576,734,244
Users: Number of total users on each platform
Looksrare: 120,193
Opensea: 1,813,812
Total Operating Expenses: LOOKS token emissions
Looksrare: $871,400,000
Opensea: n/a
Sales Volumes: Total sales volumes in ETH on each platform
Looksrare: $26,855,035,275
Opensea: $23,069,396,787
Total Market Cap:
Looksrare: $124,000,000
Opensea: $13.3B Valuation (as of January 2022)
Sources
https://docs.looksrare.org/about/looks-tokenomics
https://members.delphidigital.io/reports/sudoswap-where-defi-innovation-meets-nft-markets