Did you know that only in the crypto universe does a platform be developed by some unknown founders out of the blue? All done just to dare an industry leader and happened only in several weeks. Some vampire attacks were also involved in the challenge—but at least without any bloodshed this time. So, what actually happened? Keep on reading this article to find out the answer.
LooksRare Vs. OpenSea
A non-fungible token (NFT) marketplace called LooksRare was just launched in January 2022 when it all of a sudden earned over USD 9 billion. The number almost tripled what OpenSea—the planet’s very first and largest NFT as well as crypto collectible marketplace—gained in the same month.
As if that was not enough, LooksRare then produced a protocol revenue as much as USD 307 million only in 30 days after its launching. Meanwhile, OpenSea earned merely USD 110 million during the same period. That number is not even a half of the revenue of the tech giant’s competitor. However, those numbers do not really tell us the truth.
What really happened is OpenSea has become a vampire attack’s target from the startup LooksRare. It turned out that the latter airdropped its native tokens known as $LOOKS to the users of OpenSea that spent 3 ETH (Ether currency) at the least within the second half of the year 2021. Let’s find out more about vampire attacks and how exactly the two companies collided.
What are Vampire Attacks?
The Web3 or crypto phenomena are actually a form of strategy which offers incentives or rewards to the users of a certain crypto/NFT platform to attract them to join another platform. The incentives given away are usually tokens and the reason behind the name “vampire attacks” is how it “sucks” users like a vampire sucking blood out of its prey.
The most infamous vampire attack happened back in 2020 when a DeFi (decentralized finance) platform and community SushiSwap released an almost resembling DEX (decentralized exchange) to the leading crypto-industry platform UniSwap with just one significant difference: the users who moved their assets from the “twin” platform to SushiSwap were rewarded the $SUSHI, its original tokens.
By taking the incentives, the users will be offered some governance rights as well as a discount on transaction fees effective on SushiSwap. As a result, the liquidity of UniSwap had to decline for a while since users migrated approximately USD 1.2 billion in funds to SushiSwap. All due to the temptation to cash in the rewards offered. The good news is UniSwap finally recovered and directly launched its own token.
LooksRare’s Vampire Attacks
Following SushiSwap’s steps, LooksRare targeted OpenSea in early 2022 as its “prey.” Below are the typical games they played to wrack down the industry leading NFT marketplace:
- The target chosen must be a crypto/NFT industry leader.
- Developing a new, competitive platform that is usually a resemblance to the target, yet strategically distinguished.
- Offering a luring reward or incentive to the users willing to migrate their assets from the targeted platform to the new platform and then to the “vampire’s” platform.
What makes the key difference between both platforms’ attacks is that SushiSwap offered an almost identical duplication of UniSwap’s code called a fork as well as tokens as rewards. Meanwhile, LooksRare seemed to have developed its own smart contracts. The rest in the games is more or less in typical ways.
The company chose OpenSea which is an industry leader. They also built a competing, yet different platform, looksrare.org and attracted users with great incentives, which is $LOOKS token, if they decided to move.
More and More Incentives to Come
As we know, blockchain nature is open-sourced making the anonymous team behind LooksRare able to spot the users of OpenSea who had at least exchanged 3 Ether worth NFTs within six months before they bombarded the industry leader with $LOOKS tokens. Nonetheless, the users had to register an NFT on the LooksRare’s exchange first should they want to claim the free tokens.
The best part is airdropping tokens as a reward to the active NFT community has been proven effective due to the NFT flood on the new platform. It resulted in the raise of value of every single $LOOKS token to almost USD 7 only in 10 days after the token’s release, collecting a market capitalization worth USD 1 billion! And that was not the only incentive they offered.
As if that was not enough, LooksRare’s users got to earn more and more tokens by exchanging NFTs and staking their $LOOKS on the platform. While OpenSea charges a 2.5% fee for each NFT sale, LooksRare charges 2% instead. Moreover, staking (storing the tokens in the smart contracts) allows the stakers to be rewarded zero fee per sale.
Is It a Wash Trading?
From what we have learnt, it is safe enough to say that giving away tempting rewards could draw people’s attention to the LooksRare platform. Not to mention that a total reward of USD 10 million per day has also been enough to maintain the volumes of the startup marketplace’s daily trades exceeding that of OpenSea.
Regardless of the winning, though, if you take a closer look at both platforms’ total daily users, you will find that what LooksRare earned initially is not that impressive. Despite the fact that LooksRare has always been doubling OpenSea’s revenue, it has way more active users than that of LooksRare—like 20 to 40 times!
It leads to an assumption that the newcomer achieved its massive earning due to incentive gaming. In fact, there was an estimation report that around USD 8 B out of the USD 9 B revenue per January 2022 was a result of wash trading activities—traders or investors selling and buying their own NFTs. Nevertheless, it does not mean that the platform is only a “big mouth” with no real action.
LooksRare’s remaining valid NFT income is still on top of what other NFT marketplaces SuperRare, Rarible, Makersplace, Aysnc, and Foundation earned within the entire of 2021 combined. Even without any wash trading, the launch of LooksRare itself can still be viewed as a big success. Thanks to their interesting offers and features for their users, such as no charge at all for any private sales conducted in the platform.
Last but not least, if you are a LooksRare user, bear in mind that there is always a risk of “rug pull” coming with anonymous teams. Plus, the vampire attacks they did could be an indication of an intended manipulation. Also, the fact that their smart contracts have not been audited and have run with no GitHub report should be enough to make all the traders beware.