2/ LooksRare has 4 phases of trading rewards that continue for a total of 721 days (nice number). The initial phase gives 2,866,500 LOOKS tokens per DAY to traders. That's $10 million based on the LOOKS price right now 🤯.

3/ This means that if you complete a trade in an eligible collection on LooksRare, your volume will count towards your trading rewards that day and you'll split a portion of the 2,866,500 LOOKS pro-rata amongst all traders at the end of the day.

4/ This of course means that on a completely new marketplace, everyone will be trying to create as much volume as possible to earn a share of the $10m every day. Since marketplace fees are a flat 2%, as long as combined volume is below $500m, wash traders are profitable.

5/ This is also why wash traders are taking advantage of collections eligible for trading rewards that have 0% royalty, such as Meebits and Loot, so their cost basis to wash trade is lower. Yes there was 40,500 ETH volume in Meebits alone.

6/ You might be thinking to yourself at this point that this is real bad. How could they let people wash trade to earn rewards like this?? Devs do something! Well first of all, there's a cost to wash trade. Every wash trade donates 2% of the WETH in fees to LOOKS stakers.

7/ If you wash traded 1,000 ETH, you'd be down 20 ETH in fees. Note that by wash trading 1,000 ETH, you're actually creating 2,000 ETH of vol, since they're both the buyer and seller. So let's have a look at how many tokens someone with 2,000E volume would have earned on Day 1.

8/ So Day 1 was profitable for wash traders! But there are many uncertain variables that could make it unprofitable going forward. 1) As a wash trader, you don't know how many other wash traders there will be after you. 2) It's hard to predict the price of $LOOKS at EOD

9/ So now let's look at the situation for non-wash "normal" trading users. I personally traded 65.07 ETH during Day 1 and received 940.15 LOOKS as trading rewards. That's still $3.5k more than I would have received for doing the same purchases on Opensea. So why wouldn't you?

10/ So as I said before, a 2% fee is taken on all volume that is eligible for trading rewards. This fee is shared to LOOKS stakers over the next 24 hrs. Right now that is helping to generate an APR of 978%! This incentivises people to keep their LOOKS staked, instead of selling

11/ People have been real mad about wash trading, but I'm struggling to understand why. It's a free market. If there's money to be made, people will do it. What they don't realise, is that this is all part of the larger strategy to bring traders/collectors over from Opensea 👀

12/ Since it's basically +EV to trade NFTs on LooksRare right now, organic volume will continue to transfer over from Opensea. As this happens, the amount of wash trading will naturally decrease, as you'd be sharing your rewards with people that aren't here to just farm tokens.

13/ The key here is that it needs to remain +EV for users to trade on LooksRare for a prolonged period, for the network effect to kick in. And how is that achieved you ask? Through the staking yield that is propped up by wash traders contributing WETH fees of course🧠.

14/ It's already been demonstrated that the platform has innovative features that people love. As the UX continues to improve, I can see more and more people making @LooksRareNFT their main marketplace to trade. Once real volume takes over, it's bye bye to wash traders.

15/ To take market share away from the giant that is Opensea (has over 95% rn?), drastic measures are needed. And that's exactly what LooksRare has attempted to do. They are aiming to provide everyone with a much more transparent, decentralized, and user-friendly platform.

16/ This is why I've chosen to publicly support and I'm sure you've already seen it in just the few days that LooksRare has been online. Yes wash trading "looks" bad, but it may be part of the necessary steps to provide a better platform for the community.

@dingalingts @LooksRareNFT

@dingalingts @LooksRareNFT What an amazing thread. TY. This is what makes this community special. Education like this will help us win long term.

@dingalingts @LooksRareNFT Seeing a lot of confusion on how the weth rewards are paid out to stakers. Prob best to make super clear in the UI/socials

@dingalingts @OttoSuwenNFT @LooksRareNFT @kasielseth

@dingalingts @LooksRareNFT Wash traders provide liquidity - which is everything - it’s comparable to providing an LP for any other DeFi project