Durian Capital Profile picture
Mar 4 26 tweets 13 min read
$LOOKS Thread:
1/ Intro

While most of #LooksRare's volume has been wash trading, the legitimate NFT volume in Jan alone was still more than what #NFT marketplaces #Rarible, #SuperRare, #Foundation, #Makersplace, and #Aysnc did in all of 2021 combined.

That is still impressive.
Remember that wash traders on #LooksRare still have to pay a 2% platform fee in $WETH.

As rewards lower, the $LOOKS earned may be worth less than the $WETH spent, making wash trading unattractive.
But by then, #LooksRare would’ve achieved market share that #OpenSea’s closest competitors failed to achieve over a longer horizon.

Still early days, but I would say what the platform managed to achieve in such a short amount of time is still objectively impressive.
2/ Tokenomics

The $LOOKS token is the protocol token from the LooksRare ecosystem and is an ERC-20 token deployed on Ethereum. The token is distributed to stakers and traders. In the future, $LOOKS will become the governance token in LooksRare’s future DAO.
- 100% of LooksRare’s trading fees are redistributed proportionally to $LOOKS stakers. $LOOKS stakers earn both $LOOKS and $WETH.

- $LOOKS is earned each time a user buys or sells a #NFT on LooksRare.
$LOOKS supply was pre-minted with 200 million tokens transferred at deployment and has a supply cap of 1 billion tokens. All tokens would have been released 720 days after launch, with rewards being reduced after each phase.
3/ Competition

Prior to the launch of #LooksRare, #OpenSea dominated the NFT marketplace in terms of volume share. However, LooksRare was able to exceed OpenSea in terms of volume when it launched in Jan 2022.
While a lot of volume came from wash trading, legitimate trade volume was still impressive.

As compared to its competitors, #LooksRare collects a lower platform fee of 2%, and was only founded in 2022.
Despite having launched so recently, #LooksRare is the top marketplace in terms of volume (30d) and has the second most traders amongst Ethereum NFT marketplaces.
4/ $LOOKS Valuation

While a DCF for #NFT marketplaces like #LooksRare is possible, it is probably not too meaningful as future cash flows cannot be reasonably predicted for a marketplace that hasn't been around for long.
As such, the comparable companies approach would be more meaningful.

Looking at Market Cap (or Valuation)/Traders (30D) would be the most applicable multiple to consider for valuation as it ignores wash trading, which accounts for a large amount of the volume on #LooksRare.
This should paint a less skewed picture of the adoption and provide more accurate valuation comparison between #LooksRare and #OpenSea.

Just comparing the ratios of the two platforms, $LOOKS seems to be trading at a discount at its current price of $1.43.
However, it is important to note that OpenSea's valuation used for the exercise was obtained before the market-wide crash in their Series C, while the market cap of $LOOKS has considered the market-wide crash.
5/ Catalysts

- With the NFT community getting frustrated with OpenSea's technical hitches and potential IPO, the community could gradually be inclined to move their activities to LooksRare. This may be accelerated by #web3 personalities like @Arthur_0x promoting the platform.
- As a NFT marketplace, LooksRare could grow if the macro #NFT and #Metaverse spaces continue to experience strong growth.

- #LooksRare has done an impressive job in quickly capturing market share largely because of their airdrops and rewards systems. LooksRare could become a
leading #NFT marketplace if it can create a sustainable and attractive rewards system to attract users to its platform for more legitimate trading

- If #LooksRare is able to attract more founders and content creators of projects to favour their platform over other marketplaces

There are definitely some risks which I wanted to cover in detail, but there is a limitation of 25 tweets per thread. I would be happy to discuss more, but some of the risks and their short descriptions include:
- Lowering of rewards (whether volume will remain after)
- Misaligned incentive system (possibly more for founders to gain through wash trading than legitimate activity)
- Sustainability of token incentive system (Short timeline of 720 days to gain market share)
- Competitors (Marketplaces like #OpenSea launching a token, investors may prefer to invest in the incumbent instead)
- Founding team (Anonymous founders ability to successfully run a leading NFT marketplace, though there have been positive signs of solving key issues)
7/Concluding Thoughts

Only time will tell who the winner of the #NFT marketplace space will play out, but an investment in $LOOKS could provide good exposure to the NFT space, but is a bet on #LooksRare competing against other marketplaces.
The ultimate challenge would be whether #LooksRare can continue to attract more users on its platform in a sustainable manner and manage to keep them on the platform. If this is possible, $LOOKS will be an amazing investment as the #NFT market is poised for high growth.
Investing in NFT-infrastructure such as marketplaces is definitely a winning long-term play as the growth in volume (and revenue) is likely to outpace the growth in prices of most individual #NFTs.

Infra-investors also save a lot of time monitoring individual projects.
Some portfolio exposure to $LOOKS as a long-term play could be wise, especially since prices have been going down for a variety of reasons, providing a better entry price.

Lucrative $LOOKS and $WETH tokens can be earned by staking purchased $LOOKS as well.
Alright, thanks for reading, I would really love to discuss further!

I'll be writing more threads on other opportunities, do follow @DurianCapital if you enjoyed the thread or took something away from it.

#WAGMI #Crypto #Web3 #NFT
Also, I would really appreciate it if you could help me to like or retweet the thread :)

Thanks everybody, have a good weekend!

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More from @DurianCapital

Jan 20
I just purchased some $LOOKS. I'm looking at this as a long-term investment into the #NFT space.

Here is a short thread on my preliminary thoughts on #LooksRare ($LOOKS), the relatively new trading platform for #NFTs:
1/ Description
- #LooksRare is a NFT trading platform. While this concept is not new, the team is hoping to give more to its users through its rewards system. There are 3 ways to earn rewards (Staking, Trading, and providing liquidity).
- 100% of trading fees collected on the website is distributed to stakers of $LOOKS. Users can also trade NFTs from eligible collections to earn $LOOKS rewards.

- $LOOKS is currently priced at $6 with a market cap of $881m.
Read 10 tweets

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