In the initial stages of the emergence of non-fungible tokens (NFTs) in the market, the trading of NFTs took place primarily within their respective platforms. As interest and awareness of NFTs grew, and the market for NFTs expanded, a need for secondary marketplaces for NFT trading began to materialize. This led to the development of dedicated Marketplaces for trading of NFTs.

During the early stages of the NFT Marketplace (2016-2018), first-generation platforms emerged and gained popularity. These platforms, such as OpenSea, MakersPlace, and SuperRare, sought to broaden their respective marketplaces by placing emphasis on both quantity and quality.

OpenSea, for instance, focused on increasing the quantity of NFTs available on its platform by allowing all ecosystem participants to mint and list their NFTs for trade. On the other hand, platforms such as Foundation and SuperRare prioritized quality by selectively inviting and screening creators.

The NFT market has experienced a proliferation of platforms in recent years, as a result of which new forms have emerged that are more distinct and diverse than previous incarnations. A notable trend in this regard is the incorporation of NFTs with other financial products and services such as Automated Market Makers (AMMs), Decentralized Exchanges (DEXs) and staking. These developments are increasingly expanding the utility and value proposition of NFTs beyond their initial usage as digital art and collectibles.

Top 10 NFT Marketplaces (Based on cumulative trading volume until 2023 Jan, NFTGo.io)

The chart presented above illustrates the leading marketplaces for NFTs based on cumulative transaction volume (ETH) as of January 2023. The data indicates that OpenSea Marketplace currently holds the highest transaction volume with 12 million ETH, followed by LooksRare Marketplace with 10 million ETH, and X2Y2 Marketplace in third place with 2 million ETH.

Emergence of LooksRare: A New Frontier in the NFT Marketplace

In January 2022, LooksRare Marketplace, a platform equipped with participant compensation solutions, such as its own token (LOOKS token) and WETH, made a strong debut with about $110 million trading volume on its official launch day. On the same day, OpenSea Marketplace about $170 million trading volume. This immediately established it as a significant player in the market and a potential competitor to leading marketplace, OpenSea.

However, despite its initial success, LooksRare’s participant reward solution has highlighted a significant problem in the industry known as “NFT Wash Trading.” This form of market manipulation involves artificial NFT transactions, which are repeated in order to create liquidity in actual transactions and ultimately influence NFT prices. As the legal framework for NFTs is still relatively underdeveloped, NFT Wash Trading poses a significant risk for the market. Unfortunately, the participant compensation solution implemented by LooksRare, which was intended to encourage platform activity, has devolved into a “Trading Mining” method, where economic rewards are obtained through trading activities. As a result, this has led to a significant increase in NFT Wash Trading.

Cumulative ETH Trading Volume on OpenSea and LooksRare Marketplace (before) and after(below) Wash Trading Filter is applied (until 2023 Jan, NFTGo.io)

As depicted in the graph above, at first glance, OpenSea Marketplace appears to have a significant lead in terms of cumulative trading volume, with a total of 12 million ETH and, LooksRare Marketplace is closely behind, with a trading volume of 10 million ETH. However, upon closer examination and the exclusion of suspected cases of “NFT Wash Trading”, it becomes apparent that the true trading volume is significantly lower. The estimated trading volume for LooksRare is a little over 1 million ETH, indicating that a staggering 90% of transactions on LooksRare were suspect cases of “NFT Wash Trading”. This highlights the need for more robust regulations and oversight in the NFT market to prevent market manipulation.

The continued emergence of new NFT Marketplaces and their Vampire Attacks.

After the successful appearance of the LooksRare Marketplace, new marketplaces continued to emerge, and their ‘Vampire Attacks’ to gain market share continued. “Vampire Attack” refers to the strategy of offering better rewards to attract users away from existing platforms.

LooksRare Marketplace has implemented a successful strategy of offering transaction fee rewards through LOOKS token staking and other participant compensation solutions, which has resulted in the successful migration of OpenSea users. X2Y2 Marketplace has also gained attention by airdropping their tokens to OpenSea Marketplace users and combining 1,500 ETH and 10 million X2Y2 tokens in order to create a liquidity pool on Uniswap to offer active token rewards. This approach has been effective in attracting users and highlights the potential for NFT marketplaces to find new ways to incentivize and compensate participants.

In the second half of 2022, the Blur Marketplace (October 19, 2022) was launched. Blur Marketplace offers a unique approach to royalties by dividing them into three tiers and allowing buyers to adjust them at will. The marketplace is well-known in the NFT ecosystem and offers a user-friendly UI/UX that appeals to traders, as well as fast transaction speeds and a 0% transaction fee. Additionally, at the launch of the service, Blur Marketplace airdropped a box containing the governance token $BLUR (released in January 2023) to users with NFT trading records in the last 6 months. With the launch of the service, the Blur Marketplace attracted a lot of users due to its 0% transaction fee, and on the first day of its service launch it had a trading volume of close to 1,000 ETH.

OpenSea, LooksRare, X2Y2, Blur Marketplace Trading Volume Trends in the Second Half of 2022(NFTGo.io)

Conclusion

The NFT market is constantly evolving and changing with the emergence of new marketplaces and the needs of market participants. As a result, competition among NFT marketplaces is expected to increase, particularly in regard to transaction fees. OpenSea, which is considered the first-generation marketplace and currently the most successful, currently charges a 2.5% transaction fee. It is important to consider how this fee structure will hold up in the face of new marketplaces with unique models and functions and what the future prospects are for OpenSea in the midst of these changes in the NFT marketplace industry.

The emergence of various NFT marketplaces has led to the development of various data analysis tools that make it easier for market participants to analyze market trends, explore potential, and identify opportunities. These tools, such as wash trading filters and rarity tools, are based on real-time on-chain data during NFT trading, which allows for a more accurate analysis of the market. These tools have the potential to increase the chances of finding profitable opportunities in the market, and they are creating a new paradigm in the way the NFT market is being analyzed and understood.