When human civilizations find ways to reliably meet the basic needs of food and shelter, art and culture follows. Art at its core produces objects and experiences whose only purpose is to provide enjoyment, purchased with society’s labor surplus as we acquire paintings, music, films, performances, delicious treats, and more. Otherwise, what’s the point of working so hard anyway?
Arts and culture have been evolving for centuries ever since the first cave dwellers told their stories by painting on the cave walls. Today’s art world is going deep into NFTs – a public blockchain-enabled object/data structure that allows for the digitization of culture. By storing art in the online world using NFTs, it allows our shared culture to be digitized, traded, and made even rarer.
The right-click savers that deride NFT art fundamentally misunderstand what this could mean for the art world moving forward. Most projects today are collections of crudely designed profile pictures for the trend followers on Crypto Twitter that want to signal that they ‘get it’. What the NFT space will do in 10 years is entirely unknown, but it will look nothing like today. While some are excited about the music industry transitioning onto the blockchain, perhaps the visual arts domain will see the most activity as this subcategory within the art world has evolved the least during the last 20 years of our increasingly digital lives. There is no Napster, iTunes, or Spotify for visual art.
Trading places on NFT marketplaces
NFT trading happens on dedicated marketplaces, and OpenSea is the leader in the category. It is a centralized company that operates an exchange that allows the non-custodial trading of NFTs. In exchange for creating a market, OpenSea charges a healthy commission on all trades and minting. As the first mover, the NFT marketplace commands anywhere between 80% to 90% of the entire trading volume of NFTs.
However, an NFT marketplace does not have to be centralized and LooksRare was created as a decentralized alternative more in line with the tenets of the new Web3 economy. The platform is designed to benefit its community, mostly through the use of the native utility token LOOKS. LooksRare gives back or rewards users for using the platform, giving traders, collectors, and creators the opportunity to earn the LOOKS Rare Token. A portion of the fees also go to the LOOKS DAO, and LOOKS governance token holders can vote directly on how to use the funds.
Compared to OpenSea where we are all just customers of a centralized NFT marketplace, LooksRare offers a way for everyone to directly participate and benefit from the explosion of the digitization of culture.
So you got the LOOKS, but have you got the touch?
The fundamentals supporting the LooksRare marketplace would impress even Shania Twain. It is the number two NFT trading platform by trading volume. And since protocol revenues are available to token holders, its price-earnings (P/E) ratio is very attractive indeed. 2x to 3x earnings is an amazing valuation for a protocol that could be one of the dominant exchanges of human culture on the internet. This is the first real market cycle for tradable NFTs.
The token hasn’t been spared at all though during the recent market sell-off.
LOOKS listed in January 2022 at $2.60 and now hovers around $0.17, which is a decline of about 95%; its all-time high (ATH) was $6.87, meaning it is down 98% from its top. However, it is completely rational for the businesses connected to this sector to experience 98% drawdowns from their recent all-time highs.
The fact that trading volumes and prices are down has not reduced the enthusiasm of sellers. Appreciation of how impactful NFTs will be to human society is only increasing. Anyone even somewhat involved in the arts industry is trying to figure out what NFT technology means for their business model. NFTs will not go away, and their disruption to the economics of culture will be massive.
When the next cycle hits, these top NFT marketplaces could just be the pinnacle of how culture is traded and the P/E multiple expansion will be biblical. Of course, there could always be newer, shinier NFT marketplaces in the near future. But the table is basically set for global NFT marketplaces.
It will be very difficult to replace OpenSea or LooksRare. If the community owns the platform on which the majority of NFTs trade, then why would the community have any reason to try out a new competitor? And as every NFT seller knows, an exit liquidity strategy is not always optimal. Logically, this means it’s better to sell on the top-tier NFT marketplaces rather than some new startup that promotes something simple as lower trading fees. Liquidity begets more liquidity and LooksRare is already in position.
LOOKS token is only available on a limited number of exchanges, including AAX. It is also available under AAX Savings, which offers a 60% yield.