July 2022, Thiago Freitas

Data Source: OpenSea & Looksrare & X2Y2 Overview

OpenSea navigated the NFT oceans relatively undisputed until late 2021. Everything changed at the beginning of 2022, with the launch of LooksRare in January, 2022 and X2Y2 in February 2022. The new competitors brought different relationship dynamics with users and collections, adding new features and perks to get transaction volume.

The chart below from Footprint Analytics shows the Daily Volume of transactions in USD value for each protocol. As we can see, there was a lot of action going on in the NFT marketplaces during the year so far.

LooksRare got an increasingly large market share following its launch, but when X2Y2 debuted with better trading conditions and a different proposal for their native X2Y2 token, a slice of LooksRare market share migrated to X2Y2. Since mid-May, X2Y2 consistently has had a bigger market share of trading volume than OpenSea. X2Y2 now has over 50% of recorded trades. This begs the questions:

• Where is this volume coming from?

• What is being traded through these new marketplaces?

• What does it entail for the NFT market more broadly, and what should investors take away from this?

At launch, LooksRare and X2Y2 took the same approach to take users from OpenSea — to airdrop tokens to active users that switched from one platform to the other. This strategy is known as a “vampire attack” and aims to provide a financial benefit with the native token issued by the platform.

But these two new platforms weren’t a simple “copy and pasta” from OpenSea. The table below shows what new features they introduced besides the native token offering.

New functionalities such as bulk buying (shopping cart) and lower fees collected by the platform are helping LooksRare and X2Y2 differentiate themselves in the market. The rewards also provide an extra revenue source for the token holders, as these tokens also are entitled to a piece of the revenue generated by the platform.

When taking a look at the number of users over time, the new platforms were able to get some traction at launch, but the dominance remained with OpenSea, as seen on the Daily Active Users chart below. Its daily count is 8x higher than the second one, X2Y2.

As the number of transactions usually reflects the number of users, Opensea also

remains dominant on this metric. The Footprint Analytics chart below shows us similar numbers, with OpenSea averaging an 8x transaction volume than the second place.

It is clear that OpenSea has the most significant number of transactions and users, with X2Y2 in a distant second place. However, when we take a closer look at the average value of each transaction, the picture changes: LooksRare and X2Y2 have a higher average price.

OpenSea has more trades, but the larger ones went to the competition. The average trade size on OpenSea since May has been 260USD. The combination of high-value transactions and a growing user base enabled X2Y2 to become the number one marketplace USD volume-wise, as seen on the chart at the beginning of this article.

The charts below, provided on the Footprint Analytics dashboard, looks at some of the “Blue Chip” collections that consistently have the most prominent trading volume. From these, we can verify how transaction distribution happens between OpenSea, Looks Rare, X2Y2, and other marketplaces.

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Building from the information gathered in the previous sections, we have the confirmation that some of the main NFT collections are being traded at X2Y2, when possible.There are several explanations:

• The smaller fees charged by the marketplace makes more profitable for the sellers to use X2Y2, specially when we are looking at items with higher value.

• The shopping cart feature (bulk trading). This makes the buying process easier, as the buyer can select everything and then proceed to the checkout. By doing multiple buys on one transaction, it also helps to save in gas fees.

• The rewards in X2Y2 native token distributed to buyers and sellers, and the fee revenue share create a virtuous growth cycle.

There is a high chance that these conditions will drive a higher adoption by retail traders (that trade items of a lower value), thus making the X2Y2 native token a good investment opportunity to get exposure to the NFT market without buying a specific collection.

After combining the information presented in the charts, a clear picture is presented: X2Y2 is the leading market for the blue chips NFT collections, which brings a consistent high USD volume transactions. Smart NFT traders have already figured out that a smaller fee saves a lot of money. Therefore, the market with the lower cost (X2Y2) is preferred when possible.

As X2Y2 shares the revenue from the trading fees with the X2Y2 token holders, a sound investment strategy is to buy their native token to gain exposure to the NFT market.