I have already discussed why wash trading NFTs are not illegal in previous podcast and will not discuss here. At least not illegal yet and why they aren't likely to be found illegal or have much risk.
This works just like Uniswap-- it attracts liquidity and it provides a service-- instead of exchange- it does wash trading services for people that want to make and sell NFTs.
I haven't quite figured out the mechanics of it as far as account creation and wallets on NFT marketplaces. I haven't figured out how any of this could work- just talking outloud about some ideas.
Someone makes and NFT that they want wash traded. They sent eth to the DAO. Then the DAO buys the NFT with its liquidity. The DAO might trade it within itself if possible. Or...
Someone buys the NFT from the DAO with their own account from the outside-- the DAO then pays them 'back' but the guy still holds the NFT. The guy would have to initially deposit some funds in the DAO, or he could just profit when a real buyer comes along and not have to give any of back to the DAO.
What would people think about this if it was loud about it? Is Chainanalysis tracking this? How hard is it to track?
If you think this is unethical, you do not know how such high valuations for 'rare' NFTs are created. Even if you don't like NFTs, the best thing to do is to sell short, meaning sell into the market.
This is a legitimate use case and it could be very profitable. I think if it makes money for liquidity providers they will contribute liquidity- they won't care how the profits are found. Anything goes when code is law.
https://arxiv.org/pdf/2102.07001.pdf