LooksRare, the third-largest non-fungible token (NFT) marketplace on Ethereum, is the latest platform to make paying creator royalty fees optional in a growing trend, as the industry struggles to maintain profitability amid an ongoing slump in the NFT market.
See related article: NFT marketplaces ditching standard royalty fees labeled “short-sighted”
- The Ethereum marketplace announced the change in a blog post on Thursday, where it said it would remove mandatory creator royalty fees and instead pay creators 25% of the protocol fees from each transaction. Protocol fees are operating fees that LooksRare charges on each transaction and are set at 2% of the value of each sale.
- “The growth of zero-royalty marketplaces has eroded the general willingness to pay royalties throughout the NFT space,” the blog post said. “Good news for traders, but with a big downside: the move away from royalties has removed an important source of passive income for most creators.”
- Creators typically set a standard royalty fee into the code of the NFT so they are paid each time it is re-sold; however, this is not enforceable on-chain and marketplaces are using loopholes to circumvent these now.
- Solana-based Magic Eden was the latest high-value marketplace to make the move to optional royalties in mid-October, meaning that the vast majority of sales on that blockchain did not result in paid royalties to creators.
- Some in the industry pushed back on this trend, calling it “short-sighted” as they felt it was undermining NFTs’ ability to change existing incentive structures within the burgeoning Web3 industry by paying creators royalties for life.
- Monthly NFT sales are on track to decline for a sixth straight month in October, as September’s secondary sales figures were down almost 90% from a peak in January.
See related article: Magic Eden, largest Solana-based NFT platform, makes royalty fees optional