The token-based rewards marketplace LooksRare will no longer enforce royalties and will instead compensate creators with a portion of protocol fees.
The Ethereum marketplace LooksRare announced today that it will no longer demand traders to pay creator royalties on transactions, furthering the trend of NFT markets abandoning the enforcement of creator royalties.
LooksRare stated in a blog post that it will “no longer support creator royalties by default” when traders sell NFTs. Instead, buyers will be able to opt-in to paying optional royalties. Same to what Solana NFT marketplace Magic Eden did earlier this month when it revealed its own decision to make creator royalties optional.
In addition, LooksRare stated that it will allocate 25% of its protocol fee – the cost it charges sellers to transact their NFTs – to inventors. LooksRare imposes a 2% total fee on the sale price, which translates to 0.5% of the sale price being distributed to creators in lieu of their individual royalty rates.
Usually, between 5 and 10 percent of the price of any secondary sale is immediately remitted to the original artist or creator by the marketplace in question when a royalty is specified by many NFT authors. However, utilizing existing NFT standards, these fees are not entirely enforceable on-chain, creating gaps that some marketplaces have exploited to attract traders.
Amid the ongoing crypto and NFT bear market, Ethereum marketplaces such as Sudoswap and X2Y2 have abolished or made creator royalties optional in recent months.
Magic Eden, the marketplace with the largest market share within the Solana network (about 90 percent), capitulated and followed suit after other marketplaces did the same. Despite the fact that many NFT artists and creators have pushed back against the “race to the bottom” to reject payments, many of these actions have only occurred in recent weeks.
“The growth of zero-royalty marketplaces has eroded the general willingness to pay royalties throughout the NFT space,” LooksRare wrote in an announcement today. “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.”
In addition to eliminating compulsory creator royalties and providing creators with a portion of protocol fees, LooksRare has altered its entire trading rewards plan to assist NFT sellers on the marketplace. In an effort to lower net trading fees for sellers, 95% of token incentives generated through trading will now go to sellers, while just 5% goes to purchasers.
Launched in January, LooksRare made a stir with a rewards mechanism that grants users LOOKS tokens and ETH for trade and platform use. The marketplace amassed a trading volume of billions of dollars in Ethereum non-fungible tokens, but it rapidly became apparent that users were manipulating sales through a method known as wash trading.
Late in January, the NFT analytics platform CryptoSlam claimed that over 87% of LooksRare’s trading activity up to that point, totaling more than $8.3 billion, looked to be attributable to wash trading.
Over the past year, LooksRare has lost a lot of users as new marketplaces with their own reward systems, like X2Y2 and Blur, have come out. DappRadar says that LooksRare has done less than $11 million worth of legitimate Ethereum NFT trades in the last 30 days, when wash trades are taken out of the image.
OpenSea is the biggest market for NFTs across all blockchains in terms of trading volume, and it still pays creator royalties. DappRadar says that in the last 30 days, it has made $316 million in NFT trades.