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
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