Another NFT Marketplace Gets Zero Royalties in ‘Race to the Bottom’

Another domino has fallen in the midst of the rising trend NFT marketplaces that bend to enforce royalties for creators, med Ethereum Marketplace LooksRare is announcing today that it will no longer require merchants to pay these fees on transactions.

LooksRare wrote in a blog post that it “will no longer support creator royalties by default” when traders sell NFTs, instead allowing buyers to “opt in to pay optional royalties.” It’s a similar approach to what Solana NFT marketplace Magic Eden did back then announced his own move to make creator royalties optional earlier this month.

However, LooksRare also said it will give 25% of the protocol fee — the fee it charges merchants to execute its NFTs — to creators. LooksRare charges an overall fee of 2% on the sale price, meaning that 0.5% of the sale price will now be directed to creators instead of their respective royalty rates.

Many NFT creators set a royalty that sees a small amount of a secondary sale – usually between 5% and 10% of the price – automatically sent to the original artist or creator of the marketplace in question. However, these royalties are not fully enforceable on-chain using current NFT standards, creating loopholes that some marketplaces have used to lure traders.

On Ethereum, marketplaces like Sudoswap and X2Y2 have either eliminated or made royalties to creators optional in recent months in the middle ongoing crypto and NFT bear market.

The effect has been more pronounced on Solanawhere the leading marketplace Magic Eden – which has approximately 90% market share within the Solana network –cave and followed after other marketplaces did the same. Many of these moves have just arrived in recent weeks, though many NFT artists and creators has pushed back against the “race to the bottom” to reject royalties.

“The growth of zero-royalty marketplaces has eroded the overall willingness to pay royalties across the NFT space,” LooksRare wrote in an announcement today. “Good news for merchants, but with a big downside: the move away from royalties has removed an important source of passive income for most creators.”

Along with removing required creator royalties and giving creators a share of protocol fees, LooksRare has also changed its overall trading reward model to primarily benefit NFT sellers on the platform. Now 95% of token rewards generated via trading will go to sellers with 5% going to buyers, in an effort to reduce net trading fees for sellers.

LooksRare launched in January and made a big splash with a reward model that gives users their LOOKS token and ETH for trading and using the platform. The marketplace collected billions of dollars in Ethereum NFT trading volume – but it quickly became clear that users were manipulating sales through a process called wash trade.

In the NFT space, wash trading occurs when users sell NFTs at artificially inflated prices back and forth between their own controlled wallets, usually in an attempt to either manipulate reward models or increase the visibility of a particular project. Similar token-gambling schemes have played out on marketplace X2Y2 since its own launch earlier this year.

In late January, NFT analysis platform CryptoSlam reported that roughly 87% of LooksRare’s trading volume to that point—worth over 8.3 billion dollars— appeared to be due to laundry trade.

LooksRare has lost significant traction over the year as newer marketplaces with their own reward models, such as X2Y2 and Obscurityhas launched. With excluded washing, DappRadar reports that LooksRare has handled less than $11 million worth of legitimate Ethereum NFT trades in the past 30 days.

OpenSea, the leading NFT marketplace across all blockchains by trading volume, continues to honor royalties to creators. It has generated $316 million in NFT trades in the past 30 days, per data from DappRadar.