The Ethereum marketplace LooksRare announced today that it will no longer demand traders to pay these fees on transactions, adding to the growing trend of NFT markets giving up on enforcing creator royalties.
LooksRare took a similar tack to Solana NFT marketplace Magic Eden when it announced its own move to make creator royalties optional earlier this month, saying in a blog post that it will “no longer support creator royalties by default” when traders sell NFTs, allowing buyers to “opt-in to pay optional royalties.”
However, LooksRare also declared that it will give creators a 25% share of its protocol fee, which it charges sellers to transact their NFTs. LooksRare charges a 2% total fee on the sale price, which means that 0.5% of the sale price will now be directed to creators in place of their respective royalty rates.
Many NFT artists set a royalty that requires the relevant marketplace to automatically send the original artist or creator a tiny portion of any secondary sale, usually between 5% and 10% of the price. The existing NFT regulations, however, do not fully enforce these fees on-chain, which leaves openings that some marketplaces have taken advantage of to entice traders.
Due to the continuing crypto and NFT bear market, markets like Sudoswap and X2Y2 on Ethereum recently abolished or made creator royalties optional.
The impact was particularly noticeable on Solana, where top marketplace Magic Eden caved and followed suit after other marketplaces did the same, losing roughly 90% of its market share within the Solana network. Though many NFT artists and creators have resisted the “race to the bottom” to reject payments, many of these actions have only recently been made.
“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.”
LooksRare has changed its entire trading rewards mechanism in order to predominantly assist NFT sellers
In addition to eliminating compulsory creator royalties and awarding authors a portion of protocol fees. In an effort to lower net trading fees for sellers, 95% of token incentives generated through trading will now go to sellers and 5% to buyers.
With a rewards system that provides users its LOOKS token and ETH for trading and utilizing the platform, LooksRare, which debuted in January, made a major impression. Ethereum NFT trade volume on the market reached billions of dollars, but it soon became evident that users were tricking the market by engaging in a practice known as wash trading.
Wash trading is the practice of users selling NFTs back and forth between their own controlled wallets at artificially inflated rates. This is usually done in an effort to either manipulate reward models or increase the visibility of a particular project. Since its introduction earlier this year, X2Y2’s marketplace has seen the development of similar token-gaming schemes.
According to a research published in late January by NFT analytics company CryptoSlam, almost $8.3 billion of LooksRare’s trading activity up to that time looked to be the result of wash trading in about 87% of the cases.
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