LooksRare, a token-based marketplace that rewards creators with tokens, will no longer enforce royalties. A portion of the protocol fees will instead be paid to creators as a portion of the proceeds.
A new domino has fallen amid rising trends of NFT marketplaces abandoning enforcer royalties. Ethereum marketplace LooksRare announced today that traders will no longer have to pay fees for transactions.
LooksRare stated that it would no longer support creator royalty payments by default when traders sell NFTs. Instead, it will allow buyers to “opt in to pay optional royalties.” This is similar to what Solana NFT market Magic Eden did when it made creator royalties optional.
LooksRare stated that 25% of its protocol fees, which it charges sellers for NFTs, will be directed to creators. LooksRare charges a total fee of 2% on the sale price. This means that 0.5% will be directed at creators instead of their respective royalty rates.
Many NFT creators have a royalty system that allows for a small percentage of secondary sales. This is usually between 5% to 10% and automatically sent to the creator or artist by the marketplace. These royalties cannot be enforced on-chain according to current NFT standards. This has led to loopholes used by some marketplaces to attract traders.
In the midst of the ongoing crypto market and NFT bear markets, Ethereum marketplaces such as Sudoswap have either removed or made creator royalties non-existent.
This effect is more evident on Solana where leading marketplace Magic Eden- which has approximately a 90% market share within Solana’s Solana network– gave in and followed other marketplaces . These moves were made in recent weeks. However, many NFT creators have rejected royalties and pushed back against “race to bottom”.
LooksRare announced today that “the growth of zero-royalty markets has eroded… the general willingness to payer royalties throughout NFT space,” in a statement. The good news for traders is mixed with a major downside: the removal of royalties has eliminated an important source for passive income for most creators.
LooksRare is removing the requirement for creator royalties and giving creators a portion of protocol fees. The platform has also changed its trading rewards model to benefit NFT sellers. In an effort to lower the trading fees for sellers, 95% of tokens earned via trading will now go to sellers, with 5% going towards buyers.
LooksRare launched in January. It made a huge splash by offering a rewards program that gave users their LOOKS token and Ethereum for trading and using its platform. Although the marketplace was able to trade billions of dollars worth of Ethereum NFT volume, it soon became apparent that its users were manipulating sales via a process called washing.
Wash trading is a practice in the NFT industry where users trade NFTs at artificially high prices back and forth between their controlled wallets. This is often done to manipulate reward models or increase visibility for a project. Similar token-gaming schemes were seen on marketplace X2Y2 earlier this year.
NFT analytics platform CryptoSlam reported in January that 87% of LooksRare’s trading volume up to that point over $8.3B worth, was due to wash trading.
LooksRare lost significant traction in the last year, as newer marketplaces offering their own reward models like Blur and X2Y2 have been launched. DappRadar reports LooksRare has traded less than $11,000,000 worth of genuine Ethereum NFT trades in the past 30 days, excluding wash trades.
OpenSea is still the largest NFT marketplace for all blockchains, based on trading volume. According to DappRadar, it has generated $316 Million in NFT trades within the past 30 days.