Paying creator royalty fees is now optional on LooksRare, the third-largest non-fungible token (NFT) marketplace on Ethereum, continuing an increasing trend as the sector struggles to remain profitable in the face of a persistent decline in the NFT market.
The Ethereum marketplace made the announcement on Thursday in a blog post, stating that it would stop charging required creator royalty fees and instead give authors 25% of the transaction’s protocol fees. Protocol fees, or operational costs, are assessed by LooksRare on each transaction and are 2% of the sale’s total price.
“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.”
In order to be compensated each time an NFT is sold again, creators typically code in a standard royalty fee. However, this is not currently enforced on-chain, and marketplaces are taking advantage of loopholes to get around it.
The most recent high-value marketplace, Magic Eden, based in Solana, switched to optional royalties in the middle of October, which meant that the vast majority of sales on that blockchain did not result in paid royalties to creators.
This trend has been resisted by some in the market, who label it “short-sighted” since they believe it will limit NFTs’ potential to alter current incentive structures in the developing Web3 market by paying authors royalties for life.
October’s monthly NFT sales are projected to go down for a sixth consecutive month, as September’s secondary sales were roughly 90% below a peak in January.