Over the last few months, royalties have become a very hot-button issue within the NFT world. Because of their potential as a source of passive income for creators, royalties have always been important to the NFT world. But recently, there has been a shift within the industry of moving away from NFTs. Several collections and platforms have adjusted their policies and either scrapped NFTs entirely or made them optional for users.
The latest development in this trend comes from LooksRare, an Ethereum NFT marketplace. In an October 27, 2022 blog post, LooksRare announced that it would be adopting a zero royalty policy.
A World of Zero Royalty
Prior to this announcement, assets listed in LooksRare came with royalties for creators. Now, the marketplace is removing this default royalty policy and making them opt-in, meaning buyers get to indicate if they want to pay royalties or not.
If the buyer opts to pay royalties and the seller has set up a receiving address on the LooksRare royalty registry, they will receive a 0.5% royalty on all NFT sales. The reason LooksRare gave for this change was that the growth of zero royalty in the NFT sector has led to buyers being even less willing to pay royalties.
“The growth of zero-royalty marketplaces has eroded the general willingness to pay royalties throughout the NFT space. 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,” the blog post said.
The post also revealed that LooksRare will be creating an alternative for the creators who use the platform. In lieu of royalties, LooksRare will be diverting protocol fees directly to creators. More specifically, 25% of the fees generated from the protocol will be reserved for creators, which will help make up for the loss of royalties.
The platform was also quick to specify that while it is not the first marketplace to scrap royalties, it is the first to do so while creating an alternative for creators. This has perhaps been one of the biggest controversies in the NFT space; if creators lose access to royalties, how else can they earn a living? Luckily, LooksRare seems to have answered that question.
The Royalty Dilemma
The question of how, if at all, NFT creators should be paid royalties is one that is not going away anytime soon. The current industry trajectory indicates that royalty as a standard is on its way out and even more platforms will make announcements similar to LooksRare. But there is continuous debate about whether or not this is a good thing,
After all, the royalty system was touted as one of the biggest benefits of NFTs for a long time and with that gone, so is some of its apparent appeal to creatives of all types. But as LooksRare and other platforms move forward, hopefully, this issue will be resolved in a way that benefits both creators and buyers.