LooksRare, one of the leading NFT marketplaces, has made the decision to remove all artists’ royalties on their platform to help encourage the activity for secondary sales following a major crypto crash that has stunted the growth of the NFT market. 

Why the decision

The royalty fee structure incorporated into NFTs is starting to cause a debate within the web3 community about its importance and benefit to the artists versus the buyers. This has split the community in two, with one side believing that royalties to the artists are one of the main appeals of the market while others believe that royalties are putting a hindrance on the ability of buyers and sellers to take profits because royalty fees are taken from each secondary sale.

Protocol Fees

In an effort to still appeal to artists, LooksRare has decided to change to a new incentive model that offers artists a portion of the shared revenue from the entire marketplace protocol. So, instead of earning royalties that are directly created by an artists’ own collection, they are sharing in a pool of rewards among all creators. 

However, there will still be potential for buyers to pay an optional royalty fee when they purchase an NFT on the LooksRare platform which will go directly to the artists instead of to the shared incentive pool. 

Optional Royalties

LooksRare believes that this will prevent artists from losing interest in the NFT market because it gives special fans an option to help support their favorite creators. Unfortunately, knowing the NFT market and the strong desire for profits, most buyers will be overlooking this optional price because it’ll interfere with their exit strategy. 

Floor prices in the NFT market are constantly falling, causing traders to undercut the market price at increasingly higher rates. This became an even stronger issue during the summer crash when the NFT market began fueling itself on worthless collections that had no legitimate appeal other than becoming a gambling mechanism. 

Further, by sharing a collective revenue with every artist, LooksRare is providing an incentive to lower-quality collections that don’t deserve the same revenue income as high-quality NFT art. This shared protocol fee only works in the favor of derivative collections which are already trading off the back of original work by increasing their revenue and lowering the revenue of true artists in order to maintain a balanced payout. 

Bad for artists

In the end, this does not benefit artists in a meaningful way, rather it reinforces the belief that the NFT market is merely a place for people to buy and sell tokens that no one values or has an interest in. 

NFT royalties are considered to be a breakthrough technology for artists in the traditional art world where physical art was never able to provide any sort of royalty fee to the creator who only profited off of the initial sale of their art before the piece gained its value through time. 

The NFT market has already suffered this year. By removing the most unique incentive about NFTs to artists, LooksRare is encouraging the web3 community to abandon the people that created these products in the first place. 

By allowing this to continue, the NFT market is going to look rather bland in the future, with an abundance of derivative art taking over the market. Without new and unique art available, NFT collections will slowly take a new shape that is less visually appealing and more focused on providing gambling mechanics to the secondary market.