One of the most potentially powerful tools to attract artists, musicians and other creators to embrace blockchain-based NFTs as a way of distributing their work is in jeopardy.
Royalties are a big draw for artists, who value the ability of most non-fungible tokens to allow the creator to add a royalty collection feature on each resale at the time it is minted. So, each time an NFT is sold, a percentage of the price — generally 5% to 10% — is sent to the person who made it.
On Oct. 27, LooksRare, the second-largest NFT marketplace on the Ethereum blockchain according to DappRadar, announced that it would no longer collect and distribute artist royalties. Instead, it’s turning a quarter of the 2% protocol fee it collects on transactions, so the creators will get a 0.5% cut of sales. Which is better than nothing but a small fraction of the royalty fee that artists generally choose to levy.
LooksRare is the latest in a growing line of NFT marketplaces that are wiping out a tool that has been lauded as a way to attract artists to the NFT market in the first place and help them — especially the smaller and mid-size artists struggling to earn a living.
Until recently, this had mainly been a problem for NFTs built on the Solana blockchain rather than Ethereum, where the vast majority of non-fungible tokens are minted and sold. But like that smaller blockchain’s marketplaces, the growing draw of no-royalty NFT sales platforms is forcing the bigger players’ hands.
“The growth of zero-royalty marketplaces has eroded the general willingness to pay royalties throughout the NFT space,” LooksRare said in a blog post announcing the change. “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 response, the post said, “we’re choosing to lead the charge in this new landscape, by creating a competitive solution that still benefits creators: diverting protocol fees directly to creators.”
Royally Left Out
A growing number of artists distributing their work via this type of cryptocurrency, in which no two tokens are alike, are using this feature to provide an ongoing revenue stream. It is a particularly good feature for small- to mid-tier artists trying to earn a living off their work.
The problem is this only works if the marketplace where the work is sold respects it and deducts and transfers the fee at the time payment is made. There’s no real way to build it into the blockchain as all someone needs to do is make a private payment from one wallet to another and then transfer the NFT separately.
Publication Date: 2022-10-28
Read the full article: https://www.pymnts.com/nfts/2022/race-to-the-bottom-as-nft-marketplaces-refuse-to-pay-artist-royalties/