In LIP-0, Dom mentioned that rather than having royalties on Open Sea (which must be managed with a central key), it would be better to direct people towards community marketplaces:
Creating a Loot-specific marketplace allows collection of royalties, likely provides a better experience, allows for more optionality around L2 and other chains, and is a lower “all-in” fee since the marketplace fee is equal to the royalty, rather than being added on top of it
This was the inspiration for creating Loot Exchange, a marketplace with an “all-in” fee of 1% that goes back to the community.
Originally, our plan was to collect 2.5%, in line with a previous community poll on royalties. However, we felt that we needed to start with a lower number, in order to attract sellers from Open Sea. Unless fees are lower overall, most sellers will just continue selling on Open Sea, where network effects are stronger. After all, sellers are more likely to be motivated by price and liquidity than a sense of community (arguably the same will be true for buyers too). In effect, the fee on Open Sea sets a ceiling on what a community marketplace can collect.
Perhaps this is OK. Maybe a low fee is the right solution. But it also feels like a lost opportunity to reallocate resources from speculation to building.
Alternatively, if Open Sea had a royalty, it would be a double win for the community. Community marketplaces could collect more, while still having the lowest fees, and additional funds would be raised through Open Sea sales.
There seems like a few options:
- Continue with no royalty on Open Sea. Avoids complexity, but will likely limit adoption of community marketplaces, and stunt the overall amount of royalties that can be collected
- Set a royalty before burning the keys. Won’t be able to change it, but if it’s a conservative amount, could be a nice middle ground
- Keep the keys, with social consensus that their only power is setting royalties
Of course, this raises the question of where Open Sea royalties should go. A strong candidate is to the same treasury contract that is used to collect fees from Loot Exchange. This is a fork of the NounsDAO contract, which implements Compound-style on-chain voting using Loot balances. What’s cool is that this contract does not attempt to be “the DAO”. It’s just “a DAO”, which at this point in time has the sole purpose of collecting and allocating marketplace royalties on behalf of the community.
By decoupling the keys that set royalties from the DAO that spends them, and by limiting the scope of that DAO, you avoid many of the issues outlined in LIP-0.
Of course, as the creators of Loot Exchange, we have a horse in this race. But mostly because we want to see more cool stuff get built, and think royalties can be a powerful lever. This issue wasn’t immediately obvious to us, so it seemed worth bringing attention to. It feels like something that should at least be considered before pulling the trigger on burning the keys.
- No Open Sea royalty, and burn the keys
- Yes Open Sea royalty, then burn the keys
- Yes Open Sea royalty, and keep keys purely for adjusting royalty