LIP-3: Set marketplace royalty before burning the keys

Summary

In accordance with LIP-0, the keys which control the Loot contract will soon be burned. These keys control the ability to set royalties. This is a proposal to set a royalty before the keys are burned, and direct the funds to an on-chain treasury controlled by Loot owners.

If approved, the same royalty will be set across all marketplaces:

• Open Sea
• Rarible
• Loot Exchange

Future marketplaces can leverage Rarible's on-chain registry to detect and apply royalties.

Arguments For

1. Setting a royalty on popular marketplaces like Open Sea would create an immediate inflow of funds to a treasury, enabling experimentation in community funding, without needing to wait for community marketplaces to grow market share.

2. Setting a royalty on Open Sea evens the playing field with community marketplaces. With no royalty, these marketplaces may struggle to attract sellers, and will be forced to undercut Open Sea's fee, limiting the total amount of royalties that can be raised.

Arguments Against

1. Any form of fundraising and distribution could lead to centralization of decision making, and debates over what is "official" and what should be funded.

2. Community may become reliant on Open Sea, rather than being forced to create alternative fundraising mechanisms.

Related Discussions

For more in-depth discussion of the pros and cons, see the threads below:

• LIP-0: Burn the keys to the Loot contract
• Proposal: Set royalties on Open Sea to help Community Marketplaces
• Proposal to Fund Development and Confer Benefits by Charging Royalty Fee

Comparisons

Here are some examples of royalties collected by other popular collections:

• Meebits = 0%
• Bored Ape Yacht Club = 2.5%
• 0N1 Force = 5%
• Art Blocks = 7.5%
• XCOPY = 10%

Specification

The proposal is to send royalties to the same community-governed treasury that was created for the Loot Exchange. It is a Compound-style on-chain voting system (forked from NounsDAO) that uses Loot balances for governance (one vote per bag).

• Background post on the Treasury
• Voting Dashboard
• Wallet Address (0x8cFDF9E9f7EA8c0871025318407A6f1Fbc5d5a18)
• Github

The idea is for it to be a "Royalty DAO", with the narrow focus of collecting and allocating royalties from multiple marketplaces. Although it was deployed by the Loot Exchange team, they do not control it. It is controlled by Loot owners.

If the community chooses an amount above 0, the following steps will be taken:

1. Dom logs into Open Sea and configures the royalties amount and destination
2. Dom follows the instructions here to set the same royalties on the Rarible registry

Disclaimers

1. Once the keys are burned, the royalties cannot be changed (it's likely Open Sea could change them if petitioned by the community, but the mechanism is unknown). So it's important to pick a number that makes sense long term.

2. Although forked from audited and battle-tested contracts with a minimal diff, the treasury contracts are still new and untested.

3. Open Sea charges a platform fee of 2.5%. Any royalties would be on top of this fee (so a 5% royalty will result in a 7.5% total fee).

Vote

What should the royalty be?