Each time an order is placed on LZF, the trader pays a royalty of 1% to those that have existing unexecuted orders already in the market. New bids pay orders to existing asks, and vice versa. In a market where Bids are in dollars ("buy 10 Bitcoins at $300 each") and asks are in Bitcoin ("sell 15 Bitcoins at $325 each"), askers accumulate dollars paid by bidders; in this same market, bidders accumulate Bitcoins paid by askers.
Market orders pay royalties to existing offers, but accumulate no royalties (because they execute immediately).
LZF also charges a 0.25% commission on trades.
Accumulating vs Capturing
Regardless of how far an offer is from the current trading price, it begins accumulating royalties immediately. In order to discourage the overzealous removal of offers when the market is moving, those accumulated royalties are not captured until the order executes. This promotes a genuinely deep, stable market, rather than a market with the illusion of stability.
Magnitudes and Stake of Magnitude
When determining what share of incoming royalties each offer gets, a magnitude is computed. Magnitudes scale based on closeness to the spread, and number of units in the order. In a typical dollars-for-Bitcoins market, bid magnitudes are computed by:
NumberOfBitcoins * StrikePriceInDollars
and ask magnitudes are computed by:
NumberOfBitcoins / StrikePriceInDollars
Market magnitudes are computed by summing the magnitudes of all unexecuted bids or asks; stake of magnitude for any given offer is computed by a simple ratio of that offer's magnitude to the market's magnitude. An offer's stake of magnitude is the percentage of future royalties that the offer accumulates. As an order executes, it captures its accumulated royalties.
(Technical note: Accumulation uses a Monte-Carlo method which converges to the above.)
Unexecuted (or partially executed) offers can be retracted. Any uncaptured accumulated royalties of retracted offers are redistributed to remaining offers on the same side of the market based on their stake of magnitude immediately post-retraction.