Although approximately $100-200 million in NFTs traded on blockchain networks every week, many creators still struggle to generate significant income from their work. The reason? Royalties, or rather, the lack of them. Royalties allow creators to receive compensation for their work beyond the main sale, making them a vital source of income and a means to finance future creative endeavors.
However, royalty allowances for creators are not technically enforceable. As a result, creators are at the mercy of the NFT platforms that host their work, as these platforms have the power to determine how royalties are distributed. This is a crucial issue. Without a fair system for distributing royalties, the future of the digital art industry is at risk.
Navigating the royalty application
The royalty debate reached a fever pitch in November 2022 when OpenSea, one of the leading NFT marketplaces, announced plans to introduce a tool that would enforce creator fees (artist royalties) on its platform. The problem? Although the NFT giant gave new collections a creator fee application option, they said they were considering leaving existing collections default to zero royalties.
While some in the NFT community were pleased that OpenSea was taking a stand to support artists creating new collections, the company faced a lot of backlash from existing creators and ultimately decided to continue charging creator fees for collections. existing collections.
While the community considered this a victory, the problem goes well beyond OpenSea. Because there is no technical way to enforce royalty allowances, each marketplace can decide whether to offer or honor them. This lack of standardization has led to a situation where some marketplaces, such as LooksRare, Magic Eden, and X2Y2, do not offer NFT royalties to creators, but instead let NFT buyers honor an artist’s royalty policy for purchases. This can be problematic, as it places the onus on buyers to understand and follow each artist’s individual royalty policy, which can be confusing and difficult to navigate.
Also, most marketplaces, including OpenSea, do not support royalties on individual pieces. If an NFT with its own royalty policy is sold on a platform like Rarible and then listed on OpenSea, the original artist may not earn any income from the secondary sale. This undermines the ability of artists to monetize their work and can lead to a lack of fairness and transparency in the NFT market.
Empowering current and future creators
Empowering creators through NFT royalties is essential. These royalties democratize the acceptance rate, preventing a central platform from having full control over how royalties are shared, and ultimately giving creators more power to decide the terms. Additionally, creators can deal directly with their fans and create long-term income streams through their followers acting as distributors.
There are a few ways that the NFT space can work towards a fair and enforceable system for distributing NFT royalties. Establishing universal standards and protocols for NFT royalties would give creators more control over their work and provide a level playing field for all markets to operate. This would also make it easier for buyers to understand and follow the royalty policies of individual artists, helping to ensure creators are fairly compensated for their work.
To move towards universal standards and protocols, the Ethereum Improvement Proposal (EIP) 2981 allows developers and users to easily attach royalty information to an NFT asset stored on the blockchain. This allows for a common data storage and calculation layer that all participants can access, making it easy to track and enforce royalties. In addition, SuperRare is currently developing a NFT Royalty Model, although it is not clear if it uses EIP-2981. However, this project is a promising step towards creating a more robust solution for NFT royalties.
But this is not all that is needed. By providing creators with the support and resources they need, we can help ensure that the digital art industry continues to thrive and grow. Of udemy to the aptly named NFT art coursethousands of artists are already taking advantage of these resources and learning how to better support themselves and earn a living through their craft.
Ultimately, the future of digital art hinges on the NFT royalty debate. By addressing this issue and finding ways to empower creators, we can ensure the industry remains vibrant, dynamic, and fair for all.
Brent Annells is a serial entrepreneur, technology enthusiast, and CMO of Smart Token Labs, which connects brands with the NFT ecosystem. Brent has led partnerships and brands for major technology companies, including Facebook and Uber.
