NFTs & Royalties — the Battle continues

APENFT
3 min readSep 8, 2022

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NFTs have opened a new world for both creators and collectors. On one hand, creators are able to easily offer their products to the whole world, whilst buyers can instantly verify the authenticity of their purchase on the blockchain. However, something that makes NFTs truly unique are the royalties.

Royalties basically allow creators to earn a passive income from the initial and subsequent sale of their artwork. Royalties, though a common practice in certain industries such as music — wasn’t really possible in the traditional art world.

How does it work?

Creators can add this code to the smart contract during the minting of an NFT. The royalty % will be automatically transferred to the creator’s digital wallet. Every time a secondary sale occurs, the fee is automatically transferred. There are no intermediaries nor can the person making the transaction change anything. This lets content creators focus on the marketing of their NFTs and increase their returns.

NFT Royalties — Platform Reaction

As competition for NFT platforms increase, Marketplaces are looking for new ways to attract users, with emphasis on low fees. Due to royalties potentially being a huge additional cost for buyers, certain NFT marketplaces have stopped respecting existing creator royalties to attract more buyers. One such platform is X2Y2, who announced that all royalty payments would be optional, essentially making it seem like a digital tip jar.

Arguments in the NFT Twitter space followed suit, with many stating that refusing to pay royalties was against web3 ethos. It wasn’t just artists — collectors were also voicing their opinions for paying royalties. Abandoning royalties may also result in NFT projects with VC funding to thrive.

This has also encouraged creators to rethink new ways of revenue generation in web3. For example, holding on to majority of their NFTs during launch and selling them later if the price goes up.

Creators fight back

What can creators do as retaliation for collectors who refuse to pay royalties? Users say that it’s a matter of time until creators can ‘freeze’ smart contracts. We might also see collections blacklist certain marketplaces in their code. Acclaimed Artist Beeple has mentioned that the best thing Artists can do is to keep building relationships with collectors, and eventually they will respect your work by paying royalties.

At this moment, it is important to know that royalty payments are only enforceable on a marketplace level, and not on-chain. We hope that Creators and Collectors continue to encourage royalties in the industry, to promote utility in the web3 era.

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