In recent months, there has been some debate about the future of NFT royalties.
Some NFT marketplaces, such as OpenSea, have proposed reducing or eliminating royalty payments altogether.
This has sparked outrage from many NFT creators, who argue that royalties are essential to their livelihood.
It remains to be seen how the issue of NFT royalties will be resolved in the long term. However, it is clear that this is an important issue for both creators and collectors.
How and Who control Royalty Payment
The amount and process of royalty payment is typically controlled by the NFT creator. When a creator mints an NFT, they can specify the royalty rate. The royalty rate is typically a percentage of the sale price of the NFT.
Once an NFT is sold, the NFT marketplace will automatically collect and distribute royalty payments to the creator, based on the specified royalty rate.
There are a few exceptions to this rule. For example, some NFT marketplaces allow buyers to opt out of paying royalties. Additionally, some NFT creators may choose to sell their NFTs for a fixed price, without any royalties.
- Smart Contracts: Most NFT royalties are embedded within the smart contracts of the NFTs themselves. This means that the code governing royalties is executed automatically without intermediaries. Creators define the royalty percentage, and the smart contract enforces it.
- Marketplaces: NFT marketplaces like OpenSea often facilitate the buying and selling of NFTs and can also enforce royalty payments. These platforms may collect royalties and distribute them to creators.
- Platform Policies: Different platforms may have varying policies regarding royalties. Some platforms allow creators to set their royalty percentage, while others may have fixed rates or additional fees.
- Blockchain Upgrades: In some cases, blockchain upgrades can affect royalty payments. For example, Ethereum worked on Ethereum Improvement Proposals (EIPs) to improve royalty standards for NFTs.
Good Views of NFT Royalties
- Fair Compensation for Creators: NFT royalties provide a way for creators to continue benefiting financially from the resale of their work in the secondary market. This is seen as a more equitable arrangement compared to traditional art markets where artists don't benefit from the appreciation of their work.
- Incentive for Creativity: The prospect of earning royalties can incentivize more creators to participate in the NFT space, leading to a more vibrant and diverse ecosystem of digital art and content.
Bad Views of NFT Royalties
- Complexity and Ethical Concerns: Some argue that the smart contract-based royalties can be complex and may not always work as intended.
There have been instances of royalties not being paid out properly, and there are ethical concerns regarding artists' rights, especially when it comes to derivatives of their work.
- Centralization and Control: The control of the amount and process of royalty payments in NFTs can vary. Some NFT marketplaces and platforms have centralized control over these processes, potentially creating issues of power and control.
Royalty Income and Creators
In 2021, the total royalty income of NFTs annually is estimated to be in the billions of dollars. In 2021, NFT royalties generated over $2.4 billion in revenue.
The number of creators who have royalty
It is difficult to say exactly how many creators have royalty on their NFTs. However, it is estimated that the vast majority of NFT creators do receive royalty payments. This is because most NFT marketplaces automatically collect and distribute royalties to creators.