Some NFT marketplaces are not honoring the creator royalties specified in smart contracts.
Rising use of such marketplaces has triggered a debate among NFT creators and collectors alike.
Crypto Twitter is always buzzing, but it was especially lively this weekend as creators, collectors, and personalities went back and forth over the topic of whether or not NFT artists should be paid royalties in perpetuity for secondary market trades.
It’s not a new discussion, but it’s one that has been amplified considerably with the launch and rising adoption of SudoAMM, an Ethereum NFT marketplace from Sudoswap that does not honor artist royalties on sales. In other words, you can sell an NFT on the marketplace and not have to pay the extra 5% or 10% (or whatever amount) set as a creator royalty.
Yawww, a Solana NFT marketplace, ignited a similar debate when it launched earlier this summer without royalties enabled. And on Saturday—amid the fervent chatter—another Solana NFT marketplace, Solanart, unveiled a new model in which sellers can choose whether or not to pay creators a royalty fee, and decide how much they want to pay.
Many artists, unsurprisingly, are upset about the rise of such marketplaces. Some of them made their voice heard over the weekend through tweets and Twitter Spaces discussions.
“It’s not about feelings,” tweeted artist Claire Silver. “We’re building the first blocks of what will become a digital civilization. Royalties are a broader statement that we value creatives. Web2 and the [traditional] world are being forced to adjust based on that statement. We aren’t here to recreate old systems.”
Matt Medved, both an artist and founder and CEO of publication NFT Now, put it more bluntly in a tweet: “0% royalties are a non-starter. We’re not going back to Web2 bullshit.”
An NFT is a blockchain token that represents ownership in an item, and often is tied to digital goods like artwork, profile pictures, collectibles, and video game items. The NFT market exploded in popularity over the course of 2021, ultimately generating $25 billion worth of trading volume by year’s end.
The largest NFT marketplaces—including OpenSea, Magic Eden, and LooksRare—honor the royalty amounts set by creators. But some rival upstarts are gaining traction by appealing to NFT collectors that want to flip JPEGs with the lowest possible fees, regardless of the creator’s intent or the social stigma around evading royalties.
It’s only a debate because royalties aren’t currently enforceable on-chain with current, widely-used NFT standards. Royalties can be set by creators in their smart contracts—that is, the code that powers NFTs—and most of the largest marketplaces honor them, but there are ways to get around those settings. That’s clear from the rise of SudoAMM and other rivals.
In other words, as pseudonymous NFT collector and influencer Punk6529 tweeted over the weekend, paying royalties on NFT sales is a social construct rather than a firm, unavoidable technical rule. “People pay royalties because they believe in the social convention of buying and selling within the rules set by the artist/creator,” they wrote.
What could happen?
As the discussion unfolded over the last couple days, it wasn’t just artists that were largely in favor of honoring set artist royalties. Many collectors, as well, agreed that denying royalties was a rejection of what many see as the Web3 ethos—a more equitable market in which creators are more richly rewarded for their work, including on an ongoing basis.
It’s what has pulled some painters, photographers, musicians, and artists of all sorts away from more traditional means of producing and selling art. As such, it’s understandable why many artists and investors alike would be taken aback by the idea of anyone trying to save money by cutting artists out of the loop on secondary sales.
While some creators’ reactions were clearly emotional, others were more practical. What does it mean if more and more buyers push back against royalties for artists and they fall out of vogue? Some believe that it will restrict the ability for creators to thrive in the Web3 space.
NFT royalties shouldn’t exist because it’s “the right thing to do”.
It is simply the best alignment of incentives between founders & holders (right now).
If you want to remove royalties, that’s fine. Just don’t be mad when mints become more expensive and more projects rug, lol.
“Saying no to creator royalties will result in only projects with VC funding to be able to develop anything continuously, cutting out a large percent of the population due to the implicit bias that exists within the VC world,” tweeted the pseudonymous Betty, co-creator of Ethereum NFT collection, Deadfellaz.
Frank, the pseudonymous creator of Solana NFT project DeGods, similarly warned of potential changes ahead if royalties are shunned—including more projects that fail to honor their promises (or “rug pull” buyers) due to the lack of ongoing compensation from secondary trades.
“NFT royalties shouldn’t exist because it’s ‘the right thing to do.’ It is simply the best alignment of incentives between founders and holders (right now),” he tweeted. “If you want to remove royalties, that’s fine. Just don’t be mad when mints become more expensive and more projects rug, lol.”
Others sought to encourage creators to rethink how they approach revenue generation in the Web3 space. For example, artists and creators could keep a large chunk of the supply of NFTs at launch and then sell them later if the project is popular. Larva Labs kept 1,000 of the 10,000 original CryptoPunks and took no royalty on the over $2 billion worth of secondary sales.
“We had 0% royalties before. I kept half the supply, worked out OK. Don’t panic,” tweeted pseudonymous crypto artist XCOPY. The artist clarified in a reply that they “prefer the current model” of artist royalties, but that they want artists to “keep an open mind.”
i think the creator royalty argument is actually a lot simpler than people make it out to be.
There is ZERO way to FORCE royalties technologically so creators will have to build a collector base that WANT to honor these royalties…. It’s really that simple. 🤷
What can artists do about collectors and marketplaces that don’t honor their royalties? They could potentially exclude such buyers from ongoing benefits and perks. Anatoly Yakovenko, co-founder of Solana, suggested that “eventually creators will start adding authority to freeze assets into their NFT contracts”—a harsher punishment for royalty evaders.
Noted artist Mike “Beeple” Winkelmann, who holds the record for most expensive single NFT sale of all time, acknowledged that royalties can’t currently be enforced on-chain, tweeting that creators “can’t ‘smart contract’ their way around this.” Instead, he suggested encouraging a relationship with collectors that makes them “want to honor these royalties.”
“We can talk in circles about how things should or shouldn’t be, but that is what it will still come down to in the end,” he added. “Fuck over your collectors by oversupplying and not supporting, best of luck… treat them right, and the vast majority will treat you right in return.”
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