NFT Creators Looking for Royalties Face an Uphill Battle: Galaxy

Three royalty-free NFT marketplaces launched in 2022 alone

article-image

ilikeyellow/Shutterstock.com modified by Blockworks

share

Thanks to widespread, emerging marketplace policies, NFT creators looking to cash in on royalties have been having a difficult go of it

Until yet another set of standards for corresponding smart contracts that execute NFT transactions are put into place, that’s not likely to change, according to a new research note from Galaxy Digital.

Earlier this month, OpenSea changed up its royalty policy again. Before that, the platform required all projects released after Nov. 8 to use an open-source smart contract that prohibits digital collectible exchanges between OpenSea and rival NFT market makers that don’t collect any royalties. Any transactions involving corresponding smart contract addresses were set to be blacklisted. 

“OpenSea is effectively enforcing royalties on their marketplace at the smart-contract level by enclosing their ecosystem exclusively to royalty supporting entities,” Galaxy analysts wrote in the Friday report.

Read more: How NFT Royalties Work – and Sometimes Don’t

In an effort to quell public backlash, OpenSea first changed its policy. Now, starting in the new year, “projects on OpenSea will have the option to opt out of using the royalty enforcing smart-contract and be able to set royalties that are optional for collectors to comply with,” according to Galaxy. 

Magic Eden — which previously followed a royalty-optional model — now employs an open-source royalty enforcement tool on top of Solana’s SPL token standard, known as Open Creator Protocol (OCP). The protocol is supposed to additionally enforce royalty payouts by blocking transactions with smart contracts associated with 0% royalty platforms. 

Zero royalty payments in the NFT space have increased in popularity, as well as usage, this year, with at least three such marketplaces hitting the market for the first time, including X2Y2, Yawww and SudoSwap. 

NFT creators raked in more than $1.8 billion on the practice from its inception through October, Galaxy found in a separate report at the time. It’s a big number, but the setup has led to quite concentrated results, according to Galaxy: Just 428 collections had then accounted for an overwhelming 80% of all royalties.

“But the royalty question is contentious and the constantly shifting marketplace policies make forecasting here unpredictable,” Galaxy said. 

If creators want to keep royalties going, it’s going to require a broader industry effort, according to Galaxy. 

“The issue will not resolve until the NFT community develops a new standard to enforce royalties at the smart-contract level that is not reliant on blacklisting contract addresses,” the report added.


Get the day’s top crypto news and insights delivered to your email every evening. Subscribe to Blockworks’ free newsletter now.


Want alpha sent directly to your inbox? Get degen trade ideas, governance updates, token performance, can’t-miss tweets and more from Blockworks Research’s Daily Debrief.


Can’t wait? Get our news the fastest way possible. Join us on Telegram and follow us on Google News.


Tags

upcoming event

MON - WED, MARCH 18 - 20, 2024

Digital Asset Summit (DAS) is returning March 2024. This year’s event will be held in our nation’s capital, where industry leaders, policymakers, and institutional experts will come together to discuss the latest developments and challenges in the ever-evolving world of cryptocurrency. […]

upcoming event

MON - WED, SEPT. 11 - 13, 2023

2022 was a meme.Skeptics danced, believers believed.Eventually, newcomers turned away, drained of liquidity and hope.Now, the tide is shifting and it’s time to rebuild. Permissionless II is the brainchild of Blockworks and Bankless. It’s not just a conference, but a call […]

recent research

Sequencers: The Key to The Rollup Investment Thesis

Research

Sequencers are one of the most explicit mechanisms in crypto for creating sustainable DAO-controlled revenue.

/

article-image

Grayscale Investments, Kraken and BlockFi are among the industry players floating support, and suggestions, as the comment period winds down

article-image

Bitcoin miners have had a tough few years — but in the Roblox metaverse, they’re thriving

article-image

“Polkadot and Cosmos share a similar vision where you have a range of heterogeneous blockchains working together,” Jafar Azam told Blockworks

article-image

Coinbase CEO Brian Armstrong says the SEC suit is “very different from others out there”

article-image

The SEC greenlighting a public offering is a nuanced process that is “not passing merit on the business,” industry exec says

article-image

The majority of survey respondents in Paypal’s metaverse survey want to get paid in crypto