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.


Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.

Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. Subscribe to the Forward Guidance newsletter.

Get alpha directly in your inbox with the 0xResearch newsletter — market highlights, charts, degen trade ideas, governance updates, and more.

The Lightspeed newsletter is all things Solana, in your inbox, every day. Subscribe to daily Solana news from Jack Kubinec and Jeff Albus.

Tags

Upcoming Events

Javits Center North | 445 11th Ave

Tues - Thurs, March 18 - 20, 2025

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

recent research

Unlocked by Template.png

Research

RTK networks are critical to enabling a world of ubiquitous autonomous drones, vehicles, and industrial robots. We believe the GEOD token enables both a cost and product advantage for the GEODNET RTK network, which will allow it to out-compete multi-billion dollar incumbents Trimble and Hexagon.

article-image

Jack explored the various AI and memecoin projects that have sprung up over the past month

article-image

If gold remains steady today, a single move from bitcoin to $98,500 would do it

article-image

Revenue estimates for the third quarter come in at $33 billion, which would be an 83% increase from the prior year

article-image

Senator Cynthia Lummis hopes a US strategic bitcoin reserve can be teed up for “adoption in 2025”

article-image

As EIP-4844 “blobs” transform the economics of Ethereum layer-2s, a growing debate pits long-term scalability against immediate ETH value

article-image

Prosecutors argued that FTX co-founder Gary Wang cooperated in their case against former FTX CEO Sam Bankman-Fried