David Canellis

Say what you will about Trump. He (or his team) has figured out passive crypto income.



Vending machines, rental properties and affiliate marketing are usually the strategies of choice for passive income influencers.



Not Trump. The former president and second-term hopeful is benefitting from two distinct onchain phenomena: secondary NFT sales and, increasingly, token taxes paid by unofficial memecoins.



Over the weekend, Blockworks looked into Trump’s <a href="https://edition.cnn.com/2024/08/15/politics/read-donald-trump-financial-disclosure-forms/index.html">finances</a>, thanks to some publicly released disclosures. The former president has $635 million in assets, hundreds of millions of dollars revenue from properties including Mar-a-Lago and various golf courses, and millions of dollars in royalties.



Read more: <a href="https://blockworks.co/news/empire-newsletter-donald-trump-nft-royalties-memecoin-taxes">Memecoin taxes and NFT royalties are paying off for Trump</a>



Part of those royalties were $7.2 million in licensing fees from NFT INT LLC, the company which licensed Trump’s likeness for the official Trump Digital Trading Card <a href="https://blockworks.co/tag/nfts">NFT</a> collections on Polygon.



Much of <a href="https://blockworks.co/tag/donald-trump">Trump</a>’s assets are meanwhile in US Treasurys and other bonds, <a href="https://www.cbsnews.com/news/trump-income-wealth-financial-disclosure-forms-bible-sales-crypto-nfts/">reports</a> CBS. There’s index funds and stocks, as well as 114.75 million shares in his media company DJT, currently worth $2.65 billion. The shares will be tradable in September, after a six-month lock-up period expires.



Read more: <a href="https://blockworks.co/news/empire-newsletter-mapping-us-presidencies-to-crypto-markets">How US presidencies map to crypto markets</a>



And then there’s a disclosure of between $1 million and $5 million ether, as well as between $100,000 and $250,000 in gold bars (Arkham Intelligence puts Trump’s ether <a href="https://platform.arkhamintelligence.com/explorer/entity/donald-trump">holdings</a> at $2.26 million).&nbsp;



What isn’t represented granularly in the disclosure is that Trump’s crypto wallets (particularly on Ethereum and Polygon) are currently raking in tens of thousands of dollars every month through no continued effort of Trump’s team.



Blockchain data shows that Trump’s first three NFT collections altogether brought in up to 1,237 ETH in their respective first weeks, which would account for the initial drops. Based on the daily value of ETH, those sales would’ve brought in $2.14 million to Trump’s Polygon wallet, but the same amount of crypto would fetch almost $3.2 million today.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXd8a-3YvEGRNfXGGBZc7L0DaCAWcz2fpjkHExZW3vEBLtrvJdZ86cnL5aC7lmSw2SyVcvI6VtDfmnda6JlkEGfFgk23PXaI7y0-uxnzdFPVVcNxe-ENqsICpMFusQNfrARoO4EcZzOggY87EExiio-b5IVd?key=lBVORAnmTidvqiVrLb-7Aw" alt=""/><figcaption class="wp-element-caption">This chart shows the price of ether against Trump’s onchain passive income: purple plusses for NFT revenue, pink diamonds for memecoin taxes</figcaption></figure>



Trump Digital Trading Cards also carry a 10% royalty fee for secondary sales, and Trump’s Polygon wallet has received an additional 782.32 ETH ($2 million) outside of the initial collection sales, going back to January 2023. Perfectly decent passive income from Trump NFT traders.



But that NFT revenue is drying up and will likely continue to do so until we see a fourth drop (which Trump has <a href="https://www.coindesk.com/policy/2024/07/16/trump-says-hell-release-fourth-nft-collection-the-people-want-me-to-do-another-one/">hinted</a> at). Trump’s wallet earns a few hundred dollars at best per day from NFT trades right now and often under $10.



Luckily, a raft of illegitimate <a href="https://blockworks.co/tag/meme-coins">memecoins</a> on Ethereum are paying a steady stream of ether to Trump’s Ethereum wallet, as shown on the chart above.



Read more: <a href="https://blockworks.co/news/donald-trump-sons-web3-memecoin-drama">Web3 Watch: A second Trump token fiasco</a>



Save America, Trump Bucks and a few different “Trump Fund” coins pay a 2% auto-tax to Trump on every transfer, and so far those token contracts have paid over 5,100 individual donations (readers should be cautious about interacting with any of those tokens).



The donations are fractions of an ETH each, but they do add up: 137.3 ETH in the past four months, nearly $480,000 at the time of transaction and $354,000 at current prices.&nbsp;



Over the same period, NFT royalties have earned Trump’s wallet about 4.5 ETH ($11,600 at current prices). Annualizing those combined comes to over 425 ETH, or $1.09 million today.



Not bad for sitting back and letting crypto do its thing. That’s over 10 times more than Trump’s pension from the Screen Actors Guild, and higher than his reported royalties from The Apprentice over the past year.



A modified version of this article first appeared in the daily Empire newsletter. Subscribe <a href="https://blockworks.co/newsletter/empire">here</a> so you don’t miss tomorrow’s edition.



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Trump on track to earn more ETH passively than The Apprentice royalties

Macauley Peterson

<a href="https://blockworks.co/tag/play-to-earn">Play-to-earn games</a> may have faded from view, but Web3 gaming start-ups are plowing ahead with functional NFT integrations, and <a href="https://blockworks.co/news/eve-online-web3-blockchain-game">Web2 game publishers are preparing</a> to incorporate some of the same concepts into their existing franchises.



In the “if you build it, they will come” mold, Unioverse has debuted its first playable proof-of-concept, Proving Ground, a single-player time trial which makes use of <a href="https://blockworks.co/news/web3-gaming-hellscape-needs-reboot">the would-be franchise’s first “hero” character</a>, Reyu.



Game designers at Random Games are combining traditional game development with world building and cultivating a community through ownership of playable characters. The hope is that external developer partners will take the chance to expand upon the company&#8217;s initial “building blocks,” according to Chief Technology Officer Wyeth Ridgway.



“What we’re showing off is how good your avatar looks and how functional he is,” Ridgway told Blockworks. “We solved all these complex geometric problems so when we share this project with developers they’re getting weapons systems, inverse kinematic systems [and] physics systems.”



All the Proving Ground (previously known as Danger Room) code will all be released to game developers to give them a starting point. “We basically end up saving the developers we’re handing this to a bunch of time,” Ridgway said.



Meanwhile, players can drop in their NFTs and take a stab at navigating the various levels of the Proving Ground to compete on completion time with other players and climb a weekly leaderboard. Solve the game fast enough, and the NFT can become permanently ranked with the chess-like title of grandmaster.



Ridgway describes that as part of the ownership culture of Web3, adding value to the NFT through its career achievements. Or, “kind of like having the game-winning ball in the NBA playoffs,” he said.



That metadata, while displayed on OpenSea listings, is stored on Unioverse servers for now. The end goal is for Unioverse to be “a community owned franchise,” but until then it’s reliant on the internal team, Ridgway said. “We’ll handpick a couple developers in 2024 to work with.&#8221;



After the initial single-player “sandbox,” the next step is a multiplayer, character-plus-vehicle battle royale-style game. “Like, a Mario Kart type of thing,” Ridway explained.



<h2 class="wp-block-heading">The role of NFTs in gaming</h2>



The Unioverse NFTs are tailored to various levels — from “common” to “legendary” which, while not affecting game play, can appeal to collectors as well as gamers. That seems to be one of the through lines of this burgeoning Web3 gaming narrative.



Another franchise, Kaidro, from creators Robert Simons and Peggy Chung, is billing itself as a “Web2 crossover” where the NFTs form an optional clan system that can attached to a player’s character to form a ranking system.



The game is also planning to make use of non-transferable — or “<a href="https://blockworks.co/news/what-is-decentralized-identity">soul-bound</a>” — NFTs, which function like any traditional <a href="https://en.wikipedia.org/wiki/Battle_pass" target="_blank" rel="noreferrer noopener">battle pass</a> in a Web2 paradigm.



Royalties on the secondary sales of in-game assets is expected to form one leg of the team’s business model, in a trans-media franchise that began as a webcomic in 2020.



The game is envisioned as a clan vs. clan competition based on seasons. “Season 0,” an open beta, is expected to reach gamers by the end of the year, while Season 1 will introduce players to the core story in 2024.


<div class="wp-block-image">
<figure class="aligncenter size-large"><img loading="lazy" decoding="async" width="2560" height="1243" src="https://blockworks-co.imgix.net/wp-content/uploads/2023/04/kaidro-demo-2-scaled.jpg?w=1024&amp;h=1024" alt="" class="wp-image-53839" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2023/04/kaidro-demo-2-scaled.jpg?w=2560 2560w, https://blockworks-co.imgix.net/wp-content/uploads/2023/04/kaidro-demo-2-scaled.jpg?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2023/04/kaidro-demo-2-scaled.jpg?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2023/04/kaidro-demo-2-scaled.jpg?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2023/04/kaidro-demo-2-scaled.jpg?w=1536 1536w, https://blockworks-co.imgix.net/wp-content/uploads/2023/04/kaidro-demo-2-scaled.jpg?w=2048 2048w, https://blockworks-co.imgix.net/wp-content/uploads/2023/04/kaidro-demo-2-scaled.jpg?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2023/04/kaidro-demo-2-scaled.jpg?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2023/04/kaidro-demo-2-scaled.jpg?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2023/04/kaidro-demo-2-scaled.jpg?w=80 80w" sizes="auto, (max-width: 2560px) 100vw, 2560px" /><figcaption class="wp-element-caption">Demo video of Kaidro game; Source: kaidro.com</figcaption></figure></div>


“I’m a huge fan of collectibles,” Simons, the co-founder of developer Gadget-Bot Productions, told Blockworks. “The natural course of digital assets is you should own them.&#8221;



Simons said there’s still effort needed before mainstream gamers will warm to the concept. “I think it’s going to take time for people to understand that…why are you pouring all your hard earned money into this thing?”



Ridgway sees the cultivation of an ownership culture as the core appeal of in-game NFTs.



“An asset like your sword that you spent 5 years earning in [World of Warcraft] that doesn’t just exist in a database on the WOW server but exists as a thing that can be in an open marketplace — that in and of itself is interesting,” he said.



But for him, it’s the potential for a royalty stream to directly support game creators that’s even more significant.



“I still think the ultimate promise of NFTs lies in fulfilling that promise [of royalties],” he said.



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Game Designers Take Baby Steps Toward Web3 Vision

Shalini Nagarajan

Blur has updated its royalty policy in an effort to grab more market share from rival NFT platform OpenSea.



The fast-rising NFT marketplace raised an open battle against OpenSea, saying it’s working to help NFT creators earn full royalties everywhere and not just on one platform at a time like its competitor.



“Today, creators can’t earn royalties on Blur and OpenSea at the same time,” Blur said in a <a href="https://mirror.xyz/blurdao.eth/vYOjzk4cQCQ7AtuJWWiZPoNZ04YKQmTMsos0NNq_hYs" target="_blank" rel="noreferrer noopener">blog</a> published Wednesday. “Instead, they can only earn full royalties on OpenSea, or Blur, but not both together.”



When Blur launched in November, it stayed away from enforcing full royalties, meaning that it didn’t enforce a fee creators collect upon secondary sales of their digital collectibles. Instead, it left the option to buyers to decide whether to honor an artist’s royalty policy. It then changed tack by expanding royalties with a minimum fee of 0.5%.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">Yesterday we made an update to our royalty policy. Here’s the blog post accompanying that &#8211; it was meant to go out yesterday but due to the launch mayhem we weren’t able to publish until now. <a href="https://t.co/jeRcQYkvAr">https://t.co/jeRcQYkvAr</a>&mdash; Blur (@blur_io) <a href="https://twitter.com/blur_io/status/1625935590834446341?ref_src=twsrc%5Etfw">February 15, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



But now Blur has said that if NFT creators want to request full royalty fees, they can do so, provided they block their collection on OpenSea. This option isn’t a default setting and users will have to opt in for it.&nbsp;



“Our preference is that creators should be able to earn royalties on all marketplaces that they whitelist, rather than being forced to choose,” Blur said.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">This is a declaration of war by <a href="https://twitter.com/blur_io?ref_src=twsrc%5Etfw">@blur_io</a> <a href="https://twitter.com/PacmanBlur?ref_src=twsrc%5Etfw">@PacmanBlur</a> and I&#39;m here for it. How does OpenSea respond to this? Perhaps&#8230; <a href="https://twitter.com/search?q=%24OS&amp;src=ctag&amp;ref_src=twsrc%5Etfw">$OS</a>?<a href="https://t.co/897a4bkRdI">https://t.co/897a4bkRdI</a> <a href="https://t.co/G2mGhn7KzF">pic.twitter.com/G2mGhn7KzF</a>&mdash; Thrown➕ (@thrown_xyz) <a href="https://twitter.com/thrown_xyz/status/1625937804051238913?ref_src=twsrc%5Etfw">February 15, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Blur calls itself the NFT marketplace for pro traders and says it outranks other marketplaces as it is 10x faster than other aggregators and 20% more gas-efficient than Gem, OpenSea’s NFT aggregator for experienced traders.&nbsp;



Blur <a href="https://blockworks.co/news/blur-could-unseat-nft-marketplace-opensea">has been trying to topple OpenSea’s dominance</a> of the NFT space. Oskari Tempakka of Token Terminal told Blockworks that its user experience is extremely appealing for NFT traders and has less complex features than other platforms.&nbsp;



Late last year, OpenSea <a href="https://twitter.com/pandajackson42/status/1620081518575235073" target="_blank" rel="noreferrer noopener">reportedly</a> required new collections to block Blur to receive enforced royalties. Blur then tried to bypass this blocklist by creating a new marketplace on OpenSea’s Seaport protocol, meaning that all creators were able to receive full royalties on both platforms. 



Then in November, OpenSea announced collections that sought enforced royalties must block marketplaces that don’t fully honor them.&nbsp;



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">Opensea and Blur are mom and Dad and every NFT project with royalties is the child being fought over in divorce court.&mdash; Jonah 🎮 (@RealJonahBlake) <a href="https://twitter.com/RealJonahBlake/status/1625945035895148576?ref_src=twsrc%5Etfw">February 15, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



OpenSea didn’t return Blockworks’ request for comment by press time.



Blur said in its blog that OpenSea benefits from having creators block Blur.&nbsp;



“OpenSea has primarily cited Blur’s policy on old collections without filters as the reason for why Blur should still be filtered by new collections,” it said. “Their proposed solution, however, has serious flaws, which is why Blur has taken a different approach that has a better chance of solving the issue for good.”



BLUR, the governance token of the NFT marketplace, was airdropped to the platform’s users on Tuesday. The tokens already accumulated over $1 billion in trading volume, according to <a href="https://www.coingecko.com/en/coins/blur/historical_data#panel" target="_blank" rel="noreferrer noopener">CoinGecko</a>.



In terms of NFT trading volumes, <a href="https://dappradar.com/nft/marketplaces" target="_blank" rel="noreferrer noopener">DappRadar</a> already puts Blur ahead of the much longer-running X2Y2 and closing in on LooksRare.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



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Blurring the Battle Lines on OpenSea Royalties for NFT Creators

Bored Ape Yacht Club (BAYC) creator Yuga Labs has blacklisted addresses from marketplaces that don’t support royalties for NFTs like its latest Sewer Pass mint.



Differing perspectives on <a href="https://blockworks.co/news/web3-nft-ape-dao-hot-wheels">the enforcement of creator royalties</a> has been a hot topic among NFT stakeholders, including marketplaces, some of which <a href="https://blockworks.co/news/sudoswap-erupts-as-nft-traders-capitalize-on-royalty-free-sales">have decided to make them optional</a>.&nbsp;



BAYC had already announced that the Sewer Pass NFT will be listed on OpenSea, which <a href="https://docs.opensea.io/docs/10-setting-fees-on-secondary-sales#:~:text=That%20means%20a%202.5%25%20fee,in%20the%20My%20Collection%20editor." target="_blank" rel="noreferrer noopener">enforces royalties</a> for projects.



&#8220;We’ve always been a creative-first company, and we believe that creator royalties must be protected,&#8221; a Yuga Labs spokesperson told Blockworks via email. &#8220;The Sewer Pass free claim will only be traded on platforms respecting creator royalties.&#8221;



LooksRare, Sudoswap, Blur and NFTX have all opted to stay away from the NFT royalty model, instead leaving the option to the buyers to decide whether to honor an artist’s royalty policy. Blockworks has reached out for comment.



Certain conditions in the Sewer Pass <a href="https://etherscan.io/address/0x849b59222d093011726d829475C81C79F90ed932#code" target="_blank" rel="noreferrer noopener">smart contract</a> include a blocklist of certain wallet addresses, which were noticed by the crypto community and <a href="https://twitter.com/locationtba/status/1615792932296196096" target="_blank" rel="noreferrer noopener">shared</a> on Twitter.&nbsp;



Some of those addresses appear to be linked to marketplaces like LooksRare, NFTX, Blur and SudoSwap.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">Was taking a read through <a href="https://twitter.com/yugalabs?ref_src=twsrc%5Etfw">@yugalabs</a> Sewer Pass contract, and saw that it&#39;s referencing a contract that was deployed a week ago. The contract is labeled as a Registry and there&#39;s a bunch of transactions adding to the blocklist. Presumably one of the addresses is <a href="https://twitter.com/blur_io?ref_src=twsrc%5Etfw">@blur_io</a>&mdash; location tba (@locationtba) <a href="https://twitter.com/locationtba/status/1615792932296196096?ref_src=twsrc%5Etfw">January 18, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



<a href="https://blockworks.co/news/nft-royalties-sometimes-they-work-sometimes-they-dont">NFT royalties</a> are essentially payouts to creators, offering them a cut from the secondary sale of their digital assets on a marketplace. Beeple, one of the best-known NFT creators, himself gets a <a href="https://www.reuters.com/lifestyle/digital-only-artwork-fetches-nearly-70-million-christies-2021-03-12/" target="_blank" rel="noreferrer noopener">10% royalty</a> each time his NFTs are resold after the initial sale.



The <a href="https://icy.tools/collections/sewer-pass/overview" target="_blank" rel="noreferrer noopener">Sewer Pass</a> is a key providing access to Yuga’s skill-based interactive game <a href="https://twitter.com/BoredApeYC/status/1613331130249256962" target="_blank" rel="noreferrer noopener">Dookey Dash</a>, a game in which players will face obstacles testing their survival until top scorers can earn rewards.&nbsp;



The pass has four tiers, depending on the kind of NFTs the holder has. The floor price for a Tier 1 pass last stood at 1.4 ETH as of Thursday, while Tier 4 was selling for around 420 ETH. Currently, a <a href="https://opensea.io/" target="_blank" rel="noreferrer noopener">trending</a> collection, it’s already captured 6,510 ETH ($9.9 million) in sales volume since going live on Wednesday.



Yuga isn’t the only one to block marketplaces for their policy. NFT artist Tyler Hobbs added X2Y2 to a blacklist in his QQL collection due to its flexible royalty model. X2Y2 eventually <a href="https://twitter.com/the_x2y2/status/1593631425483657216" target="_blank" rel="noreferrer noopener">changed its decision</a> and followed OpenSea’s model.



This story was updated on Jan. 19, 2023 at 12:22 p.m. ET, with a statement from Yuga Labs.



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Yuga Labs Blacklists Royalty-avoiding Marketplaces

John Gilbert

Ornella Hernandez

In an era of artists recouping fractions of a cent on music streams and visual artists lacking any revenue share from the speculative secondary market — NFT royalties were bandied about as a trump card for artists vying to set up sustainable business models.



Now, with the move from <a href="https://cms.blockworks.co/web3-watch-twitters-potential-crypto-wallet-and-a-royalty-optional-looksrare/" target="_blank" rel="noreferrer noopener">X2Y2, Looks Rare and Magic Eden to make NFT royalties optional</a>, artists are once again playing defense.&nbsp;



Because the smart contracts underpinning NFT royalties lack legal enforcement mechanisms or any other outside accountability, it appears the technology is only as good as the platform’s commitment to uphold it.&nbsp;



And, with ImmutableX’s swift launch of a <a href="https://cms.blockworks.co/immutable-alex-connolly-on-protecting-nft-creator-royalties/" target="_blank" rel="noreferrer noopener">community-managed NFT marketplace blacklist</a>, scores of skeptical artists and NFT collectors have been asking how the tech actually works — and if artist royalties can be saved.



<h3 class="wp-block-heading">What are NFT royalties?</h3>



NFT royalties are crypto payouts designed to proffer creators a cut of secondary sales of their digital collectibles. The percentage of sale designated for royalties is set by the creator at the time of minting — typically around 6%. Smart contract platforms where NFTs are minted are, in most cases, responsible for automating the payments.



The key to the success of revenue sharing lies in previous attempts to institute universal baselines for artist resale royalty rights. It explains why NFT royalties matter to the Web3 narrative and where the system currently falls short of its intended purpose.



<h3 class="wp-block-heading">Why artists need resale revenue</h3>



Artists have long struggled to find fair compensation. Artists such as Harvey Ball, famous for creating the yellow smiley face in 1963, was only paid $45 for his iconic image. The t-shirt company that used it later sold for $500,000,000 in 2000. And Robert Rauschenberg in 1958 sold his painting “Thaw” for $900. Just a few years later it changed hands for $85,000.



Once the intellectual property of both artists left the building, they lost all rights to downstream payments. That would not be the case if they had rights to royalty payments from secondary sales.&nbsp;



Resale royalty rights are the legal entitlement to a percentage of proceeds made from selling an original artwork. The right is either granted by the state or a contract between the artist and reseller. And in the US, save for California, artists can only access this right through individual contracts.



In 2013, The <a href="https://www.copyright.gov/docs/resaleroyalty/usco-resaleroyalty.pdf" target="_blank" rel="noreferrer noopener">United States Copyright Office reported</a> that visual artists are at a unique disadvantage compared to other creators when it comes to revenue generation.&nbsp;



Because the value of their art is derived from uniqueness, little money can be made from reproduction. The inherent nature of visual art excludes it from the type of royalty contracts between musicians, record labels and streaming platforms.



The music industry has its own set of challenges when it comes to fair compensation. The streaming model has cut artists out of a large share of royalties. Projects such as Blocktones have found creative ways to royalties into their music based NFTs.



Artists in the US have attempted to institute universal baselines for artist resale royalty rights through legislation, but each attempt has failed. And while some of these rights exist for Californians — and in some countries such as France — the requirements are easy to evade due to the lack of cross-border enforcement.



The ability to offer artists an easy system to collect royalties from NFT resales is what convinced many artists to enter the NFT market. Without royalties, the technology lacks an alternative to the artist’s monetization model.



<h3 class="wp-block-heading">How NFT royalties work</h3>



The NFT royalty system can differ between blockchains, but with Ethereum, it is managed at the discretion of smart contract platforms.



With Rarible, for example, the artist can set the percentage of resale proceeds at the minting stage via a smart contract on the blockchain in question.&nbsp;At the time of purchase, the platform automatically executes the terms of the contract. Platforms differ in the specifics of payout schedules.



The terms do not represent a legal contract, though — typically in a bid to sidestep litigation.



Case in point: Per <a href="https://static.rarible.com/terms.pdf" target="_blank" rel="noreferrer noopener">Rarible’s terms of service</a>, creators must agree to grant the platform royalty-free rights to any content posted on the platform. So, even though the platform embeds the terms of royalties via smart contract, there is no legal obligation.



The legalese transfers the enforcement burden from civil authorities to code. But, because the automation still requires consent from the market maker, a series of thorny enforcement challenges have emerged.



<h3 class="wp-block-heading">Can you transfer royalties between marketplaces?</h3>



Royalty policies from other platforms do not automatically transfer.&nbsp;



OpenSea, for instance, only supports royalties on collections — not individual pieces. So, if an NFT with its own royalty policy is sold on Rarible, and then listed on OpenSea, the original artist would not see any revenue from the secondary sale. Additionally, OpenSea’s maximum royalty is 10% to Rarible’s 50%.



<h3 class="wp-block-heading">What are optional royalties?</h3>



NFT marketplaces such as LooksRare, Magic Eden and X2Y2 have all moved away from the NFT royalty model. Their new royalty-optional system lets NFT buyers decide to honor an artist’s royalty policy for purchases.&nbsp;



How? Well, even though royalties policies are immutable smart contracts, the Ethereum blockchain isn’t able to enforce stipulations on token transfers. Any enforcement of the smart contract is inherently voluntary. The platforms simply passed that option on to the buyers.&nbsp;



This means that for all existing and new NFT listings, royalty payments are discretionary. Some platforms including LooksRare have agreed to share 25% of protocol fees with creators in an effort to alleviate the effects to the artist revenue model.



NFT artists like Tyler Hobbs have started adding NFT marketplaces that evade royalties to a blacklist.&nbsp;



He added X2Y2 to the blacklist in his QQL collection following their decision to axe royalties. The move succeeded in blocking the collection from being listed, but platforms can develop workarounds. Some ecosystems such as ImmutableX are working on a <a href="https://cms.blockworks.co/immutable-alex-connolly-on-protecting-nft-creator-royalties/" target="_blank" rel="noreferrer noopener">community-managed whitelist and blacklist</a> that would implement broad enforcement across the Ethereum NFT ecosystem.&nbsp;



<h3 class="wp-block-heading">Is there evidence that NFT royalties offer sustainable revenue to artists?</h3>



During the early days of NFT launches, many projects and individuals generated millions from royalties on the secondary market. Today, the secondary market is not providing the same.



Bearish market conditions combined with a growing number of platforms abandoning royalties have all contributed to declining revenue. A look at Yuga Labs’ royalty payouts illustrates this decline:



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1024" height="523" src="https://blockworks-co.imgix.net/wp-content/uploads/2022/11/Yuga-Labs-Daily-Royalties-by-Collection-1-1024x523.jpg" alt="Yuga Labs Daily Royalties by Collection" class="wp-image-36934" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2022/11/Yuga-Labs-Daily-Royalties-by-Collection-1-1024x523.jpg?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2022/11/Yuga-Labs-Daily-Royalties-by-Collection-1-1024x523.jpg?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2022/11/Yuga-Labs-Daily-Royalties-by-Collection-1-1024x523.jpg?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2022/11/Yuga-Labs-Daily-Royalties-by-Collection-1-1024x523.jpg?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2022/11/Yuga-Labs-Daily-Royalties-by-Collection-1-1024x523.jpg?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2022/11/Yuga-Labs-Daily-Royalties-by-Collection-1-1024x523.jpg?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2022/11/Yuga-Labs-Daily-Royalties-by-Collection-1-1024x523.jpg?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2022/11/Yuga-Labs-Daily-Royalties-by-Collection-1-1024x523.jpg?w=50 50w, https://blockworks-co.imgix.net/wp-content/uploads/2022/11/Yuga-Labs-Daily-Royalties-by-Collection-1-1024x523.jpg?w=1366 1366w" sizes="auto, (max-width: 1024px) 100vw, 1024px" /><figcaption>Yuga Labs Daily Royalties by Collection | Source: <a href="https://dune.com/beetle/yuga-vs-proof-ecosystem" target="_blank" rel="noreferrer noopener">@beetle</a></figcaption></figure>



Many projects have shut down. But NFT collections such as <a href="https://cms.blockworks.co/web3-watch-sec-probes-yuga-labs-degods-eliminates-nft-royalties/" target="_blank" rel="noreferrer noopener">DeGods have responded by removing royalties</a> outright.



DeGods launched a collection of 10,000 Solana NFTs in October 2021. The project adds utility beyond the resale market by giving DeGods and DeadGods NFT holders the ability to stake and earn utility tokens.&nbsp;



While large projects with outside revenue sources can afford royalties, individual artists cannot. To illustrate, the NFT collection Fidenza by Tyler Hobbs has made a total of 3,999 ETH in royalty revenue, according to <a href="https://www.flips.finance/Dashboard" target="_blank" rel="noreferrer noopener">Flips.Finance</a>. The initial mint price was only .17 ETH, meaning royalty revenue exponentially outweighed mint proceeds.&nbsp;



Despite enforcement challenges, resale royalties have a major impact on an artist’s bottom line.&nbsp;



If an NFT transferred from OpenSea to LooksRare, the artists could still see royalties if the artist registered the collection. But as soon as LooksRare made royalty payments optional, the platform’s total volume rose dramatically, and royalty fees dropped close to 0.&nbsp;



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1024" height="523" src="https://blockworks-co.imgix.net/wp-content/uploads/2022/11/LooksRare-Volume-Versus-Royalty-Fees-1-1024x523.jpg" alt="LooksRare Volume Versus Royalty Fees" class="wp-image-36933" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2022/11/LooksRare-Volume-Versus-Royalty-Fees-1-1024x523.jpg?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2022/11/LooksRare-Volume-Versus-Royalty-Fees-1-1024x523.jpg?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2022/11/LooksRare-Volume-Versus-Royalty-Fees-1-1024x523.jpg?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2022/11/LooksRare-Volume-Versus-Royalty-Fees-1-1024x523.jpg?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2022/11/LooksRare-Volume-Versus-Royalty-Fees-1-1024x523.jpg?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2022/11/LooksRare-Volume-Versus-Royalty-Fees-1-1024x523.jpg?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2022/11/LooksRare-Volume-Versus-Royalty-Fees-1-1024x523.jpg?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2022/11/LooksRare-Volume-Versus-Royalty-Fees-1-1024x523.jpg?w=50 50w, https://blockworks-co.imgix.net/wp-content/uploads/2022/11/LooksRare-Volume-Versus-Royalty-Fees-1-1024x523.jpg?w=1366 1366w" sizes="auto, (max-width: 1024px) 100vw, 1024px" /><figcaption>LooksRare Volume Versus Royalty Fees | Source: <a href="https://dune.com/nftanalyst/lr-royalties" target="_blank" rel="noreferrer noopener">@nftanalyst</a></figcaption></figure>



<h3 class="wp-block-heading">The economics driving NFT marketplaces to drop royalties</h3>



The incentive for marketplaces to drop NFT royalties is simple. It attracts traders who want greater profit margins on NFT resales.&nbsp;



&#8220;Right now, we’re seeing some marketplaces looking for an edge during the current NFT market downturn, and they’re turning to tactics like eliminating mandatory royalties,” MakersPlace CEO Craig Palmer said in a statement. “MakersPlace has always been a firm supporter of creators and while this ‘optional’ approach where the buyer decides whether or not to pay royalties may make sense to other marketplaces, it doesn’t fit with our vision for the space.”



In addition to MakersPlace, NFT marketplaces such as Rarible and OpenSea are continuing to enforce royalties.



In response to Magic Eden and LooksRare transitioning to optional NFT royalties, Twitter user NFTstatistics.eth explained the economics in action.&nbsp;



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">Economics in action: If you think you are getting a competitive advantage by cutting royalties&#8230; you&#39;re actually just starting a race to the bottom. Everyone follows and we&#39;re back where we started, just now without royalties.&mdash; NFTstatistics.eth (@punk9059) <a href="https://twitter.com/punk9059/status/1585654054360739840?ref_src=twsrc%5Etfw">October 27, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">This has happened on Solana (MagicEden is back to 90% share now that they&#39;ve cut royalties) and is happening on ETH w LooksRare cutting out royalties This is a particularly pronounced process in NFTs since the fees being cut don&#39;t actually go to the company doing the fee-cutting&mdash; NFTstatistics.eth (@punk9059) <a href="https://twitter.com/punk9059/status/1585654843284197377?ref_src=twsrc%5Etfw">October 27, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



While there appears to be a race to the bottom, the network effects of a single platform&#8217;s decision to make royalties optional are limited to the degree of interoperability between NFT ecosystems.&nbsp;



Because Magic Eden supports both Solana- and Ethereum-based NFTs, the marketplace’s move to drop royalties incentivizes marketplaces in both blockchains to follow suit.&nbsp;



While the trend has grown across both blockchains, it has not yet triggered a similar pattern across NFT economies on the likes of Cardano.



Cardano NFT volume surpassed Solana’s for the month of October, with <a href="https://twitter.com/nftpowerranking/status/1587298873361342465?s=20&amp;t=bYjK7Xwb1eRfTNav3zS2ag" target="_blank" rel="noreferrer noopener">some speculating</a> demand for royalties as a large reason why. The theory: The artist-friendly setup attracted a new wave of artists and mints.&nbsp;



<h3 class="wp-block-heading">The future relationship between artists and NFTs</h3>



According to critics of optional royalties, this race to the bottom is a desperate attempt to keep users engaged. Yet, it robs Peter to pay Paul in the sense that benefits to traders come at the expense of the artist.



The royalty incentive only works when all major platforms agree to uphold them. If one breaks that disagreement, it’s not long before others follow.



The industry appears to be at a fork in the road. If it finds a way to enforce royalties at the protocol level — or even a legal level — then it may succeed where lawmakers failed.&nbsp;



But most proposal upgrades appear to have loopholes that would allow for similar problems to emerge.&nbsp;



The alternative is to find a different carrot. If NFTs succeed in implementing a sustainable business model without royalties, others may follow.



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How NFT Royalties Work – and Sometimes Don’t

Digital collectibles startup Immutable is doubling down on its layer-2 blockchain scaling solution for NFTs in a bid to better enforce royalty payouts, the company said Friday.&nbsp;



It plans to expand how the unit, ImmutableX, works by including all Ethereum-based NFTs, plus other blockchains compatible with the Ethereum virtual machine (EVM), via a whitelist for smart contracts that honor royalty fees overseen by Immutable users, as well as a corresponding blacklist.&nbsp;



Read more: <a href="https://cms.blockworks.co/nft-royalties-sometimes-they-work-sometimes-they-dont/">How NFT Royalties Work – And Sometimes Don’t</a>



The new setup includes NFTs stemming from popular blockchain-based games on the platform, such as the role-playing game Illuvium and trading card-focused Gods Unchained.



GameStop’s first NFT marketplace, meanwhile, went live on ImmutableX Oct 31., after debuting a public beta in July. The marketplace now offers in-game NFT assets from Web3 games built on ImmutableX.&nbsp;



Blockworks caught up with Alex Connolly, one of Immutable’s three Australia-based founders, at the NFT London conference this week to learn more.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Blockworks: Immutable has already implemented enforceable royalties. How are you taking this a step further?



Connolly: Immutable is expanding royalty enforcement to all NFT projects — games or not — on Ethereum, so users can choose to opt in or not if they want to protect royalties in this fashion.



Enforcing royalties has been a consistent challenge for games. It works on Immutable’s application-specific rollup, but as soon as you want to do an Ethereum drop with royalties — or a drop on any sort of EVM chain with royalties — then, suddenly, no one&#8217;s royalties are enforceable.



The way the ERC-721 token standard works makes it extremely difficult to enforce royalties on a public blockchain. And, basically, what we announced today was that we have a novel design for how to do it with the same degree of enforceability on a public chain.



Blockworks: Can you go into what an application-specific roll up is and how it differs from a general <a href="https://blockworks.co/news/zk-rollups-future-of-smart-contract-blockchains">zero-knowledge rollup (zk rollup)</a>?



Connolly: There are two types of zero-knowledge rollups. The first-generation ones are application specific because they have fixed functionality. So, it&#8217;s quite easy to program in — you have to pay your royalties. But, when you have smart contract-enabled zk rollups, like&nbsp; <a href="https://cms.blockworks.co/polygon-and-matter-labs-compete-on-zkevm-rollups/" target="_blank" rel="noreferrer noopener">zkEVM</a> or <a href="https://podcasts.apple.com/gb/podcast/starkware-l3s-and-the-zk-rollup-future-eli-ben-sasson/id1554930038?i=1000581394246" target="_blank" rel="noreferrer noopener">StarkWare</a>, suddenly you lose that functionality.



Our goal is to be able to offer both types of rollups to our customers. So, you can either use an application-specific rollup and get lots of great dedicated performance. Or you can use a more general rollup.&nbsp;



But up until now, our customers that went with a more general rollup were choosing to give up enforceable royalties. Now, we&#8217;re in a position to say, “Hey, we can make your royalties enforceable, no matter where you are.”



Blockworks: What do you think of NFT marketplaces that have gone royalty optional?



Connolly: The problem with marketplaces at the moment is that the only option that exists on public blockchains is not enforceable. So, up until now, it&#8217;s just been a sort of a goodwill thing if marketplaces have left it on.



There was almost $2 billion in royalties paid to creators last year. With $2 billion of income from streaming, you can build a business around that. If you&#8217;re a game, you can redesign your economy around that and your monetization can change.&nbsp;



But to go from that to the possibility that you might actually get $0? That is a huge swing that is totally untenable for most creators.



Blockworks: Let’s talk about the GameStop NFT marketplace adding support for ImmutableX and its progress so far.&nbsp;



Connolly: I&#8217;d say, due to the success of the GameStop [NFT marketplace] launch, we&#8217;re firmly second behind Ethereum in terms of NFT volume on-chain. And we think that there&#8217;s still a ton left to do, including some user experience things that still need to be ironed out.&nbsp;



GameStop has really invested in making this partnership, and their marketplace, extremely successful, because they want to reinvent their business model and find new sources of revenue. It&#8217;s fantastic to see such a major brand really going in on Web3.



Blockworks: Over a dozen new games have recently been added to ImmutableX. What are the main selling points?



Connolly: The thing that probably sets us apart more is we are really focused on gaming. A lot of our competitors sometimes have a marketing campaign to target gaming, but there&#8217;s no product that&#8217;s in any way actually better for gamers.



We are such strong believers that Web3 games will be a dominant force in gaming, but also that the solutions gaming needs are not the solutions the art market needs.&nbsp;



When you have tens of millions of people trading swords inside a game, it&#8217;s very different to people trading a $10 million digital art piece. They need different technology and they need different experiences.&nbsp;



So, why even announce the royalties enforcement? Because we care about games being sustainably successful.



This interview was edited for length and clarity.



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Q&A: Immutable’s Alex Connolly on Protecting NFT Creator Royalties

<div id="highlights-block_635c2589cdb9b" class="highlights">
 <ul>
 <li>Smartphone maker Vertu launches Web3 Android to rival Solana Saga phone</li>
 <li>LooksRare plans to divert 25% of protocol fees directly to creators</li>
 </ul>
 
</div>



Reddit’s nascent NFT marketplace made a splash in the digital collectibles market by <a href="https://cms.blockworks.co/reddit-makes-pfp-nfts-cool-again-marketplace-trading-volume-surges/" target="_blank" rel="noreferrer noopener">onboarding nearly 3 million</a> new users to Web3 by pitching NFTs to users — rivaling OpenSea’s numbers in the process.



And for those who own a Bored Ape or a CryptoPunk NFT and live in Switzerland, fintech bank <a href="https://cms.blockworks.co/swiss-bank-seba-now-custodies-blue-chip-ethereum-nfts/" target="_blank" rel="noreferrer noopener">SEBA offers to custody those NFTs</a> just like any other customer deposit. This will test if users prefer to trust a bank with their NFTs, instead of keeping them in their own wallets.&nbsp;



Here are other notable stories that caught the eyes of the Web3 Watch.&nbsp;



<h3 class="wp-block-heading">Twitter’s potential crypto wallet&nbsp;</h3>



Twitter is officially in the hands of Elon Musk, who formalized his new role by changing his Twitter bio to “Chief Twit” after a <a href="https://cms.blockworks.co/crypto-faithfuls-await-elon-musks-blockchain-plans-for-twitter/" target="_blank" rel="noreferrer noopener">$44 billion acquisition</a>.



In the lead up to the takeover, researcher Jane Manchung Wong tweeted out some juicy developing details about Twitter’s potential plans to launch a crypto wallet.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">Twitter is working on a “wallet prototype” that supports “crypto deposit and withdrawal”&mdash; Jane Manchun Wong (@wongmjane) <a href="https://twitter.com/wongmjane/status/1584616567530483712?ref_src=twsrc%5Etfw">October 24, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Wong is known for testing out tech products and new features on social media platforms, including the Twitter edit button for Twitter Blue members.&nbsp;



Since reporting on Oct. 24 that Twitter may be working on a wallet prototype that supports crypto deposits and withdrawals, no other details have been made available.



Musk previously <a href="https://cms.blockworks.co/elon-musk-teases-crypto-integration-at-his-first-twitter-all-hands/" target="_blank" rel="noreferrer noopener">said</a> that “it would make sense to integrate payments into Twitter so that it’s easy to send money back and forth, and if you have currency as well as crypto,” during his first Twitter all-hands meeting in June.



<h3 class="wp-block-heading">The royalties domino effect</h3>



First, X2Y2 and SudoSwap NFT marketplaces made the move toward optional creator <a href="https://cms.blockworks.co/nft-royalties-sometimes-they-work-sometimes-they-dont/">NFT royalties </a>during the summer. 



Then, Solana giant Magic Eden <a href="https://twitter.com/MagicEden/status/1581101016686399491?s=20&amp;t=yLNKcqyOxYxi4zGVRpq34w" target="_blank" rel="noreferrer noopener">followed</a>, because “royalties are not enforceable on a protocol level,” and due to shifting market dynamics. Notably, <a href="https://pro.nansen.ai/nft-trends?platform=MagicEden&amp;network=solana" target="_blank" rel="noreferrer noopener">Nansen data shows</a> that there’s been a slow exodus of return Magic Eden buyers per day, while the number of first-time NFT buyers has increased since the announcement on Oct. 15.



Read more: <a href="https://cms.blockworks.co/nft-royalties-sometimes-they-work-sometimes-they-dont/">How NFT Royalties Work – And Sometimes Don’t</a>



Now rival NFT marketplace LooksRare has also eliminated creator royalties, but buyers can still opt-in to pay optional royalties at checkout.



The marketplace will instead share 25% of the LooksRare protocol fee with creators and collection owners. It claimed to be the first zero-royalty marketplace to do so.



In a blog post, LooksRare <a href="https://docs.looksrare.org/blog/looksrare-offers-zero-royalty-trading-shares-protocol-fees-with-creators-instead" target="_blank" rel="noreferrer noopener">acknowledged</a> that the trend of zero-royalty marketplaces has “eroded the general willingness to pay royalties throughout the NFT space.” While this may be good for traders, most creators are left without an important source of passive income, it said.&nbsp;



The plan to divert protocol fees directly to creators hopes to achieve 0% seller fees through a rebate on protocol fees paid.&nbsp;



Protocol fees were previously 2%. Now, 1.5% of each trade goes to LOOKS stakers and 0.5% goes to collections if they’ve set up a receiving address.&nbsp;



Additionally, the trading rewards distribution ratio has been updated so that 95% of trading rewards go to sellers and 5% to buyers. As for listing rewards, the leaderboard now ranks by OpenSea rolling 24-hour volume only.



Time will tell if killing royalties, a revenue stream for many creators, disincentivizes them from providing ongoing utility. What would motivate them to add value to their NFTs if they can’t benefit when new buyers enter?



<h3 class="wp-block-heading">The latest Web3 smartphone</h3>



Would you buy a $41,000 phone? The latest Web3-marketed phone can cost as much as that.



Smartphone maker Vertu <a href="https://medium.com/@republicofvertu/vertu-is-ready-to-start-a-new-journey-37b4551f0b22" target="_blank" rel="noreferrer noopener">launched</a> its latest Android device called Metavertu that can run its own blockchain node and turn photos and videos into NFTs “with one click.”



Metavertu runs on the standard Android operating system while enabling users to switch to Web3 mode. Some benefits of Web3 mode include “instantaneous NFT generation, self-contained peer-to-peer encrypted communication” and access to decentralized applications (dapps), Vertu said.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">What makes the world’s first METAVERTU so unique? Take a look at it now! A quick view to know <a href="https://twitter.com/hashtag/METAVERTU?src=hash&amp;ref_src=twsrc%5Etfw">#METAVERTU</a> and <a href="https://twitter.com/hashtag/VERTU?src=hash&amp;ref_src=twsrc%5Etfw">#VERTU</a> is ready to start a magical journey into the world of Web3. <a href="https://twitter.com/hashtag/web3phone?src=hash&amp;ref_src=twsrc%5Etfw">#web3phone</a> <a href="https://t.co/IcQj4m2pS6">pic.twitter.com/IcQj4m2pS6</a>&mdash; REPUBLIC OF VERTU (@republicofvertu) <a href="https://twitter.com/republicofvertu/status/1585587113252118529?ref_src=twsrc%5Etfw">October 27, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Additionally, Metavertu has a concierge service that offers an NFT membership pass with access to blockchain courses and early access to a high-value whitelist.



The entry-level model is priced at $3,600 and comes with a carbon fiber finish, 12GB RAM and 512GB internal storage. The high-end model, on the other hand, has 18GB RAM and 1TB storage, and comes wrapped in &#8220;Himalaya Alligator leather,&#8221; 18K gold and diamonds for $41,000.&nbsp;



Previously, Solana Labs’ subsidiary Solana Mobile <a href="https://cms.blockworks.co/solana-branches-out-to-hardware-development-with-web3-mobile-phone/" target="_blank" rel="noreferrer noopener">launched</a> its own Android-powered smartphone — Saga — in June that is integrated with the Solana blockchain network. The Solana Saga costs $1,000, in line with the price of an iPhone, and plans to deliver in early 2023.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



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Web3 Watch: Twitter’s Potential Crypto Wallet, and a Royalty-optional LooksRare

Casey Wagner

<div id="highlights-block_6352c79fd7364" class="highlights">
 <ul>
 <li>More marketplaces are leaning toward the zero-royalty model </li>
 <li>Sellers are responsible for paying the artist’s cut for secondary sales</li>
 </ul>
 
</div>



To date, Ethereum-based NFT creators have raked in more than $1.8 billion in royalties, according to data compiled by Galaxy Digital.&nbsp;&nbsp;



<a href="https://cms.blockworks.co/nft-royalties-sometimes-they-work-sometimes-they-dont/">Royalty payments</a>, the percentage that creators collect on secondary sales, are mostly concentrated to a select number of NFT projects, with 428 collections accounting for 80% of the royalties earned. 



The highest-earning entity, according to Galaxy, is Yuga Labs, the blockchain company behind the Bored Ape Yacht Club and Otherside NFT collections, among others. Yuga Labs collections have earned a total of more than $147.6 million in royalties. 



Read more: <a href="https://cms.blockworks.co/nft-royalties-sometimes-they-work-sometimes-they-dont/">How NFT Royalties Work – And Sometimes Don’t</a>



“Until recently, NFT royalties have been an opaque aspect of NFT trading,” Galaxy researchers wrote in a <a href="https://www.galaxy.com/research/insights/nft-royalties/" target="_blank" rel="noreferrer noopener">report</a> published Friday.&nbsp;



NFT creators receive their royalties from the seller, not the buyer, similar to real estate transactions in traditional markets.&nbsp;



Royalties are not currently programmed into smart contracts, making it difficult to track payments. Smart contract transfer mechanisms cannot be relied upon to calculate royalty payments because these functions also are used when collectors transfer NFTs between their own wallets.&nbsp;



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">“The only way an NFT royalty could be programmed into a smart contract is if the program somehow knew precisely when an owner is transferring an asset between his/her own wallet or selling an NFT to a buyer,” the researchers noted.&nbsp;</blockquote>



Because a decentralized royalty payment system is not yet functional, NFT marketplaces have taken on the role of facilitating royalty payments.&nbsp;



<a href="https://cms.blockworks.co/crypto-wallet-maker-ledger-sells-nfts-becomes-top-opensea-project/" target="_blank" rel="noreferrer noopener">OpenSea</a> only began showing royalty amounts during the checkout process in <a href="https://twitter.com/opensea/status/1448362715760713731?s=20&amp;t=ai9zbl9W6W0BBCQZtN3enQ" target="_blank" rel="noreferrer noopener">October 2021</a>. The popular NFT marketplace has also doubled its average royalty payout in the past year, increasing from an average of 3% to 6% paid to artists.&nbsp;



Other marketplaces, such as <a href="https://cms.blockworks.co/sudoswap-erupts-as-nft-traders-capitalize-on-royalty-free-sales/" target="_blank" rel="noreferrer noopener">Sudoswap</a>, pay artists no royalty fees at all in an effort to appeal to sellers and attract traders.&nbsp;



“Buyers often need a price increase of 10% to just break even,” Sudoswap said on <a href="https://twitter.com/sudoswap/status/1545535672240390145?s=20&amp;t=uCntDbTuYAUncxuHWr8i_Q" target="_blank" rel="noreferrer noopener">Twitter</a> in response to the decision to move to a zero-fee structure. “Trading on sudoswap means you only pay a 0.5% fee versus the usual 7.5% (2.5% + 5% royalty) fee on other platforms, enabling better price discovery.”



<a href="https://cms.blockworks.co/web3-watch-sec-probes-yuga-labs-degods-eliminates-nft-royalties/" target="_blank" rel="noreferrer noopener">DeGods</a>, the most popular NFT project on Solana, became the latest to join the no-royalties club earlier this month when the team decreased its royalty payment from 9.99% to 0%.



Royalties have been touted as a reason to invest in digital art since NFTs came on the scene, Galaxy researchers point out. Removing this model would significantly change one of the defining features of the industry.&nbsp;



“Until NFT royalties came into the picture, artists traditionally only made money from primary sales of their works,” researchers wrote. “That restrictive economic paradigm ensures that artists, especially those whose work may be seen as too revolutionary for their time, are unable to grow their revenue stream as their work gains recognition.”



<hr class="wp-block-separator has-alpha-channel-opacity"/>



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NFT Royalties Top $1.8 Billion: Galaxy Digital

<div id="highlights-block_62fca6686595c" class="highlights">
 <ul>
 <li>Sudoswap’s total value locked has jumped from $120,000 to $3 million over the past month</li>
 <li>NFT owners can bypass artist and creator royalties by launching liquidity pools on Sudoswap</li>
 </ul>
 
</div>



The NFT ecosystem has relied on centralized marketplaces, most prominently OpenSea, for practically its entire existence. Now, decentralized alternative Sudoswap is gaining traction — fast.



Sudoswap aims to shake up NFT trading with automated market making (AMM) algorithms and liquidity pools, echoing premiere Ethereum decentralized exchange (DEX) Uniswap.&nbsp;&nbsp;



Poor liquidity and slippage has long plagued NFT markets. A CryptoPunk might sell for $100,000 on one day but not garner similar offers for weeks or months — leaving investors confused over exactly how much it’s worth.



With its own brand of AMM, Sudoswap allows NFT traders to buy and sell without having to wait for an offer. Sellers contribute their crypto as liquidity to facilitate smoother automated trades, with orders settling with the pool rather than an individual, all on-chain.



“Each user who wants to sell an item deposits one or more NFTs into a pool which they control the pricing over, and the actual purchases happen across all of the pools,” Owen Shen, Sudoswap’s founder, explained on a <a href="https://www.youtube.com/watch?v=BPgkPl5TQOU" target="_blank" rel="noreferrer noopener">podcast</a> in May. 



Shen added: “You can set a pool with a higher pricing, but it&#8217;s the same as listing an item at a higher price — users will buy elsewhere if there’s cheaper items on the market.”



<h3 class="wp-block-heading">NFT traders are into the idea</h3>



In essence, each NFT listing on Sudoswap is actually its own pool, and every seller is solely responsible for providing liquidity to those pools. Users can set NFT values and other parameters for their pools — such as selling NFTs on a bonding curve that slowly increases as pieces are bought.&nbsp;



With Sudoswap, traders can quickly buy and sell NFTs across all pools, allowing for more immediate price discovery and reducing the threat of being stuck with an illiquid asset.



NFT traders seem onboard with the experiment; over the past month, Sudoswap’s total value locked inside its liquidity pools has skyrocketed 2,400%, from $120,000 to $3 million, <a href="https://defillama.com/protocol/sudoswap" target="_blank" rel="noreferrer noopener">DeFi Llama</a> data shows. 



Overall, the platform’s AMM has facilitated trades of more than 60,000 NFTs across nearly 29,000 transactions since early July, representing $16.5 million in trade volume, per a Dune Analytics <a href="https://dune.com/ff336/sudoswap-or-sudoamm" target="_blank" rel="noreferrer noopener">dashboard</a>. 



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1024" height="627" src="https://blockworks-co.imgix.net/wp-content/uploads/2022/08/Screen-Shot-2022-08-17-at-10.49.34-1024x627.png" alt="" class="wp-image-27360" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2022/08/Screen-Shot-2022-08-17-at-10.49.34-1024x627.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2022/08/Screen-Shot-2022-08-17-at-10.49.34-1024x627.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2022/08/Screen-Shot-2022-08-17-at-10.49.34-1024x627.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2022/08/Screen-Shot-2022-08-17-at-10.49.34-1024x627.png?w=1536 1536w, https://blockworks-co.imgix.net/wp-content/uploads/2022/08/Screen-Shot-2022-08-17-at-10.49.34-1024x627.png?w=2048 2048w, https://blockworks-co.imgix.net/wp-content/uploads/2022/08/Screen-Shot-2022-08-17-at-10.49.34-1024x627.png?w=420 420w, https://blockworks-co.imgix.net/wp-content/uploads/2022/08/Screen-Shot-2022-08-17-at-10.49.34-1024x627.png?w=426 426w, https://blockworks-co.imgix.net/wp-content/uploads/2022/08/Screen-Shot-2022-08-17-at-10.49.34-1024x627.png?w=357 357w, https://blockworks-co.imgix.net/wp-content/uploads/2022/08/Screen-Shot-2022-08-17-at-10.49.34-1024x627.png?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2022/08/Screen-Shot-2022-08-17-at-10.49.34-1024x627.png?w=50 50w" sizes="auto, (max-width: 1024px) 100vw, 1024px" /></figure>



For scale, OpenSea <a href="https://dune.com/rchen8/opensea" target="_blank" rel="noreferrer noopener">processed</a> roughly $800 million in NFT trades over the same period. So, there are still ways to go for Sudoswap to catch up to the big dog.



But the power of Sudoswap is that it removes pesky intermediaries, for better or worse. Centralized NFT platforms frequently bow to copyright strikes, stopping auctions in their tracks.



In fact, OpenSea triggered debate over the line between art, freedom of expression and plagiarism when it <a href="https://www.theverge.com/2021/12/30/22860010/bored-ape-yacht-club-payc-phayc-copycat-nft" target="_blank" rel="noreferrer noopener">banned</a> “flipped” Bored Ape Yacht Club (BAYC) collections. It’s done the same with overtly <a href="https://www.trustnodes.com/2021/11/22/alt-right-nft-banned-from-opensea" target="_blank" rel="noreferrer noopener">offensive</a> NFTs, as is its prerogative. 



Sudoswap could do similar filtering via its front-end web app, <a href="https://cms.blockworks.co/defi-web-apps-block-users-hit-by-tornado-cash-dust-attack/" target="_blank" rel="noreferrer noopener">echoing those</a> of major DeFi protocols in the wake of the Tornado Cash sanctions.



<h3 class="wp-block-heading">Royalty-free NFT trading on Sudoswap could undermine artists</h3>



Sudoswap does not pay any royalties to creators on NFT trades. Unlike OpenSea which pays on average 5% to NFT issuers on secondary sales, while keeping an additional 2.5% for itself, Sudoswap charges just 0.5% fees on trades, funds it sends to its treasury, not creators.



The platform’s low fees, on top of its liquidity pool structure, has become attractive for traders, but whether NFT creators and artists feel the same way is another story.



The bulk of NFT revenues usually comes from initial sales, but royalty payments on secondary trades have long been one of the primary sales pitches of the NFT ecosystem.



And in the case of industry giants such as Yuga Labs, they definitely don’t hurt. The floor <a href="https://nftpricefloor.com/bored-ape-yacht-club" target="_blank" rel="noreferrer noopener">price</a> for its BAYC tokens is currently 77 ETH ($145,000), and 2.5% royalties means it would net at minimum around $3,600 per trade. 



Over the past 30 days, 368 BAYC trades have been <a href="https://cryptoslam.io/bored-ape-yacht-club" target="_blank" rel="noreferrer noopener">recorded</a>, according to CryptoSlam. So, the back-of-the-napkin math works out to be $1.3 million in BAYC royalties for Yuga Labs over the past month alone. (Yuga Labs declined to comment for the purposes of this article.)



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">I am 100% certain that &quot;not paying royalties&quot; is not a sustainable competitive advantage for Sudoswap. If it &quot;works&quot; in any significant way it will be copied. So people should state their views on royalties assuming every market evolves to a common approach&mdash; 6529 (@punk6529) <a href="https://twitter.com/punk6529/status/1558538350621036546?ref_src=twsrc%5Etfw">August 13, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div><figcaption>Prominent NFT figure @punk6529 weighs in on Sudoswap.</figcaption></figure>



“I haven&#8217;t seen many individual artists or creators opt into Sudoswap yet,” Derek Edward Schloss, co-founder of FlamingoDAO, told Blockworks.



“I think most of the volume so far has been NFT owners creating their own pools, bypassing the artist and creator entirely,” he said.



One artist Blockworks spoke to said they wouldn’t be phased if the entire ecosystem adopted royalty-free trading, however. They’ve sold dozens of items on which they forgot to set royalties and aren’t terribly upset whenever one of them re-sells.



If Sudoswap and its royalty-free trading truly catches on, artists will likely need to adjust how they price their work — making mints more expensive or simply focusing on moving volume themselves, Jake Stott, CEO of Web3 creative agency Hype, told Blockworks.



“My inkling is that royalty-free marketplaces will prove to be better-suited for NFT collections by big brands, like the Coca-Colas and NBA Top Shots of the world,” Stott said. “Unlike artists, brands might be keener on forgoing royalties as NFTs can be more of a community and brand building tool for them — and not a direct stream of revenue.&#8221;



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