TokenSmart NFT Humpday Report #13: Let's Talk On-Chain Royalties!
TokenSmart NFT Humpday Report #13: Let's Talk On-Chain Royalties!
Welcome to the 13th issue of the NFT Humpday Report, a weekly column covering and providing embedded analysis on the NFT economy’s biggest topics du jour. Brought to you by WIP meetup collaborators and nft42 community hub TokenSmart.
A dispute between a collector and a cryptoartist this week kicked off a new wave of calls for standardized on-chain royalties in the nascent NFT ecosystem.
The context: Like how on-chain metadata can perpetually ensure the integrity of NFTs without reliance on 3rd-party platforms, on-chain royalties can ensure NFT content creators automatically receive royalties whenever and wherever their media sells. As such, one contemporary friction is how the popular ERC-721 NFT standard lacks in-built royalty functionalities. This dynamic means NFT platforms have had to manually honor their peer platforms’ royalties to date, a reality that’s led to some royalty blind spots in the ecosystem.
A pain for creators: If a creator mints an NFT on one marketplace, they’ll miss out on automated royalties if a collector resells it on another marketplace that doesn’t support the initial platform’s royalty system. This situation has led to some creators requesting their NFTs only be resold on the platforms they were minted on or worse yet these creators missing out on royalty payments altogether.
A pain for collectors: There are noble collectors who promptly manually honor NFT royalties whenever they’ve participated in secondary sales where royalties weren’t automated. Yet this process is onerous for average or novice collectors who just want to click “Buy” and have smart contracts take care of the rest. Indeed, that’s one of the great promises of NFTs in general: the ability to automate just about everything about them and around them.
The dispute in question: This week cryptoart collector satman.eth publicly aired two private messages they’ve received from cryptoartist Coldie since this September. In the messages, Coldie requests satman.eth manually honor 10% royalties that had been missed in at least two of the collector’s recent secondary sales. Flustered by the interactions, satman.eth published the DMs and in the process kicked off a new wave of calls for automated on-chain royalties in the NFT community.
On-chain royalties are the solution: On-chain royalties are ideal because they let NFT creators embed their wallet and royalty data directly inside their NFT metadata. This dynamic allows marketplaces to read this metadata and dispense royalties automatically regardless of where tokens were minted. The result is a streamlined experience for platforms, creators, and collectors alike. The grand problem for now is simply getting a range of NFT ecosystem stakeholders on board with a unified on-chain royalty standard.
Progress to consider: There have been early advances around on-chain royalties this year. For example, nft42’s InfiNFT minting platform already supports on-chain royalties and can serve as a blueprint for other projects or as a standardization catalyst. Additionally, back in September an Ethereum Improvement Proposal (EIP) was introduced that, if accepted, would introduce a royalty standard in ERC-721 NFTs.
Looking ahead: As the NFT ecosystem continues to mature, look for on-chain royalties to become more of a uniform reality throughout the space by virtue of offering a better UX for all stakeholders!
Thanks for reading the 13th NFT Humpday Report! Check back this time next week for more excellent NFT ecosystem coverage! Cheers🌠
Thanks for the insights. Once we get the royalties sorted maybe we can look a little closer at the licensing terms. Still some uncertainty out there. I wrote about this:
https://nonfungerbils.com/blog