The Importance of Creator Royalties in NFTs
This weekend we saw a significant acceleration in the royalty “meta,” with Solanart joining YAWWW in bypassing creator royalties. As the trusted NFT protocol for creators on Solana, used by projects like DeGods, SMB, Aurory, and Degen Apes, it shouldn’t be a surprise where we stand on this issue.
Platforms that bypass creator royalties are extractive and out of touch with what makes the web3 community special. Royalties are an effective way of aligning incentives between creators and collectors to grow NFT projects and communities together. Bypassing royalties damages an important revenue stream to an already struggling creator community in a depressed market.
The Metaplex Standard specifies the creator’s intent with royalty percentages and on-chain splits for multiple creators. However, Metaplex NFTs can be transferred freely without contract locks that permit or prohibit transactions based on the royalty standard. When the Standard was first designed, we set aside strong protections on royalties in order to maximize the extensibility and portability of the assets. This was a bet on community norms and values, which have held up the system, until now.
The new Metaplex Digital Asset Standard (DAS), released in early July for public comment, expands the way creators can create assets and define their functionality. Creators will have the option to configure how assets can be transferred, which will allow them to incentivize and influence the payment of royalties.
There are several paths to enforcing royalties, depending upon what marketplaces or creators want to build and which tradeoffs they're willing to make. This is going to be an iterative process that tests and learns where the collector and creator might have the most supportive relationship. In the way that collectors and creators argue over mutable vs immutable art, we expect there to be a wide range of approaches that will get tested out.
One point is clear though: the biggest self-inflicted wound for marketplaces that bypass royalties is that it will be virtually impossible for them to work with credible creators, who are the heartbeat of the ecosystem. Marketplaces that iterate quickly to deploy new asset types and experiences hand-in-hand with creators will have the most to gain.
Come build with us on Github or reach out to us at email@example.com to shape what’s next for NFTs and digital assets.