In April of 2022, Meta made headlines when the company announced details about forthcoming tools for Horizon Worlds, a virtual reality video game created by the company. Meta is developing new features for the game that will enable creators to sell digital items and art. In a blog post published on April 11, the company revealed that it would be taking a cut of 47.5 percent from all sales.
First, they charge a “hardware platform fee” of 30 percent for any sales completed via the Meta Quest Store (a marketplace for VR-enabled apps and games). Second, there is a 17.5 percent fee that comes from Horizon Worlds itself.
Six months later, Apple made similar headlines. The company announced that it would allow creators to sell NFTs but charge its standard 30 percent “Apple Tax” on all such purchases.
This announcement ruffled more than a few feathers. It seems like another case of major corporations with billions of dollars taking advantage of smaller creators.
Yet, sizeable fees aren’t new to those regularly interacting with the blockchain. Nearly every prominent NFT marketplace has a variety of fees, and many NFT marketplaces are also rolling in wealth. So, is there really that big of a divide between Meta’s 47.5 percent cut, Apple’s 30 percent, and that of other marketplaces? Are people right to be angry?
Image Credit: Meta Quest
Interacting with the blockchain costs money
This won’t be new information to most, but blockchain transactions always cost money. How much money they cost depends on the blockchain and the type of transaction.
For example, Ethereum (like many other blockchains) charges fees to users when they conduct transactions — when they mint an NFT, swap coins, list NFTs for sale, and so on. These gas fees, as they’re called, are basically payments made by users to compensate for the computing energy required to process and validate transactions.
Ultimately, the gas fees vary from blockchain to blockchain because they all use different consensus mechanisms. But all this can get a bit technical and confusing, so we won’t get into the different consensus mechanisms and why some cost more and others cost less. To better serve this article, the fee amounts are what really matter.
Historically, the Ethereum blockchain has changed the most fees for NFT transactions. In 2021, fees ranged from as low as $9 to as high as around $300 per transaction. Yet, Solana and Tezos, the second and third most popular NFT blockchains, regularly reported transaction fees amounting to just fractions of a dollar. What’s more, Ethereum changed its consensus mechanism in September of 2022, so transactions on the blockchain now cost far, far less.
There’s no way to tell what percentage of the profits gas fees equate to until an NFT sells. If an NFT sells for a lot of money and the gas fee was low, the gas fee may be less than one percent of the sale price. But let’s say an NFT sells for just $15 and the gas fee was $50. That means the fees will be well over 100 percent of the earnings. And yes, this does happen.
However, these gas fees may not be the best thing to compare with Meta’s and Apple’s fees.
Critically, blockchain gas fees don’t go to blockchain companies. Ethereum and Solana aren’t taking money from users and giving it to themselves. Rather, these gas fees go to other blockchain users who are verifying the transactions. Conversely, when a user sells an item on Horizon Worlds, Meta takes a cut. When a user sells an item in Apple’s store, Apple takes a cut.
So, for a better comparison, we have to look at the actual act of trading NFTs — we have to take marketplace fees into consideration.
What’s the cost of trading NFTs?
Because of how they structure their fees, we can tell immediately the amount that will be taken off the top by the marketplace in which an NFT is listed. Here’s the breakdown.
Zora: Zero fee platform. When minting an NFT, users just pay gas fees. They take no commission on sales.
LooksRare: No minting fee, users just pay gas fees. Takes two percent of every final sale price.
OpenSea: No minting fee, users just pay gas fees. Takes 2.5 percent of every final sale price.
Rarible: No minting fee, users just pay gas fees. Takes 2.5 percent of every final sale price.
SuperRare: No minting fee, users just pay gas fees. Takes three percent of every final sale price.
Foundation: No minting fee, users just pay gas fees. Takes 15 percent of every final sale price.
From these figures, it’s clear that Meta and Apple have higher fees than practically every NFT marketplace. A lot higher fees. But the problems that individuals have with Meta and Apple are about more than just fees.
Meta, Apple, and Web3
In their announcement, Apple stated that creators can’t use NFTs to “unlock features or functionality within the app.” In response, individuals stated that Apple was banning utility NFTs. However, these rules aren’t new. Apple wants to keep all purchases within its ecosystem so it can take a cut — that 30 percent fee — from all sales. Still, many individuals in the NFT space take serious issue with the stance that Meta and Apple have chosen. Detractors say that the NFT ecosystem, and Web3 in general, is built on the ideology of decentralization. They say that the positions that the companies have taken make Web3 feel too much like Web2.
The problem with this position is that Apple and Meta don’t feel Web2. They are literally Web2. They are absolutely entirely centralized.
When people say that we need Web3 because the infrastructure it’s built upon will enable users to get away from the intermediaries that determine when and how users and businesses interact and engage, they are literally talking about getting away from Meta and Apple. The point of Web3 was never to convince Facebook or Apple to adapt. The point of Web3 was to build new systems and infrastructure and make Web2 obsolete.
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