OpenSea’s New Royalty Tool Could Signal a Big Change for Artists
The Alpha:
On November 6, OpenSea announced in a blog post and on Twitter that it would introduce a tool for new collections to enforce creator fees (artist royalties) on its platform.
The tool is a snippet of code that represents OpenSea’s first attempt at on-chain enforcement of royalties in NFT transactions. Starting at 12:00 p.m. ET on November 8, the platform is enforcing creator fees for new collections that use an on-chain enforcement tool like the one it’s now offering.
OpenSea gave itself a deadline of December 8, 2022, to come out with a firm stance regarding how it will address royalties enforcement for existing collections. The platform is considering several options, including optional royalties — and 0 percent royalties.
Why it matters
The royalties debate in the NFT community is one of the space’s most important and consequential discussions. Widely considered to be one of the founding tenets of Web3, royalties have allowed artists to sustain themselves in a way previously not possible in the traditional art world. Via a combination of earning money through primary sales and taking a small cut every time their NFT changes hands, royalties lend credence to the Web3 community’s claim that NFTs help chip away at the “starving artist” trope that has robbed artists of dignity for centuries. They have helped lift people out of poverty, pay off loans, and gain economic independence. That’s to say nothing of the countless NFT projects involved in building and sustaining entire sub-communities on the back of such fees.
According to a late October study by crypto firm Galaxy Digital, more than $1.8 billion in royalties have been paid out to the creators of Ethereum-based NFT collections. Notably, OpenSea has paid out the most royalties to creators, by a wide margin. But creator royalties aren’t enforceable at a technical level. Ultimately, it’s up to marketplaces to offer and honor them, or not. Marketplaces like sudoswap and X2Y2 have planted themselves firmly in the zero-royalty camp, for example.
OpenSea’s announcement has resulted in an explosion of commentary from just about every prominent figure in the NFT space. Many are happy that OpenSea is taking a stand to support artists and new collections by introducing a tool that restricts NFT sales to marketplaces that enforce creator fees. However, OpenSea has admitted that this will not apply to existing collections that aren’t built on upgradable contracts.
The platform also stated that after its self-imposed December 8 deadline, it will decide how existing collections can engage with royalty enforcement. As such, it seems likely that creator fees for these collections will either drop to 0 percent or the platform will give buyers the option to pay royalties as they see fit. The question that remains for those collections is just how they will replace a revenue stream that will likely disappear, or at least be significantly reduced.
“Unfortunately, the bitter pill is that, to the best of our knowledge, the only way to achieve on-chain creator fee enforcement for existing collections with non-upgradeable smart contracts is to take drastic measures with their communities, like shifting the canonical collection to a new smart contract,” wrote OpenSea CEO Devin Finzer in the blog post. “In our opinion, by far the better option is for existing creators to explore new forms of monetization and alternative ways of incentivizing buyers and sellers to pay creator fees, and to ensure that future collections enforce creator fees on-chain.”
What’s next
OpenSea has been taking the temperature in the space since it made the announcement, and has issued several clarifications and responses to concerned members of the community. The openness to dialogue is a good indicator that they are keen on remaining engaged with the community throughout the process. But it doesn’t negate the fact that the platform has shaken the NFT space to its core with this news.
Still, the writing has been on the wall for some time. Even creator-friendly marketplaces like Magic Eden have done an about-face on creator royalties recently, making them optional. So far, this debate is shaping up to be one of the year’s defining conversations. And it could become far more important than that.
But wait! There’s more:
OpenSea and Fair.xyz’s Soulbound ‘Minter Token’ Honors NFT Innovators
OpenSea’s Stolen Item Policy Reveals a Stubborn Problem
OpenSea Just Laid Off 20 Percent of Its Staff
The post OpenSea’s New Royalty Tool Could Signal a Big Change for Artists appeared first on nft now.