Magic Eden, Solana’s largest NFT marketplace, is wrestling with the problem of NFT creator royalties, as a flood of optional-royalty markets has damaged its market supremacy.
At Solana’s Breakpoint conference in Lisbon, Portugal, Jack Lu, co-founder and CEO of Magic Eden, proposed a new NFT standard that would “enforce royalties at a hard, technological level.”
“There is a real opportunity to give rise to a new asset class,” Lu said, adding that Magic Eden had requested feedback from “dozens of creators amongst many, many industries” to canvass their opinions. “Some folks really want sovereign ownership, [while] some folks really want royalty enforcement or new business models,” he went on to say.
Lu, on the other hand, warned that a new standard for NFTs “would have distinct trade-offs” and that “royalty enforcing by necessity means that the creator has some level of control.”
Is there a new type of NFT?
Lu expanded on his previous statements in an interview.
Initially, he stated that they will require some degree of centralization. “The holders will need to give up some level of control, or freehold ownership of these NFTs in favor of the creator,” Lu stated.
In fact, they may not even be called NFTs. Sincerely, “I think that a new name might be pretty useful, to be really honest,” said Lu “NFTs, as a name, has always been an umbrella term,” he noted, referring to tokens ranging from digital collectibles to soulbound tokens.
He proposed that the current wave of optional-royalty NFTs would be one type, while these royalty-enforcing collectibles would be another.
Several major players have offered proposals similar to this one in recent weeks. Metaplex, the company that created Solana’s NFT standard, proposed a new royalty enforcement standard. OpenSea, the leading overall NFT marketplace, has developed an enforcement mechanism that allows new project developers to restrict Ethereum marketplaces who do not enforce royalties, i.e. OpenSea’s main competitors.
Despite Magic Eden losing around 40% of the Solana market share to optional-royalty platforms in early October, Lu believes the shift provides an opportunity. Magic Eden has since reclaimed that entire market share by similarly making creator royalties optional for traders on its site.
Magic Eden has since reclaimed that entire market share by similarly making creator royalties optional for traders on its site.
He claimed that “There is a very good chance that these market dynamics might enforce the same kind of trends to play out” because the bulk of blockchains do not secure royalties at the protocol level. “In that sense, I believe that the first ecosystem to come together, address new business models and effectively address royalty-enforcing solutions will be thriving.”
“With these types of major structural changes,” he added, “there’s a ton of opportunity to be unlocked.”
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