A new research report released today from Galaxy Digital’s Mike Novogratz found which ETH NFT creators have been paid a total of $1.8 billion in royalties from secondary sales on marketplaces such as OpenSea.
In the report, Galaxy Digital researchers Sal Qadir and Gabe Parker found that NFT creators’ royalty rates on OpenSea-the highest overall marketplace by trading volume— have doubled over the past year on average, going from a 3 percent cut of sales to 6 percent.
In addition, the researchers found a concentration of royalties among only ten entities, data which suggests the NFT economy may be more centralized than some might have thought.
The top ten received about half a billion dollars worth of royalties, equivalent to 27% of all ETH NFT royalties earned. Considering the report, that relies on Flipside Crypto’s data, 482 NFT series’ collectivity earned 80 percent of the total market royalties.
NFTs—exclusive blockchain tokens which signify ownership—are generally first minted or sold on a third-party website developed by the NFT creators, or through a dedicated launchpad available from specific marketplaces. Following minting, NFTs can be resold via marketplaces such as OpenSea, Magic Eden, LooksRare, and more.
Yoga Lab, creator of Bored Ape Yacht Club, topped the list with the most NFT royalties. Expanding its focus on blockchain game development, the $4 billion startup has earned over $147 million in royalties alone. That’s not surprising, given that Yoga’s other huge mintage earlier this year led to its total sales of $561 million in just 24 hours.
As new NFT marketplaces are still appearing continuously, OpenSea still accounts for the lion’s share of total NFT sales, based on data from Dune Analytics and the Galaxy report, that says that OpenSea makes up for more than 80 percent of the total Ethereum NFT marketplace volume.
When minting NFT projects via OpenSea, creators can choose the royalty percentage they want to get from secondary sales. Those creators have collectively earned $76.7 M to date in royalties from these sales. Measured together, that is enough for third on Galaxy’s list.
Other top NFT creators on this list involve Chiru Labs (Azuki), Proof (Moonbirds and Proof Collective), and the teams behind The SandBox, Doodles, and Gary Vaynerchuk’s VeeFriends.
Citing a different data set concentrated just on legacy brands, Galaxy named Nike the top earner with $91.6 M. This listing consists of a variety of non-Nike-branded NFT offerings from RTFKT, a digital studio which Nike acquired in 2021. Other brands on the list are Dolce & Gabbana, Gucci, and Adidas.
Royalty rumblings
Historically, royalties have been hailed as an essential part of the NFT ecosystem, offering creators with a steady stream of revenue for creators to continue developing several plans on their project “roadmaps,” whether it’s creating a video game, throwing token-gated parties, or hiring more community moderators, For instance.
Qadir and Parker name royalties a “core value proposition of NFTs,” but acknowledge that royalties are not presently viable on-chain without sacrificing some principles of decentralization and self-custody- values countless crypto proponents hold dear.
On-chain royalty is likely to create a new type of blockchain trilemma that is quite the opposite of what Ethereum co-founder Vitalik Buterin has talked about at length, and which rival platform Algorand claims to have solved. Rather than on-chain enforcement, it has historically been up to centralized NFT marketplaces to choose to implement creator-imposed royalties.
NFT royalties have become the subject of much discussion in the current month. Frank, the creator of Pseudonymous Solana NFT, decided to remove the royalty from his DeGods and y00ts profile picture NFT series’ completely on October 9, calling the move “experimental”.
His move followed a rise in Solana Marketplaces, which either ignored creators royalties or allowing merchants to choose whether to pay them. By not paying royalty fees to creators, NFT sellers usually avoid paying a 5% to 10% cut of the secondary sale price.
Finally, top Solana marketplace Magic Eden revealed last week that it would follow suit and make royalty payments optional after losing important market share to rival platforms. “We understand that this move has serious implications for the ecosystem,” the marketplace mentioned on Twitter. And added that it hopes “to see the development of new standards which protect royalties”.
Some on Twitter have criticized Magic Eden for its decision, calling it “the worst decision ever” and a “disappointing gain in market share”. Metaplex, the creator of the current Solana NFT standard, said on Thursday that it is developing a new standard which can enforce royalties on-chain.
As the debate around NFT royalties continues, one thing is certain: abandoning royalties means creators would be parting with a significant source of passive income, and potentially leaving millions on the table.
Leave this field empty if you're human:
