At this point, the royalty enforcement tool only works for new NFT collections. A decision will be made later on what to do about existing collections.
OpenSea, a marketplace for nonfungible (NFT) items, seems to have taken a side in the NFT royalties debate by releasing a new “on-chain” tool to help creators enforce royalties.
The NFT marketplace, which CoinGecko says has 66% of the market share in NFT marketplaces, has been pretty quiet about royalties and enforcement while others in the space have been putting their own plans into action over the last few months.
In a blog post on November 6, OpenSea CEO Devin Finzer said that in marketplaces where fees are optional, they have “watched the voluntary creator fee payment rate drop to less than 20%,” while in other marketplaces, creator fees are “simply not paid at all.”
The CEO of OpenSea said that the marketplace has introduced a new tool that will let creators get their royalties “on-chain.”
There’s been a lot of discussion over the past few months about business models for NFT creators & whether creator fees (“royalties”) are viable.
— OpenSea (@opensea) November 6, 2022
Given our role in the ecosystem, we want to take a thoughtful, principled approach to this topic & to lead w/ solutions.
Finzer called the tool a “simple code snippet” that lets creators add royalties to new and future NFT collection smart contracts as well as existing smart contracts that can be upgraded. The code will also make it so that you can only sell NFTs on marketplaces that require creator fees.
“It’s clear that many creators want the ability to enforce fees on-chain; and fundamentally, we believe that the choice should be theirs to make — it shouldn’t be a decision made for them by marketplaces,” Finzer said.
Finzer also said that OpenSea will use an on-chain enforcement tool to make sure that new collections pay their royalties, but it won’t do this for new collections that don’t opt-in.
Finzer said in an accompanying Twitter Spaces that OpenSea is not forcing people to use our specific solution. Instead, creators can use “whatever solution you want and implement it anyway.”
“We provide a template GitHub repo that helps you use a solution that basically blocks lists marketplace that doesn’t support creator fees, you don’t have to use that solution; the requirement is that if you want creator fees, you have to enforce them on chain.”
Due to problems with implementation, the tool also won’t be used for NFT collections that are already in place right now.
“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,” Finzer said.
“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,” he added.
Finzer says that this could include options like continuing to enforce off-chain fees for some subsets of collections, letting creator fees be optional, and working together on other ways to enforce creator fees on-chain.
The NFT founder and Twitter community have had conflicting reactions. Wab.eth, creator of the Sappy Seals NFT collection and co-founder of The Pixlverse and Pixl Labs, informed their almost 60,000 followers, Although I disagree with the elimination of royalties on a basic level, I do respect this implementation.
There’s been a lot of discussion over the past few months about business models for NFT creators & whether creator fees (“royalties”) are viable.
— OpenSea (@opensea) November 6, 2022
Given our role in the ecosystem, we want to take a thoughtful, principled approach to this topic & to lead w/ solutions.
Others felt that their questions were unanswered. Betty, the alias of one of the Deadfellaz NFT collection’s designers, told their 89,000 followers: “it feels like there is no plan and no clear answers were given in regards to existing collections & artist’s royalties.”
Although later noted, “I look forward to reading more concrete communication from them soon in regards to proposed strategies.”
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