Why NFT Creator’s Rights Matter in the Struggle Against Meta Monopolization
A rapid boom and bust of market innovation within NFT proliferation created a striation of Web3-related idealism schemes with mutations around the aims of blockchain technology.
While a variety of projections for the future of the internet can coexist, it’s important to remember that at its base, Web3 is about circumventing tightly centralized systems like technological and financial markets.
Successful NFT projects like Board Apes and DeGods have set a framework for many to understand NFT ecosystems and have modeled application and utility features to the larger public. With their notoriety, many artists look to influential projects to stick their thumbs into what’s “right;” according to a Web3-based ideology.
The conversation about the advantages of blockchain assets has included the cryptographic trail that could allow creators to access passive income from their work in a way that was not possible before. Creator royalties have been a primary catalyzing feature that incited a massive portion of artists to enter the NFT marketplace. Therefore, when creator Frank of DeGods announced that creators of their projects wouldn’t receive royalties, debates ignited across the landscape of Web3.
Firstly, what are creator royalties?
The creator gets a percentage of the profits from secondary sales of an NFT. The NFT community has touted this being a fundamental component of blockchain technology and its benefits.
Smart contracts and enforcement of royalties:
Royalties are not enforceable on the smart contract level and there is no way to trace and guarantee that a royalty is paid on sales.
Resale royalties through NFT contracts act differently from traditional royalties in their ability to go beyond the first sale. However, in order for this to function, the seller is reliant on the marketplace and the goodwill of secondary sellers.
Benefits of 0% royalties:
In short, 0% royalties benefit the market platform (think OpenSea or Sudoswap), and pose a short-term benefit for buyers looking to invest in art with lower transaction costs. Automated Market Makers (AMMs) have been employed by NFT Marketplaces like Sudoswap, enabling instantaneous trades. This places less pressure on the marketplace to trace the validity of the work, as mounting royalties from scam or “rugged” projects will be avoided altogether.
There has been a mounting number of these “zero fee” marketplaces springing up within the last couple months with examples like Solanart whose tagline is: “YOU choose what’s fair.”
Why did the DeGod’s decision put the Internet into a frenzy?
DeGods is entitled to make whatever decisions about royalties vs. no royalties so why does anyone care?
Royalty fees increase friction of NFT movement, thus it often makes collectors reconsider how often they trade. Some worry that setting a precedent of 0% royalties will create a “race to the bottom,” whereby marketplaces like Sudoswap will alter market behavior.
Downstream effects include increasing competition between NFT market platforms to decrease fees and consequentially promote the prevalence of flippers.
Twitter rage began with this post from creator Frank of DeGods:
It took a bit of scrolling to gauge why there was outrage when there is a small yet highly visible disclaimer that says the project leaders “still believe that royalties are an incredible use case for NFTs.” Participants in the debate cited the fact that with DeGods being the top Blue Chip Solana project, he may have set a standard that other projects may feel forced to follow.
Creators from all corners of the internet engaged on the topic of precedent, and the need for strong leaders in the NFT space to keep artists afloat, as so many depend on the additional income from royalties.
Users shared concerns that 0% royalties would cut the thread between holders and project owners, which would create less revenue for marketplaces, more rugs and less value in the overall ecosystem.
Survival of the fittest?
It is likely to be a long road of legal debates and definitional oscillations before we realize the impact of creators feeling the push to decrease fees to 0%. The real problem would be if independent creators felt disincentivized to enter a market where that issue had been a major sticking point for ‘increased survival rates amongst artists.’
The question of long-term “sustainability” is a complicated one when considering whether or not a project can last long term if royalties do not trail. When there are no royalties, this may imply a rug in suit.
Artist uncertainty and corporate bullishness in this bear market:
The commodity aspect of NFTs are still to be defined — with artists having uncertain legal protections.
Artists want to have greater certainty on cultural reinforcement of these “goodwill” standards, and beyond that, some indication that big names like Frank will endorse royalty protections when litigation ensues.
Meanwhile, the steady deluge of big brands entering the Web3 arena may be expected to heighten scrutiny over ethical protocols involved in selling and trading items on the blockchain.
Unlike independent artists, corporate stakeholders do not need royalties to survive.
Increased incentive to embed utility into NFT projects is a trivial hurdle for long-legged companies like McDonald’s, Nike, and Louis Vuitton. Conversely, a smaller project may suffer if supplemental income from royalties lacks reinforcement. Adding real-world utility to digital assets is no easy feat, and the associated costs may limit certain projects from succeeding.
How are Web2 Companies taking advantage of the bear market?
Low prices along with low spirits make spectators vulnerable to the infiltration of an archaic centralized narrative disguised as a sweet “decentralized” treat.
Terms like “decentralization,” “Web3,” and “NFT” have been conspicuously glossed over by large corporations who have drawn in their own definitions of what they’d like the market to become.
Truth be told, there are a slim number of truly decentralized ecosystems. Strapping a Web3 UI on the front of their early 2000s storefront, big tech companies are finding a way to synonomize Web2 centralized structures with Web3 decentralized ideals. Keep this in mind when terms like “community,” “Web3,” “decentralized” are loosely flaunted in light of fungible definitions. They are meant to disorient hype-driven users looking to “ape in.”
Case study: Is Meta’s metaverse a true example of a Web3 ecosystem?
The idea that a centralized corporation copyrighted a name suggesting a decentralized, open source structure should strike anyone as deliciously ironic.
Meta’s version of the metaverse is a closed ecosystem whereby users buy, sell, trade, and communicate within the bounds of its virtual playground. For anyone that needs a visual, this is the equivalent of fish farming salmon in the open ocean where the feed is corn byproduct and the alternative to an upstream migration is life in a pen consuming the waste of the community.
Creators in Zuckerberg’s version of the metaverse will be charged up to 47.5% of the price of virtual goods sold — leaving the seller with 52.5%. When added to decreased passive income from royalties, the nascent creator may feel obliged to attach themselves to a monopolizing corp like Meta rather than venturing into an independent niche.
Web3 is not a bi-directional, user-to-company interface. Rather, it is a fully-distributed, peer-to-peer network of communication and commerce. The multi-user virtual environment should resemble something closer to a functional oceanic ecosystem than a single-species aggregate.
What is Web3 then, if not an inflatable jump pit for Zuckerberg and his cronies?
Consumers have come to rely on a small handful of companies for information access and digital identities. In the advent of a trust-less validation system, users would have the choice maintain digital autonomy rather than face loss of their data rights and used as tech products on modern day social media and commerce platforms.
If we are to follow leaders that have no moral objective whatsoever and care only to boost revenues from “Web3” themed hype, information streams, open sources, and financial independence will be constrained and controlled by the interests of a select few.
What is technological “improvement” when wealth is allocated to essentially the same demographic strata that it was before? What exactly are we “improving” on when the fat cats become fatter or the big fish stronger? Will we see a war between free minded creatives and the ideologically inclined, fighting the predating corporate machine?
Preventing the acceleration of existing cycles of explosive innovation followed by attenuated applicative strongholds will require that NFT buyers, sellers, and speculators participate in marketplaces whose interests lie in the foundational ideas of Web3. This is not to say a fee-less, royalty-free project is not doing right by the community. Rather, a marketplace driven to cheapen the experience of collection and liquify the flow of digital assets may serve to lubricate the tracks for corporate competition.
