NeoSwap
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NeoSwap

Royalties and NFTs

No, not this kind of royalty

Royalties are the hot topic at the moment and we at NeoSwap have ALL the answers… not really.

However, it is something we spend a lot of time thinking about. Our founder wife’s parents were both artists, our Head of Community Shudu is an artist himself (African Illustrations, check out his awesome work) and our lead backend developer's wife is an artist (an NFT artist no less!). With my involvement in the art world for the past 8+ years as a collector, Artist Resale Rights are something I have thought about a lot and alluded to in my first article A Bullish Case For NFTs. Our team recognises its importance.

Historically royalties/Artist Resale Rights have been inconsistently enforced at best. NFTs have vastly improved this space, where royalties on secondary markets are largely enforced- but it isn’t perfect. We have seen growing conversations around how, when and IF royalties should be implemented.

Royalties are not enforced at the smart-contract level, in the sense that it is only marketplaces (or honest peer-to-peer swappers) that currently enforce them. As part of transacting on OpenSea or Gamma for example, the platform makes the buyer pay the royalty as part of completing a transaction on their platform.

Another part of what has sparked the conversation has been the emergence of NFT AMMs like Sudoswap, setting artist royalties to 0%.

This has sparked some fierce debate on Twitter from collectors, traders, artists, community managers and more! We think royalties are an important part of NFTs and creators should have a chance to say what they would like.

Frank of DeGods on Solana has been publicly discussing some interesting possible solutions:

Frank went on further to say essentially any NFT swapped OTC (Over The Counter- privately without the use of a secondary marketplace to enforce royalties) could have any utility removed until the new owner would pay a ‘fee’ (in essence, the royalty) to restore the utility.

In theory, these NFTs should then trade at a market discount equivalent to the fee.

It is an interesting proposal and as Frank points out, we are talking about incentives and so the aim of ideas like this isn’t to eliminate all royalty-free transfers but rather to reduce the number of trades where artists/creators do not get paid.

Punk6529 also shared a great Twitter thread with their thoughts on royalties:

At NeoSwap we are thinking of ways to develop functions in smart-contracts or at the point of transaction that means you are able to specify what type of transaction is occurring, i.e is it a: swap with another party, transfer to another wallet you own, a sale etc.

Of course, if you are just transferring between your own wallets you would pay no fee, but perhaps if it is a swap it is calculated on the floor price or some other reference point agreed upon between the two parties. Perhaps in the future royalties can be programmable depending on the type of swap.

If we are to keep the future bright and Creatives creating we must find ways to support them and reward them for their work.

I do think the model for royalties will change significantly going forward. Especially with new ways of conducting transactions, as NeoSwap has created.

The old model of one flat fee may have to be adapted, but at its core the goal is still the same, to reward creators and to closer align collectors/ hodlers/ communities with the creators.

What would be your suggestions?

Feel free to leave them in the comments or contact us on Twitter or Discord!

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Kieran Parker-Moroney

Interested in learning. Art collector, investor, DeFi obsessed, golfer.