NFTs, Royalties, Code, Mess

The Whole NFT Royalty Ecosystem Is a Giant Disaster, But It Was Also Inevitable Given the Market Size

It’s OpenSea vs. everyone else, but who’s right and who’s wrong?

Photo by Dan Cristian Pădureț on Unsplash

For quite some time now, the topic of royalties (aka artist royalties or creator royalties) has been dominating the NFT space. Mostly, it’s been general arguing and bickering on Twitter and elsewhere, but yesterday OpenSea made a move that’s going to really push this into the next level. Whether it turns out to be a good or bad move is up for debate. Here are the basics on this whole issue, at least from my own perspective.

Background on NFT Royalties

My very first article on NFTs came out on April 2, 2021, just a few weeks after the famous $69 million Beeple NFT sale (the mind-boggling event that launched my own obsession with NFTs). In that article, I noted that NFTs “were conceptualized way back in 2014 by a tech guy and an artist — Anil Dash and Kevin McCoy (story here in The Atlantic) — specifically as a way to help artists.”

Helping artists has always been at the core of NFTs. And, at the time of their invention, the initial push of that whole thing was the novel creation of a unique digital asset — something that was not fungible (by virtue of it being singularly tokenized on the blockchain). Dash and McCoy apparently initially thought of NFTs as “monetized graphics,” according to that Atlantic piece.

And years went by with little fanfare aside from various at-the-time minor NFT projects like the crypto punks (which anyone back then could have grabbed for free). And then in 2021 the whole thing blew up Big-Bang-style, first with that Beeple sale, and soon after with generative sets like the Bored Apes.

Once 2021’s market took off, most of the action transpired on OpenSea, still the largest marketplace for NFTs. And thankfully, OpenSea implemented a royalty system. When you had a collection, you would specify a royalty that you wanted (up to 10%) and anytime an NFT sale happened from that collection, a wallet address specified by the collection owner would receive the specified royalty. (Well, it didn’t happen in real-time like that, but that was the basic concept.)