Oooft! Bad news for NFT artists: their royalties are at risk.
Web3 enabled something quite remarkable.
Artists of all sizes can be paid a royalty each time their artwork is sold.
When an artist mints an NFT, they can choose what to put in the smart contract associated with the NFT.
For example, it could be that “each time this NFT sells, charge a 5% royalty fee.”
Up until now that’s been pretty standard, but things might be changing.
The largest NFT marketplaces - OpenSea, Magic Eden and LooksRare - honor the royalty amounts set by creators.
But, royalties don’t have to be honored.
And in order to get some quick market share, some rival companies are appealing to NFT collectors that want to flip NFTs with the lowest possible fees, regardless of the creator’s intent or the social stigma around evading royalties.
NFT collector, Punk6529, said it best when they said:
“People pay royalties because they believe in the social convention of buying and selling within the rules set by the artist/creator.”
Paying royalties on NFT sales is a social construct rather than a firm, unavoidable technical rule.
So what’s a company to do?
In order to keep up with new players, Magic Eden (the second largest NFT marketplace, and the leader for NFTs built on Solana), announced on Wednesday that it was “joining forces” with Coral Cube - a marketplace and aggregator that allows zero-royalty NFT sales.
Basically, Magic Eden are trying to have it both ways, while they see how this plays out.
They’re looking to protect their brand by keeping creator royalties intact. But, with this partnership, will also offer the option for traders to sell NFTs without paying royalties via Coral Cube.
It doesn’t seem fair to artists that they would create their NFTs with the expectation of royalties with each sale/resale, and then not be able to claim them.
But, if there’s one thing Marc Andreessen has taught us over the years, it’s that, in the end, the only thing that really matters is what the market wants.
Let’s see how this pans out.
