What Are NFT Royalties?
NFT royalties are a way for creators to earn a percentage of the sale value each time their NFT is sold on the secondary market.
The percentage is set by the creator at the time of minting, usually around 5-10%, and is coded into the smart contract on the blockchain.
The smart contract ensures that the terms of the NFT are fulfilled, and if the NFT is sold, a cut of the profits goes to the creator.
How Do NFT Royalties Work?
The creator defines the terms in the smart contract, which automatically enforces the royalties whenever the NFT is sold in a secondary market.
Thus, creators can continue to earn income from their creation even after it has been sold once.
NFT royalties are a key feature of many NFT marketplaces.
However, not all NFTs have royalty features, and not all marketplaces enforce NFT royalties.
Advantages of NFT Royalties
NFT royalties benefit creators and artists, who earn recurring income from their creations.
They no longer have to worry about losing out on subsequent sales of their work and can even receive increasing returns as their popularity grows.
Buyers also benefit, as they can verify the authenticity of what they buy and resell the assets at an assured price.
How Are NFT Royalties Calculated?
NFT royalties are typically calculated as a percentage of the NFT’s sales price.
The percentage varies between 3% to 10% and remains the same for all subsequent sales, but the amount earned by the creator may differ depending on the sales price.
Why Are NFT Marketplaces Eliminating NFT Royalties?
Some NFT marketplaces have eliminated or limited NFT royalties.
This shift in trend began in the Summer of 2022 when some marketplaces made royalties optional and introduced a “tipping” system.
However, this change has created financial turmoil for many artists who rely on passive income from their work.
While not all NFT marketplaces have eliminated royalties, some artists have boycotted exchanges that no longer support NFT royalties for their digital assets.
How to Add Royalties to NFTs?
To receive NFT royalties on their work, artists must codify the royalty structure in their original smart contracts.
OpenSea has introduced a new royalty enforcement tool that makes NFT royalties enforceable on its blockchain.
NFTs and Copyright Laws
Copyright laws depend on the country where the creator of the NFT is located.
Most countries have copyright laws protecting digital works such as music, images, and videos.
Additionally, some countries have enacted specific legislation to address digital copyright issues.
However, the legal framework surrounding NFT is still evolving, and creators must consult with legal professionals to ensure their rights are protected.