Everything You Wanted to Know About NFT Royalties

Lately the NFT market has been growing and developing, attracting the attention of people from different sectors. Now modern artists and freelancers have many platforms and opportunities to show their creations in full glory — digital art has finally begun to bring tangible benefits. NFT royalties have become a new trend in this market. Let’s take a closer look at what they are and how they work.

What is NFT royalty?

The rise in popularity of non-fungible tokens (NFTs) began in 2021, when creators of digital content were actively thinking about ways to monetize their work for maximum benefit. So new interesting developments began to appear, like NFT royalties.

NFT royalties allow their creators to benefit even after their initial sale. For example, you made an NFT, and received X dollars for it. Then the buyer decided to resell this NFT: he does that and you, as the creator, get a percentage from the sale. Now your income will be X dollars + some percentage. The process is endless, for each reselling of his NFT creator will get a reward. That percentage is called NFT royalties.

NFT royalties are fixed payments encoded in a smart contract that an NFT creator receives after selling their creation. Basically, it is the same-old passive income. The NFT author can set the desired profit percentage. When making a new NFT, the creator notifies the trading platform that he wants to receive the X percent every time his NFT is sold and gives the address of his crypto wallet. In the future, all royalty payments will be made automatically.

For example, the popular marketplace OpenSea has this option. However, if the NFT is traded on a third-party site that does not support royalty policy, then the author won’t receive anything.

Who needs NFT royalties?

NFT royalties give creators of art objects, music tracks, designs, etc. access to good profits. This way of passive income for artists found its audience. Some authors even are making algorithmic calculations, which help to build business plans and calculate profit from sales of their work. The scheme is simple: the greater the popularity of the NFT, the more its creator will earn without doing anything.

In the traditional economic sector, in the Web2 space there is often a mismatch of interests between the providers of creative content (authors) and the corporations that promote them (producers, agents, etc.). The main problem is that it is impossible to track what will happen with the object after its first sale: whether it will be sold further, illegally copied or become a unique collectible.

Like traditional NFTs, NFT royalties exist in the Web3 system. They are based on a blockchain technology where all transactions are recorded. So it will not be difficult to track how many times an NFT was bought. And for each operation, the author will receive a fee on his wallet.

How to get NFT royalties?

Now developers and defenders of the rights of digital artists are striving to secure NFT royalty payments. There are some difficulties. For example, there is a proposal to prohibit the free transfer of NFTs so that all transactions will be carried out through a sale-purchase. That will help to automatically pay royalties for the creators each time it changes its owner. But in this case, all situations where the owner needs to transfer NFT from one of his wallets to another, or give it to someone as a present will be denied. For now, it’s hard to guarantee that the creator will definitely get his profit after each reselling of its work, but this feature is still developing. So in the future this issue might be resolved.

What helps the development of NFT royalties?

Various NFT marketplaces make a huge contribution to the development of the NFT royalty system. They:

• provide authors with platforms for creating their digital art;
• help to promote their work;
• help artists to make profit from secondary sales of their creations.

The most popular NFT marketplaces today are OpenSea, SolanaArt, Magic Eden, Sudoswap, X2Y2 and Blur. All of them support NFT royalties.

Conclusion

NFT royalties became a perfect way of passive income for all digital creators. Prior to this development, no one provided them with rewards for the secondary sales of their creations, which, frankly speaking, was not really fair. If an art resale entrepreneur can make a profit from NFTs, why can’t its maker do the same?

What do you think about NFT royalties? Share your opinion in the comments!

If you want to learn more interesting facts about crypto then check out our blog! You might like our articles “How to understand the value of NFTs” and “LG to Create an NFT-Trading TV”.

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Originally published on our Publish0x blog.