Royalties have been the lifeblood supporting NFT creators to build and thrive in the world of Web3.
But with top Solana NFT project DeGods leading the way to remove royalties, what consequences will it bring to the NFT ecosystem?
DeGods, one of the top Solana NFT brands, has done away with its royalty fee. This also applies to y00ts – an upcoming NFT collection from the DeGods team.
However, as creator royalty is such a sensitive topic, the controversial move has sparked a fiery debate on NFT Twitter.
For one, royalty is the main revenue stream for artists to build and thrive in Web3. With DeGods leading the charge to zero royalties, creators are getting concerned about the repercussions of such move.
Why did DeGods opt for 0% royalties?
For a start, DeGods has always been a longtime supporter of creator fees. The project’s co-founder Frank even warned about potential impacts if NFT royalties were omitted. Given that, it caused a lot of confusion when they decided to do it the other way around.
On its official Twitter account, the team hasn’t offered any explanations other than claiming the 0% royalty as part of its “next experiment”. As counter-intuitive as it may seem, DeGods insists that this is the best decision for its current business.
Frank, however, managed to drop some clues. In one of his tweets, the pseudonymous creator revealed that the move would hopefully give rise to some actual solutions that create enforceable royalties in the future.
In other words, forcing other NFT projects to take the hit until someone figures out how to enforce royalty payments (more on this later).
At press time, the collection’s metadata has been updated to reduce the said fee from 9.99% to 0%.
If you’re new to NFTs, you may find it surprising that royalty payments are, in fact, non-enforceable at the smart contract level. Artists can only include royalty % in the smart contract and rely on NFT marketplaces to honor them.
For instance, when you sell an NFT on OpenSea, the marketplace will receive the royalty before sending it to the creator. If the platform ignores royalties, creators will not get their cuts.
Of course, it was never a big deal until royalty-free NFT platforms began to surge in popularity. Ethereum NFT marketplace Sudoswap was the first to adopt such practice, followed by Yawww, a Solana NFT marketplace that saw huge adoption among traders.
This eventually led to some fervent discussions among NFT enthusiasts in August when people from both camps argued about the need to bypass royalties.
Speculators and high-frequency traders are in favor of it. But collectors and Web3 builders do not see the benefit of zero royalties. After all, if creators are not incentivized to build, who will drive the mainstream adoption of this emerging tech?
What could happen next?
It doesn’t make sense to implement zero royalties at large since it will force NFT startups to jack up the price, leading to more rugs or failed NFT projects down the road.
But if buyers push back against creator fees and DeGods’ latest move catches on, it will be disastrous for small NFT projects – unless we can enforce royalties through smart contracts.
Assuming royalties are here to stay, it could also push NFT marketplaces to remove or reduce platform fees. For one, it allows them to make way for creator fees without losing users. That’s what Yawww did by lowering its default platform fees from 2% to 1% in September.
Of course, removing creators’ cuts only works for successful NFT projects that have already raked in millions in royalties (e.g.: DeGods). Unlike NFT startups, established firms behind blue-chip collections have many other ways to make money.
All in all, there’s no perfect solution to this dilemma. It remains to be seen how the NFT royalties issue gets sorted out.