NFTs can range from digital art and famous tweets to music and video clips. And with NFTs in the spotlight, artists and content creators are finding that these tokens can be very beneficial for them, even after they have sold their NFTs. We’re talking passive income and all from the comfort of your home! The best kind of income. NFT royalties are the key!
Imagine, making a profit not just on original sales, but resales too! Artists can now have their fair share of the sales from their creations. As a result, this gained a lot of traction and inspired a growing interest in creating NFTs. But how do NFT royalties operate exactly? And can we make money off of them? If you are feeling confused, we’ve got you covered!
How do NFT Royalties Work?
Musicians, content creators, and artists of all kinds stand to benefit from NFT royalties. In the simplest terms, an artist or a person creating an NFT builds code in the NFT smart contract on the blockchain.
Consequently, this code acts as a method of pushing a portion of the resale proceeds back to the original creator whenever the NFT resells on a specific marketplace. Sweet! And recently, creators are finding a new way to make a profit. They are selling a percentage of their copyrights.
This means that new owners can also benefit from the NFT royalties earned! Imagine this, you do not need to create an NFT to benefit from percentages. Kinda like getting commercial rights for NFTs and making money from merch and other branded products.
What are the pros & cons?
Example on Royalties
You create an NFT, and someone purchases it for 100 ETH. While this initial sale only earns you 100 ETH, if you had included an NFT royalty of 10%, you would continue to earn a percentage of each future sale.
Meaning, if the buyer subsequently resells the NFT for 1000 ETH, the smart contract would trigger and reserve 10% (=100 ETH) of the sale price for you as you’re the original creator.
If the new buyer decides to sell, you would ALSO receive an additional 10% NFT royalty as the original owner.
This creates a long-term revenue stream for you aka passive income.
How customizable are they?
Some of you may wonder if you can write in the contract specific terms regarding the so-called royalties. How do you price them? And how does it work exactly?
It is important to mention that there are no intermediaries for NFT royalties. Also, you have to note that not all NFTs yield royalties.
It has to be specifically written into the terms! Once this is taken care of, the rest can automatically carry on.
Practically speaking, NFT royalties are platform dependent. Meaning every marketplace can set them as they wish.
But generally, with most marketplaces, 5-10% is considered the standard royalty. Some markets are even shifting towards optional royalties, check out our article here!
Examples of Popular Collections with royalties:
OpenSea and The NFT Royalties Drama
Recently, OpenSea received a huge backlash from the NFT community. The #1 NFT marketplace is considering removing creator royalties from existing collections. This made people furious.
In detail, creator fees (AKA NFT Royalties on OpenSea) will remain for existing collections on the site until December 8, at the earliest. Why, though? OpenSea CEO Devin Finzer believes that enforcing royalties off-chain can harm creators in the long run.
Finzer wrote in the blog post. “On marketplaces where these fees are optional, we’ve watched the voluntary creator fee payment rate dwindle to less than 20 percent. And on other marketplaces, creator fees are simply not paid at all,”
To truly ensure that creator revenue remains protected by code, NFT marketplaces must shift the enforcement of royalty fees to on-chain, where it can be carried out by code, instead of whoever is running any given marketplace. We still don’t know what to think…
Should you Resort to Royalties?
In a nutshell, NFT royalties are an easy and hassle-free way to keep PASSIVELY earning! Moreover, they represent an excellent opportunity for artists and content creators to tap into profits from secondary sales, which was never available to them previously. Stay tuned for all the non-fungible news your heart desires!