Amongst the chaos of NFT marketplaces opting for optional royalties, the multi-billion leading NFT marketplace Opensea has remained silent on the subject matter. However, Opensea expressed its new strategy regarding royalty payments in a tweet on November 6, announcing the new implementation of an on-chain royalty enforcement tool. Even though Opensea’s aim is to look out for NFT creators’ rights of royalty, the community shared its concern regarding the company’s true intentions.
Opensea Royalties Strategy
Devin Finzer, co-founder and CEO of Opensea, shared on Opensea’s main Twitter account the new ‘thoughtful approach’ the company is taking regarding NFT royalties. The announcement was expressed in a long thread, accompanied by a blog post, discussing the reasons behind implementing such a strategy. Finzer explained the company’s long history of implementing royalty fees to invite more creators to use the platform. However, there was a recent surge in marketplaces where royalty fees are optional. Therefore, the rate of royalty payment decreased to less than 20%. Moreover, some “creator fees are simply not paid at all.”
There’s been a lot of discussion over the past few months about business models for NFT creators & whether creator fees (“royalties”) are viable.
Given our role in the ecosystem, we want to take a thoughtful, principled approach to this topic & to lead w/ solutions. 🧵
— OpenSea (@opensea) November 6, 2022
With creators feeling that optional royalties are unfair, Opensea felt the responsibility to take action. Finzer explained how it is up to the creator to decide on NFT royalties and not the marketplaces. That way, Opensea is choosing to give the power to creators by giving them tools “ to control their business model.”
Opensea’s sensing that off-chain royalty payments are slowly fading away, with no marketplace that will enforce them in the future. However, royalty payments as a concept will NOT fade away. As a matter of fact, NFT royalty payments are the cornerstone of NFTs and are what made people interested in the contribution to Web3 in general. “Creator fees are an important innovation of web3 that help creators monetize their work in a more effective way,” Finzer wrote in the explanatory blog post. Opensea’s aim is to support creators. Also, to look for a solution where royalty fees are a part of its ecosystem.
2/ It’s clear that many creators want the ability to enforce fees on-chain & we believe that choice should be theirs–not a marketplace’s–to make.
So we’re building tools we hope will balance the scales by putting more power in creators’ hands to control their business model.
— OpenSea (@opensea) November 6, 2022
On-chain Royalty Enforcement Tool
Opensea’s royalties strategy is to equip creators with a new on-chain royalty enforcement tool. The tool will be the first one of its kind and will be available today, November 8, at 12 PM. The enforcement tool will ONLY be applicable to new NFT collections. How does it work? The on-chain tool is a “simple code snippet” that will be encoded in the smart contracts of future NFT collections. It can also be encoded in existing upgradeable contracts. This way, Opensea will enforce royalty fees for every collection that uses the on-chain tool.
In addition, the tool will provide a system that blocks NFT marketplaces with zero royalty or optional royalty fees. That way, NFT collections that use the tool will not trade in those marketplaces, ensuring the payment of creator fees.
Opensea’s Existing Collections
Since the new on-chain enforcement tool is used by new NFT collections only, existing collections are left out of the equation. Finzer stated that the on-chain enforcement of fees for exiting collections is hard. Therefore, existing collections will witness no change up until December 8. However, Finzer also discussed that what happens after December 8 is still being studied. The considered options are continuing the off-chain enforcement of fees for a subset of collections, allowing optional creator fees, and exploring other potential enforcement methods. In all cases, Opensea insists on involving the community in the decision.
Reactions to Opensea’s Royalties Plan
Opensea’s decision regarding NFT royalties faced mixed reactions from the community. Some praised the effort the company is doing for honoring creator fees. Founder of Sappy Seals NFT collection, Wab.eth, expressed his somewhat positive opinion about Opensea’s decision by praising the company for its execution.
I don't fundamentally agree with the removal of royalties though but I do appreciate this execution. There has to be give and take with these things.
Recognizing you are making a (unavoidable) change that harms your audience but also simultaneously presenting a solution.
— wab.eth ❁ (@wabdoteth) November 6, 2022
However, some creators have questioned Opensea’s future plan, calling the strategy “misleading messages”. For them, Finzer’s statement about existing collections is unclear and shaky. Many marketplaces have promised to keep honoring royalty payments, only to shift to optional creator fees. Therefore, many have sensed the same scent coming from Opensea’s tactics. Deadfellaz NFT collection’s creator, Betty (pseudonym), has expressed their concern in a tweet by stating how Opensea is not providing any real answers for existing collections.
After speaking with @opensea it feels like there is no plan and no clear answers were given in regards to existing collections & artist’s royalties. Communication has been misleading and facts are not there. Speak up if you feel a certain way about this because it has impact.
— BETTY (@betty_nft) November 6, 2022
Killing Two Birds in One Stone
Many upcoming markets like Soana’s Magic Eden and Etheurem’s X2Y2 and LooksRare going into the path of zero-royalty trading. This has pressed on Opensea’s neck. It is losing its market shares to competing markets, where buyers are not paying creator fees. However, Opensea’s new on-chain enforcement tool is a smart tactic to keep everyone happy. By providing a system that blacklists zero-royalty marketplaces for NFT projects, it will ensure the diminishing of competitors AND the royalty payment to creators on the platform.
Opensea has not yet finalized the process of royalty payments. It is still evaluating what to do for existing NFT collections. Also, the community will be able to voice out any feedback regarding the decision. If you’re a creator wishing to add the enforcement code to a new smart contract, here’s how to do it.