OpenSea Reignites Debate Around NFT Creator Royalties

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The leading marketplace will abstain from a crucial decision on removing or retaining on-chain creator fees for existing collections until December 8.

Many artists and creators entered the NFT space last year under the premise of an artistic renaissance where talented output would be fairly valued and rewarded through the traceable and transparent system of blockchain technology. 

The age-old struggles of music artists battling record companies for financial retribution and licensed ownership of their own discographies was over. No more ‘Young Gifted and Broke’ slogans to summarize artistic eminence juxtaposed with financial scarcity. 

Artists would finally be appreciated in the construct of capitalism, not appropriated for their genius in the height of cultural hysteria and then abandoned without ownership of their creations and a consistent reward.

On the blockchain, artists are paid for primary sales when they mint their work, similar to the physical space, but also gain a percentage fee — typically around 5-10% — for secondary sales of their work in perpetuity. 

In other words, every time their NFT trades hands, whether that’s tomorrow, next month, or 50 years in the future, the artist gets paid. And by minting a collection of a thousand pieces, artists had a viable route for a long-term sustainable career, not just a single paycheck and virtual thumbs-up. 

However, on-chain creator fees, otherwise known as blockchain royalties, were not automatically built into ERC-721 smart contracts upon their inception in 2018. Therefore, as a token of goodwill (pun intended), marketplaces such as OpenSea, Magic Eden and LooksRare, among others, voluntarily granted artists this support for a number of years as the industry developed. 

When the NFT market crashed in January this year followed by the global macroeconomic climate, profit margins were scrutinized and many marketplaces began re-evaluating their stance on creator royalties. 

Magic Eden stated that technical limitations prevented them from enforcing royalties for artists, suggesting that “in order for protocol-enabled royalty enforcement to work, a trend towards centralization will also need to occur.” 

X2Y2 also made the decision to enact zero-fees for creators, and LooksRare soon imitated, leaving OpenSea as the market leading and last marketplace standing on the issue.

The Director of Research at Proof Collective, Punk9059, visualized the disparity in creator fees across various NFT marketplaces.

Devin Finzer, OpenSea CEO, wrote in a recent blog post that: “An unfortunate consequence of this ecosystem shift is that the business model used by the vast majority of creators in this industry is now subject to enforcement discretion of marketplaces rather than code.” 

Creator Royalties

On the subject of creator royalties, there exists two parallel debates: unminted and minted collections. The first is relatively simple: a decision on whether to enforce on-chain creator fees for new collections, i.e. those which haven’t yet minted. 

For unminted collections, OpenSea has just released their first version of an on-chain enforcement tool, enabling artists to manually embed their royalty fee into their NFT contract. 

OpenSea will continue to pay this fee as under the current model, but only if the tool is identified as present in the contract.

Additionally, OpenSea noted that “this code restricts NFT sales to marketplaces that enforce creator fees”, excluding their competitors from trading activities supposedly in favor of the artist's wishes.

The second debate is a more technically complex and socially pertinent question: whether to enforce on-chain creator royalties for existing collections, i.e, those which are already minted, have holders and established community demand. 

Essentially, this requires the rewriting of history. Only the history is written in code. 

In a Twitter thread published Nov. 6, OpenSea advocated for a “thoughtful, principled approach” in handling creator royalties. “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”, they said. 

OpenSea has provided a guarantee that no changes will occur until their decision deadline on Dec. 8, pledging to actively listen to the opinions, ideas and concerns of artists and collection founders in the meantime.

The deadline has sparked palpable apprehension within the NFT space, as if royalties are removed by OpenSea on Dec. 8, artists will no longer earn a percentage fee for the secondary sale of their works, essentially cutting off a major supply of revenue for their career.

Artists' Thoughts

Official responses from NFT marketplaces advise that technical 'trade-offs' must exist if creator royalties are enforced.

OpenSea said that "technical decisions like this involve trade offs: enforcing creator fees on-chain requires sacrificing some of the censorship-resistance and permission-less nature of NFTs."

ONE37PM spoke to renowned NFT artist and poet, Amber Vittoria to discuss whether this concept of trade-offs is a legitimate hurdle of technology, or merely a ploy for marketplaces to pass off their responsibility.

“It can be both; given this technology is new, the enforcing of the contract on chain has proven to be difficult. However, marketplaces racing to 0% royalties to survive feels short-sighted. As creators and traders, we should not be relying upon marketplaces to decide enforcement if we truly want to continue being in a decentralized space”, said Vittoria.

She continued to state that “we are the reason these marketplaces have garnered millions in their fees”, before concluding that “the solution will likely be nuanced, but we must begin to pull away from placing the decision making with the marketplaces and instead innovate together.”

19-year-old NFT artist Fewocious tweeted an impassioned message in the form of a written letter to OpenSea arguing that “royalties were the reason the art community flocked to NFTs in the first place”, concluding with the explicit plead to “please reconsider removing royalties.”

Brooklyn-based digital artist Elise Swopes has forged an extensive personal brand over the past decade, primarily on Instagram, combining her talents for iPhone photography with an avant-garde style of graphic design. 

Speaking to ONE37PM, she revealed that her entrance into the NFT space came about after “many of my followers, friends, and team knew it was an ideal space for me as a unique digital creator.”

It “felt like a whole new opportunity to be valued for the work I’ve put into the culture of creativity and the internet”, she said, declaring that “royalties weren't the main contributing factor to make the transition into Web3, but rather the hope of “overall acknowledgment” of her artistic craft within a burgeoning industry. 

Alongside her successful endeavors in the NFT space such as becoming a top-selling artist on exclusive marketplace SuperRare, Swopes has collaborated with some of the leading brands in the Web2 space, and most recently announced her involvement in the Creator of Tomorrow programme with Meta. 

Swopes has been an active spokesperson on the creator royalty debate over recent months, candidly asserting that the subject simply shouldn’t be up for debate, and NFT artists can and should be justly compensated for their work.

Advising artists to uphold professionalism in building corporate relationships, Swopes also claimed that “we’re allowing the least creative people to dictate how we elevate ourselves, whether they’re collectors or developers, or ‘influencers.’”

“Web3 may remind us consistently how powerful and innovative these tools are, but they’re only as powerful as what we do with them”, she stated.

Swopes remains optimistic on the future possibilities for artists in the Web3 space, but reserves a “concern that we will lose the purpose of these tools in exchange for hype and attention in the short term.” 

It will affect the long term” she said, and having a balanced perspective of time will be “vital for future readiness.”

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