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.