Bored Ape Founders Propose NFT Royalty Model, Dismiss OpenSea’s Stance as ‘Not Good’

With top NFT marketplace OpenSea sayings of the weekend that it may follow the trend of no longer imposing royalties on secondary sales, more and more prominent artists and creators are making their views known. And that now includes Yuga Labs, the creator of Bored Ape Yacht Club.

IN a blog post shared today by Wylie “Gordon Goner” Aronow – but also signed by his co-founders Greg “Garga” Solano and Kerem “Tomato” Atalay, along with 10KTF CTO Randy “Melonpan” Chung – Yuga denied that the growing industry is moving away from honor the creator royalties, and proposed a technical solution to enforce them.

Yuga Labs and 10KTF—a digital “tailor” who creates fashion for NFT avatars—has proposed a whitelist model that allows creators to only approve secondary trades through marketplaces that respect royalties. If a marketplace is smart contract is on the list, a transaction will go through. If not, then it doesn’t. Standard wallet-to-wallet transfers would be unaffected, they wrote.

“The NFT ecosystem would be a tiny fraction of what it is today if it weren’t for creator royalties,” the authors write, noting “a couple of facts” at the beginning of the piece. “The leading marketplaces of the last couple of years would be nowhere if they hadn’t supported them.”

The founders note that when Bored Ape Yacht Club launched in 2021 at a price worth around $220 Ethereum apiece, Yuga set a 2.5% creator royalty on secondary sales because that’s the amount that OpenSea charged for its own marketplace fee. That’s lower than the royalty fee chosen by many other NFT creators – typically between 5% and 10% of the sale price.

“The end result has been that OpenSea has made approximately $35 million from Bored Ape sales on its platform, not including any of our other collections,” they wrote. “We’ve never met the founders, but maybe they have a beach house somewhere with a plaque for us.”

Yuga Labs, meanwhile, has earned more than $147 million in royalties from creators on secondary sales of its various projects — including Mutant Ape Yacht Club and Otherside metaverse game– based on data collected by Galaxy Digital in October.

However, NFT royalties as they exist today are not sustainable. They can be set by the creators in smart contract—or code that powers NFTs and autonomous decentralized apps– but they are not fully enforceable on the chain. Marketplaces must choose to honor them, which most of the major players have until recently.

It is changing rapidly. IN Solana NFT space, almost all secondary sales now take place on platforms such as either reject royalties from the creator or make them optional for traders, following Magic Eden did the latter after losing market share to rivals. In the Ethereum space, marketplaces like Looks WeirdX2Y2, Blur and Sudoswap have also taken that approach.

OpenSea, the largest NFT marketplace by trading volume, has long honored royalties for creators. On Saturday, however, the firm acknowledged the changing winds in the space and said it eventually may making royalties to creators optional for traders, along with exploring new enforcement models or perhaps simply claiming royalties for certain projects.

Many prominent creators in the Web3 space haven’t taken the OpenSea news well. The founders of the Bored Ape Yacht Club have now joined the cause, describing the rejection of creator royalties as a “race to the bottom” that they believe OpenSea will eventually join.

“OpenSea made their position clear that they intend to move with the rest of the pack and remove royalties for legacy collections from their platform while keeping the trading fee the same across the board,” Yuga’s co-founders wrote, adding: “Not great .”

Yuga Labs’ proposed permission list model is the opposite of what OpenSea proposed at the weekend, which is to create a blacklist for marketplaces that not full glory creates royalties. Some in the NFT area believed that this was anti-competitive and monopolistic on OpenSea’s part.

The authors suggest that an approval list avoids the problem of playing “whack-a-mole” to block new royalty-clouding marketplaces while rewarding “good actors,” but acknowledge that it could create a barrier to adoption for new platforms emerging in the future. They also called “bullshit” on the hypothetical idea that an approval list would not be decentralized.

In their view, a decentralized whitelist model would be governed by one DAO, or decentralized autonomous organization – an online community united by a common goal, with membership represented through token ownership. The tools are already available to make this happen, they suggest, but such a model needs to be configured to benefit creators.

“So the real work is just figuring out what this governing body looks like,” they wrote. “But I think it’s a solvable problem for the NFT ecosystem to take on.”

Notable creators from across the NFT ecosystem – included Mike “Beeple” Winkelmann, Bobby “Bobby Hundreds” Kimand the pseudonymous one Betty from Deadfellas– Already supported the proposal.