Crypto Twitter split as another NFT platform moves to record royalties

by James · October 20, 2022

Solana-based Magic Eden has become the latest NFT marketplace to move to an optional royalty model, following in the footsteps of X2Y2 in August, albeit reluctantly.

Under the optional royalty model, buyers are given the power to specify the royalties they wish to contribute to an NFT project, meaning there is a chance that some creators may not receive royalties when their artwork is sold.

In a post from October 14, the NFT marketplace noted that the decision came after “difficult reflection and discussions with many creators” and came as “the market has been shifting towards optional royalties for creators for some time.”

The NFT marketplace shared a graph showing that the number of cumulative wallets using optional royalty marketplaces to buy or sell NFTs skyrocketed in late September.

4/ The market has been shifting towards optional royalties for creators for some time. These charts show the cumulative wallets that have used optional royalty marketplaces to buy or sell NFTs. pic.twitter.com/wxiU800l2P

— Magic Eden (@MagicEden) 15 October 2022

However, the move has been met with divided opinion from Twitter’s NFT community, with some seeing the move as positive for the long-term health of the industry, while others have branded skipping royalties “theft”.

Well-known NFT artist Mike “Beeple” Winkleman pointed out to his 700,000 followers on October 15th that while he doesn’t love what Magic Eden and others are doing, the move from seller’s fee to buyer’s premium may be better for the industry in the long run.

while I’m obviously pro-royalties and don’t love what @MagicEden and others do, I think there is one important change that they hit on… switching from a seller’s fee to a buyer’s PREMIUM. I think this is actually much more sustainable in the long run…

— beeple (@beeple) 15 October 2022

Another Twitter user named CaptainFuego, behind Fuego Labs, told their nearly 10,000 followers that “Royalties are stupid and shouldn’t exist. Glad to see platforms taking this approach.”

Others were more critical of the change. Broccoli DAO argued that “royalties are necessary in an immature ecosystem,” noting that according to their calculations, they have already lost as much as $27,000 in royalties due to 0% purchases on other marketplaces.

KINGDOMS:

Following Magic Eden’s announcement that they will make royalties optional, we have taken proactive measures to protect the integrity of our project.

We have run analyzes and determined how much we have lost in royalties to 0% purchases on other marketplaces:
/1

— Broccoli DAO (@Broccoli_DAO) 15 October 2022

“In the future, we will block anyone who has not paid royalties from accessing our Discord channels. Not paying royalties is theft. We will treat it as such,” they said.

Cozy the Caller, a self-proclaimed analyst, made a grim prediction to his 108,000 followers, states “I can see a scenario where Magic Eden goes 0% and loses market share to a marketplace that enforces royalties in an innovative way.”

honestly unreal i don’t know who advises the magic eden but imagine groping a billion dollar company man

I can see a scenario where magic eden goes 0% and loses its market share to a marketplace that enforces royalties in an innovative way

such a fumbled man unreal

— Cozy ⓣthe Caller (@cozypront) 15 October 2022

Magic Eden said the change was not taken lightly and “has actively sought to avoid this outcome and has spent the last few weeks exploring various options.”

Last month, the NFT marketplace attempted to produce a royalty enforcement tool called Meta Shield, with the aim of deterring NFT buyers who try to extort royalties from creators by giving creators a tool that can flag and blur NFTs that sold immediate royalties.

Magic Eden noted in its latest post that: “Unfortunately, royalties cannot be enforced at the protocol level, so we have had to adapt to changing market dynamics.”

In August, NFT marketplace X2Y2 announced that it was introducing a similar option that allows buyers to set the royalty fee when purchasing an NFT.

The move does not appear to have affected the platform’s usage, according to data on NFTGo, for the past three months, X2Y2’s trading volume has ranked first, surpassing OpenSea.