How NFT royalties benefit both creators and players

by James · April 12, 2023

Discover why NFT royalties are critical to the sustainability and growth of web3 gaming. Find out how royalties benefit both creators and players and unlock the full potential of NFTs in games.

The rise of NFTs (Non-Fungible Tokens) has opened up a whole new world of possibilities for the gaming industry.

The ability to own and trade unique in-game assets allowed players to enjoy a more immersive and personalized gaming experience. Have you worked hard to loot that item from a dungeon? Not only is it yours in-game, but the entire digital footprint is yours, opening up more revenue opportunities from it in-game.

But NFTs also bring new challenges, such as how to ensure that creators and studios are fairly compensated for their work. This is where NFT royalties come in.

Table of Contents

NFT royalties

In the web3 gaming world, royalties are an important part of making the system work.

Traditional game models rely on a centralized structure, where the studios have full control over their games and assets. With NFTs, ownership is decentralized, meaning studios have to find new ways to monetize their creations.

Enabling peer-to-peer trading through NFTs impacts the value studios can capture through primary sales. In traditional game models, studios earn revenue from primary sales of games and in-game assets. With NFTs, secondary sales can continue to generate revenue for creators as well, as they can tap into those sales.

Another important factor is that with NFTs the players themselves can become traders and enter the market. This creates a new, less price-sensitive audience that game studios can make money from. With the ability to earn ongoing revenue from secondary sales, studios can offer more value to players and motivate them to engage with the game on a deeper level.

No royalties?

But what happens if we fail to enforce royalties?

Studios may not be able to generate the revenue they need to continue making games without royalties. This can lead to a situation where only primary mints generate income, leaving assets with a rapid decline in value. In this case, NFTs would become nothing more than a marketing buzzword, with no real value or sustainability.

Without a strong royalty system, the business models of NFT games will favor primary coins, leaving assets with a rapid decline in value. This is not much different from traditional gaming models, where games lose value over time and are eventually replaced by newer titles.

To avoid this, it is important to develop a strong and enforceable royalty system that benefits both creators and players.

It’s not just studios that benefit from a strong royalty system. Gamers also benefit from relying on studios to create new and engaging games. Without studios, there would be no games to play. By supporting studios through a royalty system, players ensure that they continue to receive high-quality games and can also directly benefit from the royalties themselves.

As games lean more heavily into UGC (User Generated Content), players are becoming creators themselves. By creating and selling their own NFTs, players can earn royalties just like studios. This creates a more diverse and dynamic ecosystem that benefits everyone involved.

Final thoughts

NFT royalties are an important component of web3 games. They allow studios and creators to monetize their creations and offer ongoing value to players. It is common for most people new to the area to either complain or consider royalties a scam or scheme. But looking a little closer can give us a much clearer picture of how this industry works.