NFT royalties: good or bad?

by James · May 13, 2023

If NFTs are important and provide unique opportunities for artists to share their work, should there be a debate between preserving the royalties creators receive and abolishing them altogether?

This was part of the discussion at the just-concluded Consensus event by Coindesk, where Erick Calderon, the co-founder of Art Blocks, insisted that royalties should never be completely taken out of the ecosystem.

NFTs are unique digital assets that can be bought, sold and traded. They are often used to represent digital art, music, videos and other forms of creative work. NFTs are stored on a blockchain, making them secure and transparent. NFT royalties are payments to the original creator of an NFT each time it is sold on the secondary market.

They can be set by the creator when creating the NFT or by the marketplace. NFT royalties are automatically paid out by the NFT marketplace and can be a valuable source of income for creators.

Towards the end of 2022, the debate around royalties heated up with MagicEden announcement royalties as optional for traders, while Opensea in February 2023 declared royalties as an optional feature on the platform.

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Artist deserves royalties

Erick, who heads Art Blocks, which is one of the first to support NFT royalties for creators, further explained that royalties give artists the encouragement they need to create more art.

Creators are excited because they have the opportunity to not only continually release artwork to make a living, but “to be more thoughtful about your releases and create something that can generate extra income in perpetuity.”

He added that with or without royalties, the idea of NFTs has created an innovative system that reveals how digital ownership can be proven on-chain. Regardless of what happens in the market, “the value proposition for being able to prove ownership of a digital asset cannot and will not change.”

He also believes that this new age of art with NFT has changed how art is created and consumed. “A lot of things in the traditional art world happened behind closed doors,” he said.

“Here everything happens in the open. We all build in the open. We all enjoy the outdoors. We all trade in the open. We know exactly who pays royalties and who doesn’t.”

Choice is important

The CEO finally noted that while he is a strong believer in royalties for NFTs, he is aware that there are platforms that give users the freedom to choose what they want, and he also thinks that is a good thing.

He compared it to gun laws in the United States, where people have their opinions about what is right. “When you’re talking to a decentralized ecosystem, you actually have every right to participate in it however you want.”