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Artists & Content Creators Love NFT Royalties: But Why?

Non-fungible tokens or NFTs are highly celebrated among creative people, including artists, musicians, and authors. This technology paved the way for tremendous success for the creators by offering their artwork fair and secured payments. It is not limited to this only.

There is even a system called NFT royalties which is an excellent way to respect the creators of NFTs for their hard work and creativity.

Every time an NFT is sold, its creator gets a portion of its price based on the percentage he put as his attainable royalty when minted the NFT on a marketplace.

What are NFT Royalties?

NFT royalties, in simple words, represent the system by which a creator, including artist, author, or musician, receives a particular percentage of the sale price of their non-fungible tokens when the NFTs are purchased on the marketplace every time.

Being fintech enthusiasts, we all know that the NFTs are the new dimension of cryptocurrency. Non-fungible tokens or NFTs refer to the unique and scarce digital assets such as pictures, audios, videos, or tweets stored on the blockchain. Unlike other cryptocurrencies, they are non-exchangeable and can have one owner at a time. You can compare them with Pablo Picasso’s valuable but exclusive paintings.

NFTs are about creativity and innovation. So, NFT royalties have been coined to give NFT creators the proper remuneration for their hard work and unique creativity. NFT royalties allow the creators to have an amount of money from the profit each time their NFT products are sold. Blockchain and smart contract technology assist in the functioning of this process.

NFT royalties are just like offline royalty that means a payment backed by laws someone receives for the ongoing utilization of his assets, which can be a creative work or any product. But the procedure of receiving NFT royalties takes place online, specifically on the blockchain.

Royalties are a must if we want to honor our artists. In a conventional system, artists can profit from the first sale of their artworks. It can seem justified at first. But when we imagine a circumstance where an artist’s name and fame accelerates with time, we will find a problem.

In such cases, the second owner of the art piece can make a massive amount of money while the artist is gaining nothing. So, to solve this problem, giving royalty plays a vital role as the artist gets a percentage of the profit every time his work is sold.

How do NFT Royalties Work?

Creators set the royalty percentage they want to have when their NFTs get minted for the first time. Whenever a secondary sale of their NFTs happens after that, they receive the rate they set on the smart contract at the time of minting.

Suppose a creator settles the royalty for his NFT as 10% at his NFT’s first sale. If the buyer sells this NFT in the future for a certain price, the creator will receive 10% of the cost. Getting this 10% of NFT royalties will happen whenever the new owners sell the NFT, bringing fortune to the creators.

Imagine that you put your NFT artwork on a marketplace to sell. If someone buys it with 10 Ethereum (ETH), you will get 10 ETH at first. But you added the condition of getting 10% of royalty at every resale of your product.

So, if the price of your NFT increases in the future because maybe you are more famous now or the artwork is considered rare for any reason, you will make a huge profit. If the buyer sells your NFT for 300 ETH, you will earn 30 ETH as your 10% royalty. If the new Collector sells your collection again, you will receive a 10% profit from the selling value.

The reason behind the smooth payments of royalties after each resale of an NFT is the powerful, safe, and decentralized technology of blockchain. Blockchain is DLT which means distributed ledger technology. This transparent and resolute ledger determines whether the NFTs are authentic or fake.

Moreover, some protocols of blockchain guarantee that every condition of the smart contract will be fulfilled, including the clearance of royalties. Another positive side of blockchain technology regarding royalties is that the payment of royalties occurs without involving any external technology or person that causes the artists to get more royalties as no extra charge is made during the process.

Identifying the authenticity of creators and ensuring their attainable royalties are two crucial things in the NFT royalties procedure. Both blockchain and the Smart Contract of the NFTs simultaneously safeguard these things. Buyers are safe from fake sellers, fake stores, fake NFTs, and creators are secured from being cheated and not receiving their royalties.

Who Gains from NFT Royalties?

Artis, musicians, authors, precisely all kinds of content creators in the digital realm are the beneficiaries of NFTs royalties. The buyers also get advantages because they can verify the authenticity of the NFTs and their creators and resell the NFTs. But NFTs royalties are mainly serving the creators.

Let me introduce some artists who are gaining a high amount of NFT royalties. Jacques Greene, the electronic musician by profession, made about $27,904 in royalties from Spotify as his track “Another Girl” has had 7 million plays on the platform since 2011.

A portrait photographer, Justin Aversano sold an NFT collection of all 100 portraits called “Twin Flames” for $130,000 between February and June in 2021. Interestingly, Aversano profited for “Twin Flames” over $565,000 till last year’s June, when its first price was comparatively low, as he was receiving NFTs royalties from the reselling of his digital assets.

Sarah Jucker, Steve Aoki, Kings of Leon, and many more creators are generating extra revenues through royalties coming into their wallets every time their creations are being resold.

The Benefits of NFT Royalties

There is a long list of benefits NFT royalties have. It’s expected because people wouldn’t love the NFTs otherwise. Some of the noticeable benefits of NFT royalties are given below. Go through them.

1. Offering Creators Full Control over their NFTs

One of the most significant benefits of NFT royalties is that it gives the creators complete control over their NFTs in the form of copyrights. Even if the digital assets are sold already, creators still enjoy the copyright of their artworks. Because of this copyright, creators receive a percentage of revenues whenever the NFTs are purchased, when they are not even the owner anymore.

This control over their NFTs leads the creators to the economic and artistic freedom that subsequently inspires them to produce high-quality artworks.

2. Automated Payment System

Creators receive their portion of the profit, also known as NFT royalties, as soon as their digital product is purchased through an automated payment system maintained on the blockchain. Now, creators are paid automatically without taking any action with the recursive sales of their non-fungible tokens. Whenever the product is purchased, money enters the creator’s wallet. Even the secondary owners can also have a part of the royalties in some marketplaces like Bluebox.

However, some rules and regulations are still required regarding the transaction of NFTs as they are one kind of intellectual property. Tax and vat laws related to digital assets also need to be transparent.

3. Perpetual Royalties Despite the Number of the Secondary Sales

A cool thing about NFT royalties is that the copyright is permanent for the artists. They will gain revenues from their NFTs during their lifetime, even after their deaths theoretically. The perpetual nature of entitlement to the NFTs ensures this advantage. 

Yes, some legal issues are needed to be cleared regarding what will happen to an NFT after its artist’s death. As we know, in the tangible world, intellectual property like books or music tracks becomes public property after a specific period. So, we are waiting to know whether this rule will be applied or not to the NFTs. Whatever, still, NFT royalties are a wonderful way for artists to profit, even when they don’t own the NFTs anymore.

4. Hassle-free Earning

NFT royalties allow innovative and creative artists, musicians, authors, and other creators to earn money by secondary purchases of their products. No intermediary is involved, no third-party agency is welcomed, and no lawyer or bank is needed. Even you don’t have to face things like signing on lots of papers, making agreements and documents. You don’t need to talk to anyone. Your royalties will effortlessly come into your wallet with every repetitive sale of your product. What can be more hassle-free earning than this?

5. No Controversy over Ownership of NFTs

NFT royalties help to ensure the actual owner of this digital asset. The creator mints his NFTs on the blockchain through a marketplace, and his ownership is sealed over them. He gets the copyright, and no matter how many times his NFTs are sold, he receives the royalties he put on the smart contract. There is no chance of controversies on the primary owner of digital assets. Because immediately the purchase occurs of an NFT, the royalties go to the creator’s wallet.

6. Fans can Support Creators

NFT royalties offer the fans the opportunity to support their favorite creators. It has been reported, lots of fans buy their favorite artist’s creations and resell them for higher value because they know a percentage of the profit will go to the creator’s wallet in the form of NFT royalties. These fans see this act as their way to pay tribute to their respected creators and make them more financially strong to create more unique pieces of art.

7. Physical Art Gallery is not Required

A significant advantage of NFT royalties is that creators don’t need to show their artworks in a physical gallery, which decreases the creators’ production cost and saves time and energy. As the production cost goes down, artists can make a profit from their NFTs every time a collector buys their digital assets. Not only artists, but the same also goes to other creators like musicians or authors. Being able to showcase their creations on the blockchain, they become free from managing the auditorium or library.

Unique Features of NFT Royalties

NFT royalties hold some features you need to know if you want to completely grab the whole idea of these digital asset royalties. So, we are attempting to briefly describe the NFT royalties features.

1. Not All NFTs have Royalties

Royalties are a common feature of NFTs and are considered a blessing to the creators and their complex works. But not all NFTs hold royalties. It can be because the creator forgot to put the conditions about royalties on a smart contract or doesn’t want to put these conditions as he doesn’t wish to gain royalties. But once the NFTs are set in the blockchain, the creator cannot add the percentage of royalties anymore.

2. The Creator Sets the Royalty Amount

NFTs royalties give power and independence to the artists and creators, which includes the right for the creators to determine the royalty amount for their piece of works. But the creator needs to be calculated while settling the royalty amount. Because if he puts a meager amount of royalties, he will not profit, and if he puts a high amount of royalties, buyers will not want to buy his NFTs. So, it’s better to put such an amount that will be good for sellers and buyers. Setting the right percentage of royalties is a crucial part of NFT strategy in reality. Appealing people towards your NFTs project depends on it. The most accepted amount of royalty is 5% to 10% for work.

3. Royalties are Permanent

The current structure of NFT technology and the rules regarding NFT royalties tell us that creators will get profits through NFT royalties until the world ends. No conditions or laws prevent the creators from receiving NFT royalties even after their death. There is no expiry date or imposed time frame beyond which creators cannot make revenue. However, this perpetual nature can create some legal issues as real-life copyright laws demand intellectual properties to be public property after a specific time period after the creator’s death. Now let us see, the law about NFTs follows the real world or has independent features. This topic is already discussed in the benefit of the NFT royalties section of this article.

4. Empowers Buyers as well

Smart contracts of non-fungible tokens also empower buyers along with sellers and creators by giving them a chance to verify the authenticity of sellers and their NFTs. Like real-world, scammers are everywhere in the NFT world and waiting to deceive buyers with fake products; when a buyer can verify the seller and his digital information, the risk of being cheated decreases.

5. NFT Royalties are not Guaranteed

NFT royalties are offering creators a just exchange for their hard works. But unfortunately, NFT royalties are not guaranteed. You will not receive it in every circumstance. For instance, if an NFT is minted on Rarible, you won’t receive royalties if the new owner resells it on OpenSea. That means reselling an NFT in a marketplace other than where it was minted will pay you nothing. Especially, the blockchains based on different cryptocurrencies strictly prohibit the interexchange of NFT royalties. The next section of the article will elaborate on this loophole more.

6. Opportunity to Split the Royalties

A remarkable feature you will find in NFT royalties terms and conditions is there is a chance to split the revenue you generate every time through the NFT royalties you receive when your NFTs get purchased. Maybe you operate as a band and have six members, or you created an artwork as a group of artists. In such cases, the money of royalties needed to be divided. Fortunately, the technology of NFT royalties has this scope that will allow you to split royalties among every creator’s wallet.

7. Royalties Include Smart Contracts

Without smart contracts, gaining royalties without trouble will be tough. Smart contracts verify the authenticity of the NFTs and work as a document to ensure the smooth transaction of royalties in all secondary purchases in the future. There are a few reasons why this technology is used to provide royalties to creators.

Smart Contract offers the creators of NFTs the amenity of getting instantly paid. Smart contracts make instant payment of NFT royalties possible as it is a swift technology that empowers creators.

Whenever an NFT transaction occurs, the smart contract begins to function with all its features and conditions. We don’t need to add any external agent or additional information for a successful transaction because it’s an automated system. The artists or authors will simply get the money of their NFT royalties as soon as their digital assets’ resales occur.

Transparency and clarity are other essential things smart Contract attaches to the NFT royalties transaction procedure. Creators write the royalty fee of their NFTs into the code of smart contracts before minting their digital assets, which is clear, transparent, and easy to understand for every party related to the NFT and its royalties transaction. Even any lawyer isn’t needed to be involved in explaining the terms. Smart contracts represent a clear picture of how much NFT royalties fee will go to the creators’ wallets. After writing them on smart contracts, there is no chance to manipulate the codes.

Moreover, smart contracts make the royalties amount auditable as all the transaction records are recorded on the blockchain. So, if Government or any authority wants to audit the NFT royalties transactions for some reason, that is possible.

Is Getting NFT Royalties Easy?

We have discussed the criteria and advantages of the NFT royalties so far. This discussion was pretty much positive that can make you think getting NFT royalties is a child’s plaything, and there are no difficulties to face to get it. But this conception is wrong. NFT royalties offer so many benefits to the artists, but getting it can be challenging due to technical reasons.

There are marketplaces with NFT royalties for creators, but the platforms are not compatible with other marketplaces. That’s why when a digital asset of one marketplace gets sold at another marketplace; creators don’t get royalties. It’s a huge problem that should be solved as early as possible if marketplaces want to respect the artists. Technology should be introduced by which every marketplace will give royalties to the creators. EIP-2981 technology can be an excellent option to deal with universal royalties payment system.

EIP, which stands for Ethereum Improvement Proposal, contains standards for the Ethereum platform, discusses topics like core protocol specifications, client APIs, and contract standards to establish some criteria for Ethereum backed platform to sophisticate the transaction system of the forum.

EIP-2981 retrieves the information about royalties payment of NFTs to create universal NFT royalties to find the creators smartly and fairly across all NFT marketplaces. This standard framework conveys correct royalty payment information, and marketplaces that function on Ethereum based blockchain adopted it.

Thus, reselling on any marketplace of Ethereum based blockchain will give NFT royalties to the creators. Still, other marketplaces that don’t function on Ethereum blockchain, like Binance, won’t provide royalties if any NFT is resold on their platform that wasn’t minted on Binance. Those who resell their NFTs minted on Binance on other marketplaces will not receive royalties.

So, introducing a universal royalty payment method is still an issue. Without ensuring a ubiquitous payment system for NFT royalties, the creators will be deprived of their royalties and lose motivation to create new and unique artwork. Implementing one standardized royalty payment system among all NFT marketplaces will increase the efficiency of the complete NFT ecosystem.

Wrapping Up

Non-fungible tokens shook the fintech spectrum due to having lots of positive features. One of them is respecting the creators or artists by offering them NFT royalties. It is an unbelievable benefit NFT is providing to the creators. Digital artists are concentrating more on creating new digital assets because of this. 

Moreover, the artists of the natural world who are inclined to conventional artwork are also shifting to the digital world. Though there are some flaws in the NFT royalties system, such as an NFT doesn’t bring on royalties when being resold on different marketplaces, this digital royalties’ rapid and transparent transaction system can beat the benefits of offline royalty system to some extent. NFT royalties are one important ground depending on which NFTs are getting popularity at an observable pace.

Henry Hicks
Henry Hicks
NFT and Crypto Enthusiast. Loves Travelling and Exploring the Metaverse!


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