Have you caught wind of the hype surrounding NFTs yet? If so, then you may have also heard stories about people successfully reselling already previously owned NFTs for amounts staggeringly higher than their original price.
Should we feel sorry for the creators missing out on profits despite originally owning the piece? Turns out, we don’t have to. As the title of this article suggests, NFT Royalties are a thing.
Do they work the exact same way as regular royalties? Quite so, yes. But there are additional details, conditions, and caveats specific to NFTs and blockchain networks. And this is what this article will look into.
All About NFT Royalties Overview
- Basic Concept Recap
- Conditions, Regulations, and Considerations
- Digitally Consolidating a Career Base
Basic Concept Recap
Royalties for non-fungible tokens work by resales. Suppose a buyer manages to snag, let’s say, an NFT artwork from someone who already bought the piece before. Specifically, registered information bound to the NFT’s smart contract would then kick in to split part of the earnings (a determined percentage) and give them back to the original creator. Remember how NFTs store bits and pieces of information related to its existence, how it was handled, the transactions made within its respective blockchain network? Yup, such is the tracking accuracy of code-trigger-based (and decentralized) digital assets.
So in a way, the new owner of the NFT still honors the original creator in a sort of electronically automatic way. This is opposed to royalties being issued by secular institutions as per a transaction or contract, for example, like UK’s similar Artist’s Resale Right. The added bonus is that, because the existence of the NFT is acknowledged and confirmed by all computers connected on the blockchain, tampering with any information related to issuing royalties is technically impossible.
In this way, even if NFT-focused digital artists only managed to make it big later on, their circulating NFT works will (potentially) continue to generate a stream of revenue for them. This is true providing the rules for accepting NFT classifications eligible for royalties are met, of course.
Conditions, Regulations, and Considerations
In terms of ultimate, legally binding conditions, NFTs can be freely programmed to modify and change their policies to benefit their creator directly and the blockchain network as a whole. However, a couple of quite specific things have sprung up over the past few years:
- The smart contract doesn’t indicate any limitation to the determined time period of NFT royalties. As such, it isn’t restricted to the entire lifetime of the creator, and could be set to any custom period of time.
- Depending on the marketplace/platform that the creator chooses, there might be an option to increase or decrease the royalty percentage as they see fit (or… absolutely none at all). Rarible, for example, allows users to edit royalty percentages on certain NFT listings.
- As suggested by the previous two points, platforms do not strictly enforce any pre-set rules for NFT royalties. As this will be a case-by-case basis, it’s important to completely read and understand the terms and conditions, regardless of whether you are a collector or a creator.
- Platform transferability depends on both technical agreement and the code written on the smart contract. Depending on the terms, blockchain network transfers may even be possible (still acquiring NFT royalties even if the NFT has long since then changed platforms).
- NFTs are a mix of underlying reference assets (identity/classification), external property assets (token/value), and other ancillary information that supports its existence on a platform. Royalty disputes may be settled separately through each of these, depending on context.
- Financial processing of NFT royalties may still be subject to related law institutions specializing in monetary discussion and settlement, as with any other related activities relevant to the overall ecosystem of a specific blockchain network.
Digitally Consolidating a Career Base
The importance of NFT royalties in stabilizing the careers of digital creators cannot be understated. Since art and design were made into lucrative businesses of the financially elite, tradition has always looked upon the original artist as the inevitable victim. Perhaps you’re starting small, selling only for small amounts, only to realize later on that some rich aristocrat has earned millions reselling your previous work.
With NFT royalties, this mad cycle of unfairness effectively ceases to exist. It doesn’t matter if you are already popular before entering the blockchain or are starting completely fresh. If programmed correctly, the royalty percentage will still offer a decent (and consistent!) amount of funding for the original creator. Even if it eventually resold for millions later on.
In addition, other perks of NFT royalties include:
- Professional sustainability. You only need to ever focus on your craft.
- Activity flexibility. You don’t schedule productivity based on financial cycles anymore.
- Underlying ownership. NFT royalties effectively still mark the creator as an owner.
- Allows for a stream of revenue even if the profession is no longer practiced.
- Hassle-free, at least after initially setting up the NFT itself.
So, No More Worries for Digital Artists?
On paper, NFT royalties typically work best as a substitute for traditional real-world “tribute” payments to original creators. For one thing, authenticity is almost always guaranteed, as the blockchain network itself confirms all the information and details attached to the digital asset. There is no risk of, let’s say, a figurative counterfeit painting being sold behind an artist’s back. The blockchain will instantly recognize the fakes, and wipe them clean.
That being said, this does not necessarily mean an entirely bright future for digital artists. The devil is once again in the details. As concluded prior, NFT royalties are an absolute necessity for the sustainability of modern “crypto” digital artists. But, there is a rather high-level-ish requirement to be familiar with blockchain technologies, and not just the accepted terms of marketplace NFT royalty rules.
After all, you never know when a scalper or some other similar digital knave would simply move your hard-earned assets to the farthest digital marketplace possible.