Empowering NFT Artists: Royalty-Embedded Blockchains

Blockchain technology has the potential to ensure that NFT creators receive the royalties they deserve, according to experts in the field of Web3. In 2023, one of the major problems faced by the NFT space was creators missing out on their royalties, resulting in millions of dollars in lost earnings. Marketplaces that experimented with optional royalties models contributed to this issue. On July 16, the royalties on Ethereum-based NFTs hit a two-year low, indicating the severity of the problem. However, some platforms have taken a different approach by integrating built-in royalty enforcement tools into their blockchains.

For example, Enjin, a blockchain platform focused on NFTs, released a mainnet in June 2023 that embedded royalty enforcement in its foundational code. Similarly, the RARI Foundation, a nonprofit organization within the Rarible ecosystem, developed a testnet and mainnet for an Ethereum Virtual Machine (EVM)-compatible chain with embedded royalties. Jana Bertram, head of strategy at the RARI Foundation, emphasizes the importance of having royalties embedded within the blockchain, stating that it provides the highest level of guarantee for creators. Unlike app-level enforcement or smart contract enforcement, node-level royalties are permanent and cannot be altered.

Bertram believes that incorporating royalties into the blockchain can create a sustainable Web3 creator economy, giving creators a consistent revenue stream whenever their NFTs are traded. Nadaine Tongco-Edades, vice president of finance at Atlas Development, agrees, suggesting that reliable royalties could lead to the resurgence of NFTs. If creators can rely on royalties as a stable source of income, it could foster the emergence of new business models within the NFT space.

Tongco-Edades explains that on-chain royalties solidify the creator economy by allowing artists to invest in an ecosystem where they are confident in being rewarded for their work. She also argues that royalties, along with other NFT functions, are best enforced at the protocol level of the blockchain. By incorporating royalties directly into the blockchain’s code, it offers greater protection for holders and a more convenient experience for users.

In conclusion, by embedding royalties into blockchains, NFT creators can have more confidence in receiving the compensation they deserve for their work. This not only helps to build a sustainable creator economy in Web3, but it also has the potential to spark innovation and experimentation within the NFT space.