Immutable is Enforcing NFT Royalty Fees on Ethereum at a Protocol Level
The company has introduced a community-governed white- and blacklisting tool to enforce creator royalties on-chain.
NFT royalties are now enforceable thanks to Immutable
While many NFT platforms are struggling to protect creator royalties, Immutable has found ways to enforce such fees at the protocol level.
On Thursday, the blockchain technology firm announced that it had deployed a white- and blacklisting tool on Ethereum to enforce NFT royalties.
Smart contracts that honor royalty fees go to the whitelist, while contracts that bypass royalties go to the blacklist. NFT creators can then use these lists to dictate smart contracts that can transfer or receive NFTs from their collection.
By doing so, creators can rest assured that holders can only trade their creations through royalty-respecting contracts. The company also added that $IMX token holders would govern the lists. Thus, allowing both lists to be managed in a decentralized manner.
Notably, the tool is already in use on ImmutableX, the company's L2 scaling solution on Ethereum.
About the creator fees debate
Whenever an NFT is sold on a marketplace, a percentage of its sale price will go to the original creator in the form of NFT royalties. These payments will allow artists to earn recurring revenue from the secondary sales of their Web3 creations.
However, NFT royalties were not enforceable at a protocol level. Creators merely depended on marketplaces like OpenSea to take a cut of the sales before sending it over to them.
For that reason, several emerging marketplaces, such as Sudoswap, took advantage by enabling royalty-free trades on their platforms. Needless to say, this has resulted in a boom for zero-royalty platforms, especially among NFT traders.
Many have argued that racing to the bottom would only harm the entire Web3 ecosystem. If creators are not incentivized to build, who will power the growth of this space? Knowing this has led to multiple stakeholders looking for ways to enforce royalties on-chain.
Immutable X is showing the way
With Immutable now leading the charge, many platforms will likely follow suit.
"Our vision is an ecosystem where creators have a choice over their royalty model and level of enforceability, and users can vote with their feet when it comes to the projects they feel strike the best balance," said Alex Connolly, Co-Founder & CTO of Immutable.
"Soft-enforced royalties only serve to punish users who are trying to support projects and massively reduce the confidence creators and game studios can have in their revenue streams. Royalties, structured correctly, provide significant long-term incentive alignment."