OpenSea Takes On NFT Royalties, But Creators Are Not Happy About It
Creators are concerned after the marketplace reveals its plans, which include blacklisting competitors and possibly optional royalties.
The leading marketplace, OpenSea, has remained silent, while other NFT platforms have recently rejected creator-set royalties. But recently, the $13.3 billion firm revealed its approach and hasn't gone down well with many notable Web3 developers.
OpenSea shared a "thoughtful, principled approach" to NFT royalties in a Twitter thread, including the rollout of a system that will allow creators of new projects to blacklist certain marketplaces that do not require traders to pay royalties. The new system goes into effect on November 8.
Moreover, the NFT marketplace has stated that it is still considering its options for ongoing NFT initiatives and will seek additional community feedback before its own self-imposed deadline of December 8. The market will determine that date, which could include making trader royalty fee payments optional in the end.
“In transparency, the consideration set for what happens after Dec 8 is wide open—[with] options ranging from continuing to enforce off-chain fees for some subsets of collections, to allowing optional creator fees, to collaborating on other on-chain enforcement options for creators,” the marketplace tweeted.
Devin Finzer, CEO and co-founder of OpenSea, wrote a blog post about the company's track record of paying out NFT royalties. Basically, NFT royalties are a charge set by the creator and paid by the seller on each secondary market transaction that ranges from 5% to 10%. On-chain, these royalty expectations are not entirely enforceable. However, the major markets (such as OpenSea) have generally supported them.
New Marketplaces are Introducing Zero Royalty and Optional Royalty
Many newer, competing marketplaces are introducing zero-royalty trade or making royalties optional in recent months in an effort to steal customers. After Magic Eden declared royalties optional for trades, competing Ethereum platforms like Blur, LooksRare, and X2Y2 rapidly followed suit. Now, the whole Solana NFT market uses almost similar models.
Several investors choose not to pay creative royalties when they are optional. In late October, Proof's pseudonymous research director, Punk9059, posted data from X2Y2 showing that just 18% of merchants paid any royalty. According to them, "free riding" is easy and convenient.