Royalty-embedded blockchains can help NFT artists get paid: Here’s how

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Blockchains with royalties embedded within their code can guarantee that creator royalties will be respected, according to professionals working in Web3. 

Nonfungible token (NFT) creators losing out on royalties was one of the most important issues that the space faced in 2023. As marketplaces experimented with the optional royalties model last year, creators lost out on millions of dollars that they could have earned for their NFT collections. On July 16, royalties on Ethereum-based NFTs hit a 2-year low, according to data provided by blockchain analytics firm Nansen. 

Total royalties paid to NFT projects. Source: Nansen NFT trends dashboard 

While some platforms continue to hop on the optional royalty trend, others are going the other way, implementing built-in royalty enforcement tools within their blockchains. In June 2023, NFT-focused blockchain platform Enjin released a blockchain mainnet with royalty enforcement embedded in the blockchain’s foundational code. 

Apart from Enjin, the nonprofit arm of the Rarible ecosystem called the RARI Foundation unveiled a testnet for an Ethereum Virtual Machine (EVM)-compatible chain with royalties embedded into its node. The organization released the mainnet version of the blockchain on Jan. 24. 

Jana Bertram, the head of strategy at Rari Foundation, told Cointelegraph that it’s very important to have royalties embedded within the blockchain. The executive said that it’s the “highest level guarantee” that a creator’s royalties will be respected. Compared to app-level enforcement, Bertram said that node-level royalties are permanent and cannot be changed. 

“This is different to app-level enforcement, where a change in business direction can scratch royalties completely or smart contract enforcement, where changes in the contracts can still be implemented and the enforcement may be subject to the chain.”

The executive also argued that this could help build a sustainable Web3 creator economy, giving a revenue stream to creators each time their NFTs are traded. “Royalties are an important tool for creators to make a living. Without their enforcement and guaranteeing to the creators that they can thrive in Web3 in the long run.”

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Meanwhile, Nadaine Tongco-Edades, who works as the vice president of finance at Atlas Development, echoed the sentiments. The executive told Cointelegraph that this could also potentially spark a comeback for NFTs. According to Tongco-Edades, if royalties are proven as a reliable revenue stream, new business models could emerge within the NFT space, potentially sustaining various NFT projects experimenting with the technology. The executive explained: 

“On-chain royalties concretize the creator economy and allow artists to invest in an ecosystem, confident that they will be rewarded for their work and that content creation will be sustainable.”

The executive also added that royalties are one of the many NFT functions that are best enforced on-chain. “Chains with NFT functions, especially royalties, hardwired at the protocol level offer the strongest holder protection and greatest user convenience,” she added. 

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