I’ve heard a disturbing rumor floating around the NFT space that we are moving to a royalty-free model on secondary sales. The thought is that someone will eventually build an NFT marketplace that will ignore royalties in a move for market share. Sure, buyers would see fewer fees.  Before you support such a proposition, please consider the very real repercussions of eliminating royalties on secondary purchases.

Let’s Imagine A World With No Royalties.

You can forget long-term building.  Instead projects that fund utility-driven upgrades will instead mint more NFTs. And then more NFTs.  This will dilute the projects and the market. No project in its right mind will keep developing unless it can generate funding. In the zero-royalty world, what else can they do, except continue minting more and more NFT into the collection?

If royalties are eliminated, I guarantee we’ll see a much higher rate of rug pulls. Projects will promise the world, knowing good and well that they won’t be able to afford to implement anything long-term. Instead, we’ll see slow rugs, fast rugs, and probably new kinds of rugs we’ve never seen.

Smart entrepreneurs that build projects are going to find a way to fund those projects and without royalties, the best teams will be spending much more time getting funding and less on developing the project.

Royalty-free marketplaces will only benefit themselves long-term. With diluted projects, there will be fewer winners and more losers. Pump-and-dumps will be normalized and it could put a black eye on the entire industry. I don’t think we want that.

For the record, the top Cardano marketplaces honor royalties, but a rogue marketplace could open and undercut any of these guys at any time. Jpg.store has been a great supporter of honoring royalties, and I have no reason to think this stance will change

How Do We Keep NFT Royalties From Dying?

The first thing you can do is make a commitment to only purchase NFTs on a secondary market that honors royalties.  If everybody does that, the problem will solve itself quickly. But let’s face it, that’s not how we degens operate.

If people do make a move to royalty-free markets, there are still actions we can take, at least on Cardano, that would force sales to honor the royalty token. I saw a Twitter thread talking about this (I wish I could find it to quote), and suggested that we could propose a CIP (Cardano Improvement Proposal). If we proposed and passed a CIP that forces exchanges to honor royalties, Cardano could become a bastion for NFT projects and artists. Any project that starts in the post-royalty world would be a fool not to build their project on a platform that pays them.

We must support the people and projects making this ecosystem great. The best way we can help them is to keep them free from hunting for the next funding round and allow them to earn passive income while they continue to build their projects in accordance with the holders’ high standards.

Artists that make one-of-one pieces are particularly in jeopardy from the no-royalty marketplaces. To me, NFTs are a godsend for artists that sell works that are later sold for 10 or even 100 times the price the artist sold the work for originally. Why should they not benefit from the appreciation of their works?

This FUD about royalties is an opportunity for Cardano. If we get this right, we could become the gold standard for non-fungible tokens.

At first look, a cheaper NFT may seem to be a better deal.  That short-sided attitude will burn us all if we let it.

If anyone has a CIP that they’d like to propose, please let me know. I’ll read the proposals, and vow to support and promote any that I feel will benefit the community. We need to nip this in the bud right now.

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