NFT Royalties

#web3-eli5

Though they are not built into the standards, royalties are one of the truly revolutionary concepts of creating and owning NFTs. NFT royalties allow creators, collaborators, curators or anyone else involved with a project to be paid royalties on any downstream sale of the asset.

This means that an artist could continue to benefit from the resale of their earliest work, even if they aren’t discovered much later in their career. This opens up whole new concepts when it comes to releasing work. A creator could give away or sell a collection of NFTs at very low cost. If the creator then builds value or utility that can only be unlocked by owing an NFT, they’ve given that NFT value. Now they can earn revenue any time the NFTs change hands. This would happen naturally as people discover a need for the utility and sellers decide they might want to cash in or move on.

Up to this point, the biggest issue with royalties has been a lack of any standard to collect and remit them to their rightful owner. An NFT Royalty Standard, EIP-2891, was recently approved to correct this. But it’s not yet widely adopted. So NFT creators must still rely on marketplaces like OpenSea and LooksRare to manage their royalties in the near future.

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