NFT Royalties Fall Short in Web3 Ecosystem

Nonfungible tokens, or NFTs, have become a popular gateway for users to enter the Web3 ecosystem, with artists and creators leveraging Web3 tools to enhance their work. However, recent data from eBit Labs and LiveArt marketplace suggests that the loss of creator royalties in the NFT space may be higher than previously estimated.

The emergence of the Blur marketplace in October 2022 has caused shortcomings in royalties for two of the leading NFT collections, Bored Ape Yacht Club (BAYC) and Mutant Ape Yacht Club (MAYC), with losses totaling around $20 million alone. This new data indicates that previous estimates of $35 million in royalty shortcomings may have been too conservative.

Creator royalties have been a hot topic of discussion in the NFT space. After briefly halting creator royalties and receiving severe backlash from the community, the OpenSea marketplace announced that it would enforce creator royalties on all listed collections.

In November 2022, the founders of BAYC proposed a new model for NFT creator royalties that would keep NFT transfers between wallets free. Meanwhile, MagicEden, another prominent NFT marketplace, has defended its own NFT royalty enforcement tool, which gives creators the ability to flag an NFT or blur the image if the listing or trade bypasses royalty rules.

Despite these efforts, Boris Pevzner, co-founder and CEO of LiveArt, says that the new data shows the Web3 ecosystem falling short of its promise to be a "creator-centric space." Pevzner warns that if the current system continues to fail artists, it may cause them to lose interest in the industry, potentially causing the space to become more like the stock market.

Pevzner's comments on "marketplace wars" primarily reference the entrance of the Blur marketplace onto the scene, which has targeted OpenSea's market share. With NFTs continuing to gain popularity and more marketplaces vying for a piece of the pie, it remains to be seen how the issue of creator royalties will be resolved.

As the Web3 ecosystem evolves and matures, it is important to ensure that creators are fairly compensated for their work. The current system of enforcing creator royalties appears to be falling short, potentially hindering the growth and success of the NFT industry.