Immutable’s recent NFT sales volume surge has been impressive. It’s remarkable in many ways, not least of which is the fact that the broader market is going through a correction. Potentially worse, it’s a flashing yellow light – if not outright red – for the established royalty model on Ethereum. While a million buyers entering the NFT space sounds like a win, digging deeper reveals a potentially unsettling truth: are we sacrificing creator compensation for volume?

Volume Surge At Royalty's Expense?

The numbers don't lie. Immutable briefly surpassed Ethereum in sales volume. Let's connect the unexpected dots. Typically, Immutable’s ecosystem is more focused on lower fees and alternative royalty structures – up to and including no royalties on secondary sales. Now, don’t get me wrong and think that I’m saying that this is a bad thing. Is this market movement indicative of a larger shift? In practice, it appears to be pushing to platforms focusing on lower transaction costs and increased trading activity rather than protecting creator royalties.

We need to ask tough questions. Creators are not better off if they’re receiving a less bad share of a much bigger pie. Are we creating a system that only favors the most entrenched creators? This creates a situation where new artists can’t make it. Is this a sustainable model for fostering innovation and artistic expression amongst the next generations?

Unintended Consequences Loom Large

Think about the ripple effects. Yet platforms like Immutable are rapidly taking market share with their alternative royalty models. What does this mean for Ethereum’s dynamic ecosystem of NFT artists that depend on those royalties to make a living? Or will they be driven to have to move, perhaps breaking apart the community and watering down the power of their collective work.

And what of these social good unintended consequences? As an example, a number of NFT projects are using royalty splits to benefit charitable organizations. If royalties are eliminated, where do we get the money to support these programs and initiatives? In short, are we accidentally woefully miscalculating and undermining the potential for NFTs to do stimulating great social change.

That’s not just because of the dollars involved, because of the ethos that is currently dominating the NFT space. Have we lost sight of what building a full, creator-centric ecosystem means? Or are we replicating the predatory ways of old marketplaces that milk creators to death for their cash?

South Asia's Creators At Risk?

I’ve spent quite a bit of time in the South Asian crypto community. From my point of view, the collateral damage inflicted on them might be especially cruel. Many creators in this region are just starting to explore NFTs as a way to bypass traditional gatekeepers and earn a living from their art. Lowering or eliminating royalties would dramatically undercut their ability to achieve financial independence.

Now picture that same South Asian artist who uses NFT royalties to put food on the table for their family. If the market shifts towards zero-royalty models, they could be forced to abandon their passion and return to more traditional, less fulfilling work. This is not a hypothetical issue, but rather an immediate danger that threatens the futures of thousands of creators from emerging markets.

We have to acknowledge the global ramifications of these alarming trends. Are we building a more inclusive decentralized system for everyone or one that serves the privileged few while further disenfranchising movers and creators in developing nations?

A Call For Pragmatic Solutions

First, let me be clear that I’m not suggesting an absolute prohibition on zero-royalty models. That’s a big part of the beauty of the NFT space as it stands—to embrace that diversity and experimentation. We must begin a frank discussion about what these trends mean for the future.

The key is to strike a balance between driving innovation and ensuring long-term sustainability. We do indeed need to build a system that promotes creativity and experimentation but makes sure that creators and innovators can monetize their work.

  • Dynamic Royalties: Implement smart contracts that allow creators to adjust royalty percentages based on market conditions or collector demand.
  • Tiered Royalties: Offer different royalty tiers for different types of collectors, rewarding early supporters with lower fees while still compensating creators fairly.
  • Community-Driven Royalties: Empower communities to collectively decide how royalties are distributed, fostering a sense of ownership and participation.
  • Education and Awareness: Educate creators and collectors about the different royalty models available and their potential impact.

Immutable’s rise isn’t the beginning of the end for Ethereum or the royalty model, but it is an alarm bell. Get ready for a serious discussion on the future of creator royalties in the NFT landscape. We should ground our conversation in good data and common sense. The creator economy’s future just might hinge on it. Let’s not pursue the easy lure of volume and overlook the downstream harm that can be done by trading away creator royalties. The long-term prosperity of the NFT space relies on our collective and market-driven efforts to establish a more equitable and sustainable paradigm.

Immutable's rise isn't necessarily a death knell for Ethereum or the royalty model, but it is a wake-up call. We need to engage in a thoughtful and data-driven debate about the future of creator compensation in the NFT space. The future of the creator economy may very well depend on it. Let's not let the allure of volume blind us to the potential consequences of sacrificing creator royalties. The long-term health of the NFT ecosystem depends on our ability to find a more equitable and sustainable model.