Just the other day, I was talking to this super talented indie game artist, Sarah. She invested herself emotionally and spiritually into developing full collections of character skins for an exhilarating new blockchain based game. She had been promised a cut of every secondary sale, a royalty, a lifeline for independent creators such as herself. But months later, she's seen pennies. Marketplaces that enforce royalties are opening at a rapid pace and others are turning a blind eye to them, leaving artists such as Sarah to feel robbed and jaded. This broken promise is merely a symptom of a deeper issue that threatens the very foundation of what blockchain gaming has to offer.

Royalties Matter But Are They Enforced?

NFT royalties were supposed to be the great equalizer, weren’t they? They’re intended to make sure that creators keep profiting from their work well after the first sale. Now imagine an artist getting paid every time his song is streamed on Spotify. It’s not just about the sale upfront, but they are compensated with EVERY single replay! That's the potential of NFT royalties. The reality is far more grim.

  • Royalty evasion is rampant. Marketplaces are allowing users to bypass royalty payments, either through technical loopholes or outright disregard for the creator's wishes.
  • Marketplace competition is driving a race to the bottom. To attract users, marketplaces are slashing royalties, making it harder for creators to earn a sustainable income.
  • Lack of standardization is a major hurdle. There's no universal standard for enforcing royalties across different blockchains and platforms, making it difficult to track and collect payments.

It’s as effective as constructing an exquisite mansion atop a sand dune. The framework is in place, the concept is great, but the execution is where it’s crumbling. And for creators like Sarah, it’s them who are paying the price.

The idea that we can truly own anything in the digital space — thanks to NFTs — is groundbreaking. Blockchain provides a shared, decentralized, immutable ledger, which helps improve the security and transparency of data. Web3 promises better user data management through decentralized governance. Through NFTs, players can actually own, trade, and monetize these virtual items, enabling a new level of digital ownership that’s in their hands. Are these promises being honored, or are these just slogans hiding a broken system?

Blockchain To The Rescue Or False Hope?

Meanwhile, some have suggested blockchain could actually help solve the climate crisis it’s exacerbating. Potentially. Smart contracts might streamline royalty payouts, making it easier for creators to get their fair share of each NFT resold on the marketplace. DAOs should be able to set and enforce industry-wide standards for royalties received, allowing more of a level playing field. Blockchain’s transparency offers a clearer, immutable method of tracking and verifying royalty payments. This goes a long way towards increasing the difficulty for marketplaces to game the system.

Let's not get carried away. Figuring out how to implement these solutions across multiple blockchains is a technical nightmare. Though smart contracts are powerful things, they’re quite susceptible to exploits. As DAOs have great potential, they are currently nascent. They have not proven that they can actually govern such complex systems well.

Look at the CryptoKitties example. While it proved the potential of blockchain gaming, it was a demonstration of the scalability issues as well. The reaction to Ubisoft’s Quartz experiment was largely negative, based on fears of another monetization scam. These are not admonitions to be more cautious, but rather a clarion call for a new direction.

Financial Literacy & Gaming's Future

This isn’t just a financial issue — it’s financial literacy and social good. As an artist whose practice is intertwined with the South Asian crypto-community, I am wary. On a daily basis, I witness how blockchain technology can return control to creators and create new economic opportunities. That promise is being drained by a system that’s stacked against them.

If we want a thriving and inclusive gaming community, fairly compensating creators must be an important priority going forward. We should incentivize these kinds of practices from independent developers and artists—in particular from underrepresented communities. If we don’t, we’ll end up with a system in which only the incumbents win—and that means no innovation and less public value.

Though the play-to-earn model (P2E) seemed like an innovative and futuristic idea, as exemplified by Axie Infinity, the model proved to have its weaknesses. Increasingly, the play-and-own (P&O) model, which focuses on ownership to enjoy beauty for its own sake, offers a more sustainable path. Yet even P&O is deeply dependent on a working royalty system.

It’s not about make money fast, it’s about creating an ecosystem that provides a fair distribution of creator’s value for their labor.

Will the gaming industry realize it's in their best interest to support the creators?

Now is the moment for all industry stakeholders to come together and cooperate to address the issues with NFT royalties. This is not only beneficial for creators, but necessary for the long-term health of blockchain gaming’s sustainability. The future of gaming depends on it.

  • Regulation: Should there be some level of government oversight to protect creators and prevent market manipulation? I'm generally skeptical of heavy-handed regulation, but some basic consumer protections may be necessary.
  • Industry Standards: Can the industry come together to create its own standards for enforcing royalties? This would be a more flexible and innovative approach than government regulation.
  • Education: Do creators and consumers need more education about NFT royalties and their rights? Knowledge is power, and informed participants are less likely to be exploited.

It's time for industry stakeholders to work together to find solutions to the problems with NFT royalties. It's not just good for creators; it's essential for the long-term sustainability of blockchain gaming. The future of gaming depends on it.