The whispers are getting louder: "NFTs are dead." "Royalties are a thing of the past." So let’s cut the nonsense. It is way too early to be writing NFT royalties’ obituary—even if it’s as premature as declaring Bollywood dead just because Hollywood had one hot summer. It’s not dead; it’s changing, and if you ask some folks, for the better. And here's why you should care, especially if you're building, investing, or simply participating in the future of the internet.
Are Royalties Really Dying Though?
So let’s get the digital elephant in the room out of the way. Yes, a few bad actor marketplaces have stacked the deck against royalty enforcement, doing right by volume instead of in their compensation to creators. It feels like a betrayal, right? It’s sort of like learning your favorite band is lip-syncing all their old hits. This is not an indicator of demise. Instead, it’s indicative of the old model’s difficulty in coping with its own contradictions. The current royalty system, which mostly depends on a mixture of goodwill and platform adherence to the law, is fragile. This vulnerability sparks innovation.
Think of it like this: early automobiles were unreliable, prone to breakdowns, and required specialized knowledge to operate. Did that imply the conception of the automobile was wrong-headed? No. That meant more advanced engineering, off-the-shelf parts, and locally available training. In the same way, today’s attacks on NFT royalties are not an ending, but an exciting opportunity to develop smarter, more durable ones.
Creators Deserve Fair Compensation, Period
One of the most compelling aspects of NFTs is their potential to enable creators and open market opportunities. In return, they get a direct relationship with their readers and a proportional cut of the value they create. To abandon royalties is to abandon that promise.
I can tell you firsthand how meaningful this kind of support is, especially to South Asian crypto communities. For many artists from developing nations, NFTs offered a lifeline, a way to bypass traditional gatekeepers and earn a living from their art. Royalties were not simply an added benefit, but a necessary livelihood, particularly for those who did not have the means to traditional forms of funding or patronage. Taking that away is like cutting the rug from underneath them.
Picture a world where musicians were denied royalties after the very first sale of their album. Ludicrous, right? Royalties are the lifeblood of creative industries, protecting artists so that they can safely pursue their craft. And even though the way we deliver those royalties may be changing, that principle is still important.
What Evolution Actually Looks Like
It's not a single solution, but a multifaceted approach:
- On-Chain Enforcement: Embedding royalty terms directly into the smart contract, making them immutable and enforceable regardless of the marketplace.
- Retroactive Public Goods Funding: Using mechanisms like quadratic funding to reward creators based on the overall impact of their work, rather than solely relying on individual sales.
- Hybrid Models: Combining traditional royalties with membership perks, exclusive content, or early access for NFT holders.
It’s similar to the shift in the music industry from buying albums to streaming on services like Spotify. When streaming was first introduced, artists were understandably cautious about the new technology, concerned it would undermine their profession. To be clear, early waves of streaming did in many ways shortchange artists. Eventually, alternative models developed, putting more power and money in the hands of artists.
The unprecedented challenges we’re facing today are pushing us all to innovate, to explore new and more effective ways to reward creators. And that's a good thing.
One interesting example is the use of fractionalized royalties, where fans can invest in a creator’s future earnings. Some have begun experimenting with DAOs to collectively manage and distribute royalties, ensuring transparency and community governance.
None of this will be successful without a strong foundation in financial literacy. Creators should be well equipped to know their worth, to negotiate better deals, and to fight for their bottom lines. Collectors need to understand the impact of their choices, to support projects that prioritize creator compensation, and to demand transparency from marketplaces.
Feature | Old Royalty Model | Evolving Royalty Model |
---|---|---|
Enforcement | Platform-dependent, based on honor system | Smart contract-embedded, decentralized enforcement |
Distribution | Primarily through marketplace sales | Diversified, including retroactive funding, memberships |
Transparency | Opaque, reliant on platform reporting | Transparent, DAO-governed distribution |
Creator Control | Limited | Enhanced, with more control over royalty terms |
Financial Literacy Is Critical Here
This extends beyond NFTs. Together, we can continue building a more equitable digital economy that respects and rewards the work of artists and creators. As Raoul Pal sagely reminds, art creates capital. We need to build an environment where creative talent is cultivated and able to flourish.
So, don’t count NFT royalties out entirely. Instead, embrace the evolution. Support your creators working experimental new models. Support those creators pushing the boundaries and requiring a more equitable transparent system. The future of NFTs—and the future of the digital economy—depends on it. Let's build that future together.
The Call to Action
So, don't write off NFT royalties just yet. Instead, embrace the evolution. Experiment with new models, support creators who are pushing the boundaries, and demand a more fair and transparent system. The future of NFTs, and the future of the digital economy, depends on it. Let's build that future, together.