The promise of NFTs was revolutionary: a direct line between creator and collector, cutting out the middlemen who have historically pocketed the lion's share of art's value. Royalties are leading this revolution. A modest percentage of each subsequent sale is returned to the creator, making it impossible for them to be left behind. So is this promise really coming through? Or are we just witnessing yet another instance of the digital realm under-delivering on its utopian promises?

Are Royalties Fixing Art's Broken System?

For centuries artists have had to live and create at the mercy of galleries, auction houses, and elite collectors. Artists make powerful, moving pieces of art, investing their passion, spirit and energy into each one. Sadly, creators usually get just a small percent of the profit when their works are resold in secondary markets for substantially greater amounts. Think of it like this: Imagine a musician writing a hit song, but only getting paid for the initial recording session, never seeing a dime from radio plays, streaming, or licensing. Absurd, right? That's been the reality for visual artists.

NFTs offered a potential solution. When properly structured, smart contracts—the code that makes NFTs work—can ensure royalties are automatically paid. This means every time an NFT artwork is resold on a compatible marketplace, a pre-defined percentage goes directly to the artist's wallet. This is huge. We’re imagining a kind of UBI but artist focused. This basic safety net would encourage them to return their creative energies to the community—without the daily fear of when their next meal will be. For us, it’s about providing them a real incentive to think about the long-term success of their work.

Here's the rub. Make no mistake, tire-kickers and free-riders beware, the NFT space is still the Wild West. There's no universal standard for enforcing royalties. Royalties on NFTs are not guaranteed and instead are dependent on the decisions marketplaces make to uphold them—or not. Many are losing out, forced to make a choice by the brutal competition to win traders with the lowest fees. It’s a race to the bottom, and artists are footing the bill. Earlier this month, when platforms like Magic Eden went to make royalties optional, we’ve witnessed a huge upheaval.

Voluntary Royalties: A Toothless Tiger?

The industry is pushing for “optional royalties,” which might as well be no royalties since the result would be the same. That’s precisely as ridiculous as it sounds—similar to asking someone if they want to pay their taxes. Of course, some will, driven by altruism or a social conscience. But most won't, especially when they can save money by going to a marketplace that doesn't enforce them. This isn’t about personal morality, this is about system design. If the system is set up in a way that makes eviction financially advantageous, then evictions will occur.

Consider this: if the traditional art world operated on a voluntary royalty basis, would Damien Hirst be cutting checks every time one of his spot paintings changed hands at Sotheby's? Of course not. The power dynamic is too skewed. Artists do not have the industry leverage needed to hold people of power accountable to their rights. That’s why we need smart contracts and platform-level enforcement.

The wishful thinking that collectors will just start paying royalties on their own is well intention, but incredibly naive. It overlooks the underlying power dynamics at play in the art market. We can’t continue to operate on this “honor system” and need to replace it with strong, enforceable standards.

Can We Save the Royalty Revolution?

The good news is, it’s not too late. After all, the NFT space is still in-game, and the future isn’t won yet. Here's what needs to happen:

  • Standardization: Platforms need to agree on a common royalty standard. This should be baked into the NFT's metadata, making it enforceable across all compliant marketplaces.
  • Regulation (Yes, Really): The word "regulation" often sends shivers down the spines of crypto enthusiasts. But in this case, it's necessary. We need clear legal frameworks defining digital ownership and enforcing royalty rights.
  • Education: Artists and collectors need to be educated about the importance of royalties and how they contribute to a more sustainable art ecosystem.
  • Boycott the Bad Actors: As consumers, we have the power to choose where we spend our money. Support marketplaces that prioritize artist royalties and hold those that don't accountable.

The NFT space has the potential to completely change the game for artists. It provides them not just financial stability, but creative independence. If we allow the royalty system to disintegrate, we risk losing it all. Otherwise we quickly risk recreating the exploitative dynamics that currently abound in the traditional art world. The time to act is today, not tomorrow. Let’s make the promise of NFT royalties real, rather than letting it become yet another digital age broken promise.

The problem isn’t that NFTs can’t empower artists — it’s that we won’t allow them to. The choice is ours.