The NFT marketplace is booming, it seems like every project is going out and making millions, sales are up, everyone’s hyping the next big drop. Before you dive into the deep end right away, check out this chart. I'm not going to paste it here, but imagine it: a stark, undeniable downward spiral of NFT creator royalties.

The digital revolution can — and should — be shaped by artists, particularly from marginalized communities such as south Asia. Sadly, these creators are currently under tremendous duress. We’re constructing a digital tomorrow while leaving the people who make it all happen in the dust.

Who Profits From Artists' Exploitation?

Let's be blunt. The elephant in the room is that some platforms including perhaps most notably, Opensea are encouraging royalty-free NFTs to capture market share. They’re hoping that increased volume will make up for the lost royalties. Volume for whom? Definitely not the single artist who’s just trying to make a living. It is only working for the platforms, for the flippers, and for the whales that can pay to play the volume game.

Think about it. One platform is claiming a 460% increase in decentralized exchange trading volumes and record-high NFT sales. That sounds great, right? If the creators are not reaping a reasonable proportion of that growth, then who, pray tell, is profiting. Is this the decentralized future we were sold—or simply an improved version of digital feudalism?

Amazon has a lock on hundreds of new nuclear energy contracts to supply energy for their new data centers alone. That's a monumental investment in infrastructure. Instead, we’re seeing a gross disrespect emerge that’s leading to artists being underpaid. As these digital spaces explode with content, the compensation for those who make that content is quickly drying up. That same energy which powers today’s new digital universe should power the creators—the artists, musicians and other visionaries—building it. Are we really dedicating 86% of our IP addresses to farms for servers instead of promoting human creativity?

Are Royalty-Free NFTs Ethical?

This is not only a financial issue, it’s an ethical one. Now consider if you commissioned that same painting, sold prints of it every day for the next 20 years, and never paid the artist another cent. Sounds outrageous, doesn't it? That’s exactly what’s being done with royalty-free NFTs.

The counter argument is that artists can just include their commission in the original sale price. That misses the whole secondary market—indeed where most of the value piles up. Too many artists—particularly those from historically marginalized backgrounds—face challenges accessing bargaining power. As a consequence, they are less able to demand premium launch prices. They don’t have any choice but to cut prices to be competitive, knowing they will not earn a penny from those future sales.

Consider this. Further, El Salvador’s recent experiment with Bitcoin as legal tender has contributed to a dramatic drop in crypto remittances. Lack of interest in serving the community and delivering meaningful value contributed to its decline and disbanding. In the same way, if we don’t fight for artists’ royalties to be protected, we’ll end up seeing the whole NFT ecosystem crash in on itself. Artists are the community.

Can We Fix This Crisis Now?

So, what’s the solution? We won’t be able to sit back and trust the goodwill of platforms. Here are a few ideas:

  • Smart Contract Enforcement: Develop smart contracts that mandate a royalty split on every transaction. This removes the option of royalty-free trading.
  • Community-Led Initiatives: DAOs and artist collectives can create platforms that prioritize artist compensation.
  • Regulatory Frameworks: While regulation can be a dirty word in the crypto world, some level of oversight may be necessary to ensure fair practices. We need to be careful to avoid stifling innovation, but we also can't allow exploitation to run rampant.

The outgoing FSB chairman recently sounded alarm bells over the ‘critical point’ reached by the cryptocurrency market. This should be a tremendous alarm bell for all of us who work in this space. To take that risk while sidelining the needs of creators is a tremendous mistake and risk to the entire ecosystem.

The future of NFTs depends on whether we can create an ecosystem that is equitable and sustainable. It has to be deeply rewarding to all of us, not just the first movers and well-to-do speculators. We need to ask ourselves: what kind of digital world do we want to build? One where artists are respected and rewarded for their contributions, or one where they are siphoned off for corporate profit? The choice is ours.

The surge in crypto VC funding, the accumulation of ETH by whales, the fluctuations in Bitcoin price – these are all distractions from the core issue. If artists aren't being fairly compensated, then all the technological advancements in the world won't matter. The chart doesn't lie. The sad reality of NFT royalties is that we’re doing it wrong for the creators. We need to do better.