02/09/2022 An NFT Marketplace Is Letting Buyers Avoid Royalty Payments. Creators Aren’t Pleased

The popular NFT marketplace X2Y2 announced it will no longer make buyers pay royalties on certain NFT purchases, sparking debate on the importance of such payments to the industry.

Royalty payments have become a cornerstone of the growing non-fungible token (NFT) industry, allowing artists to make money when people resell their work, venues to capture revenue on secondary marketplaces for NFT tickets and musicians to subvert streaming services in favor of more lucrative, blockchain-driven products.

But there’s a problem: Royalty payments are only enforceable on a marketplace level, and not on-chain. An NFT buyer, for example, could send ether (ETH) to a designated wallet after making an off-chain agreement to buy their NFT, and the seller could send them that NFT with no marketplace as a middleman for the transaction, paying no royalty fees in the process.

Sellers on marketplaces such as OpenSea can program a designated fee into each sale, in most cases between 5%-10% of an item’s purchase price, but if a marketplace wanted to waive the fee altogether, there’s nothing stopping them from doing so.

That’s exactly what’s happened withX2Y2, a popular NFT marketplace that announced on Friday that all royalty payments would be optional, making them the equivalent of a blockchain tip jar.

X2Y2 has been the most popular NFT marketplace by volume in the past week, according todatafrom NFTGO. It operates similarly to LooksRare, issuing its own token to buyers on the platform to incentivize transactions. It also still charges a 0.5% marketplace fee despite creator-imposed royalties being optional.

X2Y2’s announcement drew backlash from NFT Twitter, with many JPEG enthusiasts arguing that eliminating royalty payments would hurt the very artists and creators who first turned to NFTs as a more profitable medium of selling their work.

The debate around NFT royalties has been especially tense in recent weeks. Prominent digital artists have been weighing their pros and cons in public forums like Twitter, with most agreeing that the consequence of eliminating them altogether could be detrimental to Web3, but also perhaps inevitable without being able to enforce them on-chain.

X2Y2 evenadmittedthat buyers always setting creator royalties to 0% would be a bad thing for the general industry. In a Saturdayupdatein response to the backlash, the marketplace stated that it would be forcing buyers to pay creator royalties on sales of one-of-one (1/1) collectibles. The marketplace is also creating a “holders only” voting system whereby holders will decide as a group whether to enable or disable royalties for specific collections.

In the days since X2Y2 changed its royalty policy, only two Mutant Ape Yacht Club buyers out of 14 havechosen to pay royalty feesback to Yuga Labs, the project’s creator and possibly the most prominent company in NFTs.

Potentially significant consequences

If skirting royalty fees becomes commonplace, the next steps for NFT creators are obvious. Collections will blacklist certain marketplaces in their code to avoid missing out on these fees, ending the era of open marketplace competition that’s done so much to grow the industry in the past two years.

A change in attitude toward fees could also change the way that projects plan to generate revenue. A trend in recent months amid the broader NFT market downturn has been to lower mint prices and raise royalty fees, incentivizing project teams to continue engaging with their communities to earn their keep, as opposed to taking a lump sum off an initial mint.

The most prominent of these projects has beenGoblintown, whose NFTs were free to mint but included a hefty 10% royalty fee on every secondary sale. The project’s founding team, Truth Labs,announced on Thursdayit would be opening a dedicated marketplace for Goblin NFTs where every secondary sale would only carry a 5% royalty fee instead of 10%.

“I think for projects that have an ecosystem, [dedicated marketplaces] most definitely are the future,” Alexander Taub, co-founder ofTruth, the team behind Goblins, told CoinDesk. “If you have multiple collections that are interconnected, then owning that marketplace experience is really important.”

Arts

https://www.coindesk.com/business/2022/08/31/an-nft-marketplace-is-letting-buyers-avoid-royalty-payments-creators-arent-pleased/

Interesting NFTs
Stay Free (Edward Snowden, 2021)
This unique, signed work combines the entirety of a landmark court decision ruling the National Security Agency's mass surveillance violated the law, with the iconic portrait of the whistleblower by Platon (used with permission). It is the only known NFT produced by Snowden. Produced using open source software. This auction is on behalf of Freedom of the Press Foundation. https://www.aclu.org/press-releases/appeals-court-strikes-down-nsa-phone-spying-program-aclu-lawsuit
Mars House
Mars House is the first NFT digital house in the world. Upon purchase of Mars House NFT, 3D files will be sent to the new owner by Krista Kim Studio Inc. for file upload to the owner’s Metaverse. Technical support for Mars House integration on Metaverse is provided. (Architectural Digest, March 14, 2021) “Kim ventured into NFTs while exploring meditative design during quarantine; her hope was to use the influx of digital life as an opportunity to promote wellbeing. Comprised entirely of light, the visual effects of her crypto-home are meant to omit a zen, healing atmosphere. The artist also partnered with musician Jeff Schroeder of The Smashing Pumpkins to create a calming musical accompaniment. So what makes the file a compelling purchase? Beyond the promise of buying into the lucrative NFT market, the home and all of the furniture in it can be built in real life by glass furniture-makers in Italy, as well as through MicroLED screen technology. Kim also has a strong visions the art being projected, as well. “Everyone should install an LED wall in their house for NFT art.” says the artist. “ This is the future, and Mars House demonstrates the beauty of that possibility.” The owner is in agreement to the following terms and conditions upon purchase of Mars House (hereby referred to as Mars House NFT): The collector agrees to own one copy of Mars House NFT on a single Metaverse platform. The collector is required to register Mars House NFT ownership with Krista Kim Studio Inc. Krista Kim Studio Inc. will provide technical support to upload and integrate Mars House NFT on a Metaverse platform. If/when Mars House is resold, the collector is required to delete all Mars House NFT 3D file(s) from his/her Metaverse, and provide verification of deletion to Krista Kim Studio Inc. before new 3D files are transferred to the new owner by the artist. The new owner is required to register Mars House NFT ownership with Krista Kim Studio Inc. Krista Kim Studio will send Mars House NFT 3D files directly to the new owner and provide support for Metaverse integration. This verified ownership transfer system will be appointed to Krista Kim Studio Inc. trusteeship, after 40 years of the date of the sale. Krista Kim Studio Inc. retains ownership of Mars House NFT copyright. All rights reserved. All reproductions of Mars House (NFT) in both digital and physical formats, are restricted. Mars House NFT physical furniture pieces, made of tempered printed glass in Italy, may be commissioned by the collector as NFT physical pieces.
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