The competition for NFT royalties is fierce, and various platforms stage a subsidy war
In the NFT field, royalties have become a hot topic that cannot be avoided.
For a long time, everyone has adopted a royalty rule similar to that of OpenSea, that is, the buyer pays the royalties set by the project party or creator, which allows creators to obtain both the primary sales income of NFT works and the The royalty income in the secondary market also solves the problem that creators have no income after the subsequent price surge. For creators, this is not only a creative incentive but also one of the means to obtain a source of funds to maintain their own lives.
However, as NFT competition intensifies, new NFT markets emerge in endlessly, but the functions of each NFT market are similar, and the NFT aggregation market brings together NFTs from various markets, allowing buyers to compare NFT prices, transaction fees and other important factors. The retention rate of home users decreased. With the slowdown of market growth and the decline of NFT popularity, how do these new NFT markets attract and retain users? In addition to optimizing the user experience and listing potential blue-chip NFTs, changing the business model (royalties) has become a new breakthrough.
After Sudoswap fired the first shot at royalty reform, mainstream NFT markets have introduced their own royalty strategies. At present, it is mainly divided into three camps. Magic Eden, LooksRare, X2Y2, Blur, etc. implement user-defined royalty strategies. Opensea and ImmutableX enforce royalty strategies. In addition, Sudoswap implements zero-royalty strategies.
As the name implies, zero royalties means that buyers do not need to pay fees to creators; user-defined royalties give buyers the power to pay royalties, and buyers can choose the percentage they are willing to pay to creators, or even choose not to pay; mandatory Royalty is to ensure the protection of the interests of creators. It is believed that off-chain law enforcement is too fragile and needs to be combined with on-chain enforcement tools.
After sorting it out, we found that each NFT market considers it from the perspective of creators and buyers.
On the creator's side, royalties are an important part of Web3, which can ensure a fair distribution of value to creators. By retaining copyright, creators can better monetize NFT creations. On the buyer’s side, the royalties of many projects are too high and unreasonable. Under the background of the bear market, many NFTs are caught in the “Soft rug” situation, and high royalties will be charged, which will harm the interests of buyers.
Judging from the current results, no NFT market royalty strategy can satisfy both parties. In fact, each company does not have a one-size-fits-all strategy when formulating strategies. They all give each other certain subsidies to a certain extent, or ways to earn extra income.
secondary title
Start with transaction fees/handling fees
1.Sudoswap
Sudoswap is a decentralized on-chain NFT trading market using the AMM model. Its feature is to allow NFT holders to become liquidity providers by creating a trading pool, thereby improving the liquidity of NFT collectibles transactions in the market.
This feature has also become the entry point for Sudoswap to make up for the zero royalties of the project party/creator. That is to say, creators and project parties can obtain service fee income through LP market making instead of royalties. LP can control the price changes in its trading pool, set trading conditions and prices according to their own needs, and use them as liquidity providers. Earn fees from pool transactions.
Recently, Sudoswap stated that it will announce information on a new set of Sudoswap pools that focus on gas optimization, customizability, and full on-chain royalty enforcement, and apply to all collections without any allow/block list requirements. It seems that as the voice of royalty disputes in the market expands, Sudoswap also seems to be considering optimizing the original royalty mechanism.
2.LooksRare
LooksRare cancels the creator's royalty and switches to an optional royalty mechanism, but will subsidize creators and project parties in the form of transaction rewards. And give 25% of the agreement fee to the creator, the specific rules are as follows:
95% of the transaction rewards will be given to creators and project parties, and 5% will be given to buyers (previously it was fifty-five points).
Creators are able to share 25% of the LooksRare protocol fee.
secondary title
Launch of additional NFT custom marketplace
1.Magic Eden
Magic Eden offers buyers three ways to set the royalty percentage: full royalty, half royalty, or zero royalty. To this end, Magic Eden waived the 2% transaction fee required to purchase NFT, and launched an NFT customization tool based on transaction characteristics, allowing buyers to further customize their NFT to enable new sources of income for creators and project parties. The tool is currently available on Raindrops and Metaplex.
secondary title
Spotlight on Token Incentives
1.Blur
Blur supports users to freely set the royalty rate, but will encourage users to pay royalties through airdrop token incentives. Those who choose to forego paying royalties entirely will receive “low returns,” and buyers who set their royalties above 0.5% will receive more airdrops. The specific royalty incentive formula has not yet been announced.
2.Rarible
Rarible supports creator royalties. If a buyer purchases an aggregated NFT on Rarible from an NFT market that does not support royalties, Rarible will let you choose to pay royalties. But it will be offered to buyers in the form of RARI token rewards"Royalty Cashback"rewards.
However, there are also parties that focus on creator royalties and do not join the subsidy war, such as Opensea.
According to the NFTstatistics.eth tweet, even though OpenSea's transaction volume (denominated in ETH) in November was less than 50% of the total NFT market transaction volume, its platform still paid 91% of royalties. In contrast to the overall NFT market, buyers are more inclined to trade in the royalty-free NFT market, and Opensea said last week that data showed that nearly half of the top 20 NFT series had no royalties paid. As a proponent of creator royalties, Opensea is still determined to continue to collect royalties for all existing NFTs even when it is not beneficial to itself. And in order to better protect creators, an optional on-chain creator fee enforcement tool will be launched for new NFT series, even if it is difficult to implement.Along the same lines is Immutable, which is also rolling out a community-curated whitelist and blacklist tool on Ethereum to enforce creator royalties.And the product has been used on the NFT platform ImmutableX.
In fact, the current debate on royalties is not limited to the royalties themselves, but is the result of fighting each other in various NFT markets. In the face of an existential crisis, many NFT markets did not straighten out the logic of royalty incentives, and hurriedly formulated strategies to attract traffic, which may result in breaking the ecological relationship between creators, buyers, and platforms.
At present, NFT royalties are still in the early stages, and it is impossible to judge which strategy and which subsidy are suitable for the NFT market. But we know that as the NFT market continues to develop and mature, there will be long-term solutions that are in the interests of all parties.
