OpenSea is guaranteeing creators NFT royalties — at their peril
The Future. OpenSea is considering nixing royalties for old NFTs. They also plan to give creators the option to guarantee that they’re paid royalties for new ones, but if creators do this, then collectors won’t be able to sell those NFTs on other markets which don’t pay royalties. While OpenSea claims the move protects creators’ freedoms, most just see it as a power play.
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OpenSea will roll out a new code snippet that creators can choose to embed in their NFTs’ smart contracts to ensure that they receive royalties from subsequent transactions.
- The caveat: OpenSea’s code snippet prevents an NFT from being sold on other marketplaces, making collectors far less likely to buy them. As a result, the NFT is stuck on OpenSea.
- By design, OpenSea’s new initiative can’t be retroactively applied to old NFT collections…
- This matters because OpenSea has also just announced that they’re considering eliminating royalties for existing NFTs. It’s their way or the highway, in other words.
Creators can opt out of OpenSea’s code snippet, but if they do, they can’t guarantee receipt of royalties, which are optional without the code snippet.
Most NFT marketplaces have already moved away from royalties, and not because they want to screw artists over. On the contrary — they object that a royalty system creates a business model that rewards creators for flooding the market, which devalues existing NFTs and, in turn, owners’ collections. Collectors lose, and artists have to work harder.
By instituting a royalty system for new NFTs and removing it for old ones, OpenSea appears to be urging creators to do precisely this — create a larger supply to earn more royalties. And all of this would happen on OpenSea’s platform, choking off rival marketplaces.
But that will only happen if creators actually take OpenSea’s bait. At the moment, it’s unclear if they will.