Art Blocks co-founder and CEO Erick Calderon has reaffirmed his support for creator royalties within the NFT realm, saying they “let the creator keep creating.”
NFT creators and collectors have long debated the need for royalties — money paid to a creator every time their item is sold. Digital artists consider built-in creator royalties a valuable feature of NFTs and have expressed disagreement when NFT exchanges and collectors try to eliminate this norm.
NFT buyers want to avoid royalties because they can reduce their profit margins, but Calderon argued that viewing “royalties as a transfer tax” would make them lose some “opportunities.”
Calderon said royalties offered benefits not only to the creators but also to collectors. He explained that creator royalties encouraged artists to create more meaningful works because they did not need to produce artwork continuously to maintain their livelihood.
According to Calderon, high-quality artwork will have a higher monetary value, increasing potential profits for buyers too. Royalties also maintain artists’ engagement with the whole NFT community. The Art Blocks executive said the fundamental values of NFTs remained the same aside from creator royalties.
“No matter what the stock market cycles do, no matter what [failed crypto exchange] FTX does and no matter what happens with our regulation in our government, the value proposition of being able to prove ownership of a digital asset cannot and will not change,” Calderon said.
In the traditional art industry, transactions happen “behind closed doors.” Calderon said the NFT sphere had allowed art transactions to happen in the open, creating pricing transparency and reducing fraud chances. NFT also informs users about “who’s paying royalties and who’s not paying royalties.”
Despite his argument, Calderon said anti-royalty NFT marketplaces and investors still had a place within the ecosystem. He said in a decentralized ecosystem, every actor had the right to participate according to their personal preference.
Calderon’s Art Blocks recently launched a secondary NFT marketplace with a default creator royalty feature. Art Blocks does not take platform fees for secondary NFT sales that happen on its platform. Digital artists selling their creations on the new platform can also customize their royalty settings.
Art Blocks CTO Jake Rockland said the launch of his company’s marketplace in March, amid a heated debate between artists and collectors regarding royalties, was “coincidental.” In addition to honoring royalties, the new marketplace focuses on showcasing projects and individual minted pieces.
Rockland, however, acknowledged that some collectors preferred already-minted pieces or might discover projects after the mint.
Marketplaces make royalties optional
The trend of skipping royalties has grown since last year, prompting industry players to change their stance, according to Decrypt. Marketplaces like Hadeswap and Solanart, which do not impose creator royalties on transactions, have risen in popularity on the Solana network over the past months.
Magic Eden, the top marketplace for Solana NFTs, announced in October last year that it would no longer strictly follow creator-set royalties on its platform. According to Magic Eden, it decided on “some difficult reflection,” as rivals began to take over its market share.
Throughout most of 2022, Magic Eden owned 90 percent or more of the market share on Solana, reaching a company valuation of $1.6 billion in June last year. Its market share, however, fell below 60 percent in the last part of 2022 as competitors thrived.
Magic Eden acknowledged that the move had “serious implications” for the entire NFT ecosystem, given its dominance in the market. The platform also said it hoped the decision would not be permanent, calling for new standards to protect creator royalties within the sector.
