NFT Royalties: A Guide for Artists & Collectors
Written by  Daisie Team
Published on 9 min read

Contents

  1. What are NFT Royalties?
  2. Why NFT Royalties matter for Artists & Collectors
  3. How NFT Royalties work
  4. How to track NFT Royalties
  5. How to calculate NFT Royalties
  6. NFT Royalties and Blockchain
  7. NFT Royalties in different NFT Marketplaces
  8. Legal aspects of NFT Royalties
  9. Future of NFT Royalties
  10. Conclusion

If you've been keeping an eye on the digital art world, you've probably come across the term "NFT Royalties." But what exactly are they? How do they work, and why should you care? In this guide, we'll be making sense of NFT royalties, demystifying this digital art world concept for artists and collectors alike.

What are NFT Royalties?

NFT Royalties, or Non-fungible token royalties, are basically fees. But they're not just any fees—they're special. These fees are paid to the original creator of the NFT each time their work is sold to a new owner. And that's pretty cool, right? It's like a digital tip jar that keeps filling up every time someone else appreciates your art enough to buy it.

Let's break it down a bit more:

  • NFT: This is short for Non-fungible token. It's a type of digital asset, and each one is unique—like a one-of-a-kind piece of art.
  • Royalties: These are payments made to the original creator of a work. In the world of NFTs, these payments happen each time the NFT changes hands.

So, if you're an artist who's created an NFT, you get a royalty payment every time your NFT is resold. And if you're a collector who's purchased an NFT, part of your payment goes back to the original artist as a royalty. That's how we're making sense of NFT royalties—it's a win-win for both artists and collectors!

Why NFT Royalties matter for Artists & Collectors

NFT royalties are shaking up the traditional art world, and for good reason. These royalty payments ensure that artists continue to earn from their work, long after it has left their digital canvas. This is a game changer, as it provides ongoing income rather than just a one-time payment.

Here's the big deal: In the traditional art world, an artist sells their painting—let's call it "The Majestic Cat"—to a collector. If that collector later sells "The Majestic Cat" to another collector for a higher price, the artist doesn't see a dime of that increase. The artist only profited from the original sale.

But in the world of NFTs, the artist can set a royalty rate on their work. This means if "The Majestic Cat" was an NFT and it gets resold, the artist gets a percentage of that sale. So, every time "The Majestic Cat" changes hands, the artist earns from it. Isn't that purr-fect?

And from a collector's perspective, NFT royalties are a way to support their favorite artists directly, contributing to their ongoing income. Collectors also benefit, as the value of the NFTs they hold could increase over time, leading to potential profits in the future. So, royalties are not just making sense of NFTs for artists but for collectors too!

How NFT Royalties Work

Imagine you're an artist who just finished a digital masterpiece—let's call it "The Glowing Unicorn"—and you're ready to sell it as an NFT. Here's how you can make sense of NFT royalties and how they work.

First, you set a royalty rate on "The Glowing Unicorn", say 10%. This means that every time your art changes hands in the future, you'll receive 10% of the sale price. Nice, right?

The royalty rate is embedded into the NFT through something called a smart contract. This is a type of digital agreement that automatically carries out the terms of the contract when certain conditions are met. In this case, the condition is the sale of "The Glowing Unicorn".

So, if "The Glowing Unicorn" is sold for 50 Ether (a type of cryptocurrency), you, as the artist, will receive 5 Ether. If it's later resold for 100 Ether, you get another 10 Ether. And this continues for as long as "The Glowing Unicorn" keeps selling. See how this adds up over time? Your digital unicorn could keep earning you Ether while you sleep!

That's making sense of NFT royalties for you. It's a system that rewards creativity and longevity, and it's changing the way artists and collectors think about the value of digital art.

How to Track NFT Royalties

Now that you've created "The Glowing Unicorn" and understand how you'll earn royalties, you might be wondering, "How do I keep track of all those payments?". Don't worry, I've got you covered.

The beauty of NFTs and blockchain technology is that everything is transparent and traceable. When your NFT is bought and sold, the transactions are recorded on the blockchain. Think of it like a public ledger that keeps track of who owns what and how much was paid. It's like having a super detailed receipt for every sale of "The Glowing Unicorn".

There are also various tools and platforms that can help you monitor your NFT royalties. For example, Etherscan is a popular blockchain explorer that allows you to view all transactions involving your NFT. You can see when it was sold, how much it was sold for, and calculate your royalty from there. Just enter the address of your NFT into the search bar, and voila, all the details are there.

So, while making sense of NFT royalties might seem like a daunting task, the reality is that blockchain technology makes it fairly straightforward. With the right tools, you can easily keep tabs on your "Glowing Unicorn" and watch those royalties roll in.

How to Calculate NFT Royalties

So, you have your NFT, "The Starry Night Sloth", and it's starting to change hands in the marketplace. Awesome! But how do you figure out what you're earning from each sale?

Making sense of NFT royalties involves a little bit of math, but don't worry, it's nothing too scary. You just need to understand the percentage of the sale that's coming back to you as a royalty.

Let's say you've set your royalty percentage at 10% for "The Starry Night Sloth". Now, if it sells for 5 Ethereum (ETH), you would earn 0.5 ETH as a royalty. It's as simple as multiplying the sale price by the royalty rate. In this case, 5 ETH times 10% gives you 0.5 ETH.

Remember, the royalty rate isn't a one-size-fits-all thing. It can vary depending on the platform or your own preferences. So, it's crucial to clarify this before you mint your NFT.

By now, you should be getting the hang of making sense of NFT royalties. So, go ahead, release "The Starry Night Sloth" into the wild and watch your royalties stack up!

NFT Royalties and Blockchain

So, where does blockchain fit into the whole NFT royalties conversation? Well, it's a big player. It's like the stage where our star, "The Starry Night Sloth", performs.

Blockchain technology is at the heart of NFTs. It's the ledger that records every transaction, every sale, and every royalty payment. It's like a super detailed diary, noting down every time "The Starry Night Sloth" changes hands and the royalties you earn from each sale.

Remember, each blockchain platform has its own rules and systems for managing NFT royalties. For instance, Ethereum, the blockchain platform most commonly used for NFTs, uses smart contracts. These are like digital agreements that automatically handle the royalty payments when an NFT is sold.

Think of it as an invisible middleman, making sure you get your share from every sale. So, when "The Starry Night Sloth" is sold, the smart contract on the Ethereum blockchain automatically sends your royalty payment to your digital wallet. Pretty cool, right?

Understanding the role of blockchain in NFT royalties is a key part of making sense of NFT royalties. As you explore the world of NFTs, you'll get to see just how much blockchain technology shapes this exciting new landscape.

NFT Royalties in different NFT Marketplaces

Just as every artist has their own style, every NFT marketplace has its own way of dealing with NFT royalties. Let's take a quick tour around some of the popular ones, shall we?

OpenSea: This is the eBay of the NFT world. It's vast and varied. But when it comes to royalties, OpenSea allows artists to set a royalty percentage for future sales when they mint their NFTs. So, if you decide to mint "The Starry Night Sloth" on OpenSea, you can decide what slice of the pie you want from future sales.

Rarible: Rarible is another major player in the NFT marketplace. It has a standard royalty rate of 10% for artists. That means every time "The Starry Night Sloth" is sold on Rarible, you get 10% of the sale price. No haggling, no confusion. Simple and straightforward.

Foundation: Foundation has a similar approach as Rarible. The royalty rate is set at 10%. But there's a catch. The royalties only apply if the NFT is sold within the Foundation marketplace. If "The Starry Night Sloth" decides to hop over to another marketplace, the royalties don't follow.

So, you see, making sense of NFT royalties also involves understanding the rules of the marketplace where you plan to mint and sell your NFTs. Each marketplace has its own charm, and its own way of handling royalties. Choose wisely!

Now, let's talk about the legal side of NFT royalties. And no, you don't need to be a lawyer to understand this stuff. We're just making sense of NFT royalties, remember?

First off, it's important to know that NFTs and the royalties attached to them are still a new concept. This means the legal landscape around them is still kind of like the Wild West—exciting but quite uncertain.

One key issue is that of copyright. Just because you buy an NFT doesn't mean you own the copyright to the work. The artist still holds that. So, if you buy an NFT of "The Starry Night Sloth", you can't just start printing it on T-shirts and selling them. That's a no-no.

Then there's the matter of royalty enforcement. While blockchain technology makes it possible to track and distribute royalties, it doesn't guarantee that it will happen. Some marketplaces might not honor the royalty agreements from other platforms. So, if "The Starry Night Sloth" hops from OpenSea to another marketplace, the artist's royalties might get lost in the move.

Finally, there are legal jurisdictions to consider. The internet is global, but laws are not. What happens if an artist in Canada mints an NFT, but the buyer is in Japan? Which country's laws apply to the transaction and the royalties?

These are complex issues, and we're still figuring out the answers. But don't let that scare you away from NFTs. Just like the early days of the internet, there's a lot of potential here. We just need to navigate it with care.

Future of NFT Royalties

Okay, so we've looked at the current landscape of NFT royalties, but what about the future? Can we predict where this roller-coaster is headed? Well, we can certainly try.

The future of NFT royalties is, in a word, promising. As we're making sense of NFT royalties, we're seeing that they offer a new way for artists to benefit from the resale of their work. That's a big deal.

Imagine you're an artist who creates a digital masterpiece—let's call it "Moonwalk Mongoose". You mint it as an NFT and sell it. A few years later, "Moonwalk Mongoose" becomes a viral sensation and its price skyrockets. With traditional art sales, you wouldn't see a dime of that increase. But with NFT royalties, you get a cut every time it's sold. That's pretty cool, right?

But it's not just about money. NFT royalties could also lead to a shift in how we think about art ownership and value. They could turn art into a type of investment where both the artist and the collector benefit from price increases. That’s a win-win scenario.

Of course, there are challenges ahead. We still need to sort out the legal issues, improve the technology, and educate people about NFTs and royalties. But if we can do that, the future of NFT royalties looks bright.

So, are you ready to jump into the world of NFTs and royalties? Remember, it's not just about buying a piece of digital art. It's about supporting artists and reshaping the art world. And who knows? Maybe your NFT collection will be the next big thing!

Conclusion

So, we've journeyed through the land of NFT royalties, deciphering the language, uncovering the benefits, and even gazing into the crystal ball of its future. Making sense of NFT royalties might not be a walk in the park, but hopefully, it's a bit clearer now.

Whether you're an artist looking for a fairer way to profit from your work, or a collector keen to support your favorite artists while possibly gaining from price hikes, NFT royalties may offer an exciting opportunity.

But remember, NFTs and royalties are like a pair of dancing shoes. They might look flashy and promise a great time, but you need to learn the steps. Do your research, understand the legal and technical aspects, and tread carefully.

And don't forget the big picture. The true value of NFT royalties isn't just in the potential earnings. It's in the chance to reshape the art world into a place where artists are rewarded every time their work is sold. That's a future worth striving for, isn't it?

So, as we wrap up this journey of making sense of NFT royalties, remember this: It's not just about the money. It's about the art. It's about the artists. And it's about creating a fairer, more rewarding world for everyone. Now, that's a masterpiece, wouldn't you agree?

If you're interested in exploring the world of NFTs further, don't miss the workshop 'Sell Your Creations As NFTs' by Tom Glendinning. This workshop will provide you with invaluable insights and practical tips on how to successfully sell your creations as NFTs, helping you navigate the exciting and rapidly-evolving world of digital art and royalties.