NFT Creators Have Earned Over $1.8 Billion in Royalties: Galaxy Digital
A recent report from Mike Novogratz’s Galaxy Digital has revealed that Ethereum non-fungible token (NFT) creators have raked in a total of $1.8 billion in royalties from secondary sales on marketplaces.
The report also highlighted that in the last year the average royalties at OpenSea increased from 3% to 6%. This is remarkable, considering that OpenSea remains the largest NFT marketplace by trading volume.
Royalty payments, the percentage that creators collect on secondary sales, are mostly concentrated to a select number of NFT projects, with 428 collections accounting for 80% of the royalties earned.
10 NFT Creators have Amassed 27% of all Royalties
Galaxy Digital also reported that 10 NFT issuers have earned 27% of the total royalty payment market share. Yuga Labs, the creator of the Blue Chip Bored Ape Yacht Club collection, has garnered the most royalties, with over $147 million in payments to date.
According to data from Dune Analytics, Nike has earned $91.6 million in consolidated NFT royalties. Other real-world brands, including Gucci, Adidas, Nickelodeon, McLaren, who have successfully integrated NFTs into their business models, have made some money from NFT royalties, although the number is much lower compared to royalties from the creators of leading native Web3 entities like Art Blocks, The Sandbox, Doodles, World of Women and more.
Whether platforms should require resale royalties is an ongoing conversation, as some have moved to allow artists to choose their own royalty allocations.
In August, the X2Y2 NFT market switched to an optional royalty payment structure for buyers, and last week, leading Solana-based NFT platform Magic Eden followed suit, leaving the amount of royalty payments in collectors’ hands.
While new NFT markets continue to appear regularly, OpenSea continues to account for the largest share of all NFT resales, according to data from Dune Analytics and the Galaxy report, which finds that OpenSea accounts for over 80% of all market volume. of Ethereum NFT.
When creating NFT projects through OpenSea, creators can choose the royalty percentage they would like to receive from secondary sales. Those creators have collectively earned $76.7 million to date in royalties from such sales. Taken together, that’s enough for third on the Galaxy list.
Other notable NFT creators on the list include Chiru Labs (Azuki), Proof (Moonbirds and Proof Collective) and the teams behind Gary Vaynerchuk’s The Sandbox, Doodles and VeeFriends.
The Controversy Around NFT Royalties
Royalties are not currently programmed into smart contracts, making it difficult to track payments. Smart contract transfer mechanisms cannot be relied upon to calculate royalty payments because these functions also are used when collectors transfer NFTs between their own wallets.
“The only way an NFT royalty could be programmed into a smart contract is if the program somehow knew precisely when an owner is transferring an asset between his/her own wallet or selling an NFT to a buyer,” the researchers noted.
Because a decentralized royalty payment system is not yet functional, NFT marketplaces have taken on the role of facilitating royalty payments.
However, recently some platforms have chosen to switch to an optional royalty mechanism. Magic Eden, Solana’s top NFT marketplace, is the latest such platform to switch to an optional royalty mechanism, following the controversial trend set by X2Y2 and others.
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