NFT Royalties Definition
NFT Royalties represent a feature or mechanism baked into certain Non-Fungible Tokens (NFTs), allowing original creators to receive a predefined percentage or amount on every subsequent sale of that token.
NFT Royalties Key Points
- Royalties provide a source of recurring revenue for NFT creators.
- NFT Royalties are facilitated through smart contracts on the blockchain.
- They ensure that creators continually benefit from the success and value appreciation of their work.
What are NFT Royalties?
Non-Fungible Tokens (NFTs) are unique digital assets on a blockchain that are provably unique and scarce. The feature of NFT royalties came into existence as a way for artists to continue earning from their work even after it’s been sold for the first time. This model grants creators a percentage of the profits each time the NFT is resold on the secondary market.
Why are NFT Royalties Significant?
NFT Royalties are significant because they create a new revenue model for artists and creators where they can continue to benefit from their work even after it’s sold. Traditionally, artists would only profit from the initial sale of their work. But with NFTs and royalty features, artists can earn royalty on each subsequent purchase of the NFT, creating an ongoing stream of income.
Where are NFT Royalties Used?
NFT royalties are implemented within smart contracts on blockchain platforms that support NFTs, such as Ethereum, Flow, or Tezos. They are typically used in digital art marketplaces where NFTs are bought and sold, like OpenSea, Rarible, or NBA Top Shot, among others.
When were NFT Royalties Introduced?
The concept of NFT royalties has been around since the explosion of the NFT market in 2020-2021. As digital artists increasingly sold their work in the form of NFTs via online platforms, the necessity for a system to allow artists to continue benefiting from their work became clear.
Who Benefits from NFT Royalties?
The clear beneficiaries of NFT royalties are original creators and artists, as they receive a passive income each time their NFT is sold. This innovative mechanism ensures creators continuously benefit throughout their NFT’s lifecycle. On the other hand, buyers can support their favorite artists by helping them earn royalties via secondary market sales.
How are NFT Royalties Calculated?
The amount of royalty is usually a predetermined percentage set by the creator at the time of minting the NFT. Whenever the NFT is resold, a smart contract automatically executes, deducting the royalty from the sale and transferring it to the original creator’s wallet. The exact percentage can vary, but it’s typically between 10% and 30% of the selling price.
