Explain the blockchain royalty situation in detail: Why is it reasonable to raise royalties above 2%?

Using the 2021 tax rate as a base, artists and creators reduced their income by approximately $37 million last December.OpenSeaRoyalties are still being implemented for a few projects, but they will stop on February 29th. At that time, overall royalties will drop to around 0.5%.

Author: NFT platform Highlight

Original title: Blockchain Royalties: State of TheMarket

Source of original text:mirror

Compiled by Felix

gist

• EthereumEcological NFTs' royalties have dropped drastically in the past two years. Today, the average tax rate is around 0.8%, down 84% from 5% two years ago.

• Using the 2021 tax rate as a base, artists and creators reduced their income by approximately $37 million in December 2023 alone.

• OpenSea is still implementing royalties for a few projects, but it will stop on February 29th. At that time, overall royalties will drop to around 0.5%.

• Artwork royalties are significantly higher than other types of projects, which shows that collectors want to build a positive ecosystem.

Royalties were once the focus of blockchain art debate, but the debate has faded over the past two years. January 2022LooksRareLaunched, thenX2Y2和SudoswapLaunched in March and April, respectively, these platforms either removed royalty enforcement or completely eliminated royalties. Blur launched the royalty-free marketplace in October 2022 and the token in February 2023. OpenSea soon dropped royalty enforcement as well. Each event has significantly and continuously reduced royalty rates. The data shows that the rate is now around 0.8%, down 84% from around 5% a few years ago.

Overall royalty revenue has dropped significantly compared to previous market highs. In December 2023, artists and creators were paid approximately 3,339 ETH ($8,315,512.38 at the current US dollar exchange rate). Compared to the record high of 91,982 ETH ($229,418,744.94 at the current US dollar exchange rate) in January 2022, this is a 96% decrease, exceeding $200 million.

These numbers are shocking, but they also reflect overall market trends. The reason for this phenomenon is a significant drop in market transaction volume rather than a reduction in royalties. Even if calculated based on current market conditions, assuming 5% royalties (about the 2021 standard), it can be seen that creators and artists have reduced their revenue by about 15,100 ETH in December 2023 alone, equivalent to $37.6 million under current market conditions.

This February, things will get worse as OpenSea stops collecting royalties for projects that implement royalties enforcement tools (i.e. Operator Filters).

Although the downward trend is clear, there are some interesting changes in the specific situation, mainly depending on the type of project. We'll take a closer look at these differences below, but before we dive in, let's review the current context.

The current royalty market

Although platforms such as LooksRare, X2Y2, and Sudoswap have played an important role in market transformation, leading to lower royalties, the vast majority of secondary market transactions now occur on OpenSea and Blur. OpenSea lifted royalty enforcement in February 2023, but then decided to increase enforcement for projects that enabled Operator Filter before August 31, 2023 or were created on non-Ethereum blockchains before that date. This means that a small number of projects now retain OpenSea royalty execution. However, OpenSea will stop collecting royalties on all projects on February 29, 2024. In terms of user experience, by default, OpenSea creators can set royalties in the UI.

Blur will enforce a 0.5% minimum royalty for NFT collections that have royalties on all marketplaces. In addition to that, Blur also allows royalties to be set to 0%.

In-depth discussion by project typePFPs

As mentioned above, royalties are generally on a downward trend, but this change is most evident in popular PFP projects such as Azuki, Bored Ape Yacht Club, CryptoAdz, and Milady. Although these projects used to enjoy 2.5%-5% royalties, now the average royalty for these projects is even lower than 0.5% of Blur. For a few weeks Azuki was even in the 0.0x% range.

art

Art performs better than PFP. This may be due to shared public norms and support for individual artists on behalf of collectors. As can be seen, although some mainstream art projects (including several Art Blocks projects) used to enjoy higher royalties than PFP, they are now hovering in the 1.5%-2.5% range, and for a few weeks or even higher.

Platform comparison

The royalty rate for all OpenSea projects is still hovering around 2%. On Blur, this ratio is around 0.4%. However, considering that OpenSea will stop collecting royalties on all projects in February 2024, this situation is expected to change significantly.

The chart below shows royalty rates for different platforms (excluding items over 5%). After OpenSea shut down royalty enforcement tools, the average royalty rate dropped by more than half to 0.75%. This helps to understand OpenSea's average royalty situation after all enforcement was lifted in February.

conclusions

There are strong signs that collectors, and art collectors in particular, want to participate in a positive ecosystem and are willing to support artists by spending more than the creator asks for. The NFT platform Highlight believes that it is reasonable to increase royalties paid to artists by 2-3 times, that is, to more than 2%.