Magic Eden CEO: Royalties Enforcing NFTs Could Be ‘New Asset Class’

The largest NFT marketplace at SolanaMagic Eden, struggling with the issue of creator fees for NFTs, after a wave of optional royalty marketplaces ate into market share.

Speaking at Solana’s Breakpoint conference in Lisbon, Portugal, Magic Eden co-founder and CEO Jack Lu advocated a new NFT standard that would “enforce royalties at a hard, technological level.”

“It’s a real opportunity to give rise to a new asset class,” Lu said, adding that Magic Eden has spoken to “dozens of creators across many, many industries” to get their opinions. “Some people really want sovereign ownership, [while] Some people really want enforcement of royalties or new business models,” he continued.

But Lu cautioned that a new standard for NFTs “will have special trade-offs,” adding that “king habilitation by necessity means that the creator has a certain level of control.”

A new type of NFT?

Lu elaborated on his comments during an interview with Decrypt at Breakpoint. “These kinds of royalty-enforcing NFTs don’t look like the NFTs we understand today,” he said.

First, he said, they will require some degree of centralization. “The owners have to give up some level of control, or own ownership of these NFTs in favor of the creator,” Lu explained.

In fact, they can’t even be called NFTs. “I think a new name could be quite useful, to be quite honest,” Lu said. He added that “NFTs, as a name, have always been an umbrella term,” encompassing the likes of very different tokens such as digital collectibles and soul-bound tokens.

“Perhaps it would be more useful for there to be NFTs as an umbrella term,” he said, “and then the current wave of royalty-optional NFTs would be one form, and these royalty-enforcing collectibles would be another. “

Similar models have been launched by other major players in recent weeks. Metaplex, which created Solana’s NFT standard, proposed a new standard for enforcing royalties. Top NFT marketplace OpenSea, meanwhile, has created an enforcement tool that allows creators of new projects to block Ethereum marketplaces that don’t enforce royalties — i.e., OpenSea’s biggest competitors.

Lu added that despite Magic Eden having lost around 40% of Solana’s market share to optional royalty platforms in early October, the disruption represents an opportunity. Magic Eden has since regained all of this market share since it similarly made creating royalties optional for traders on the platform.

With most blockchains not protecting royalties at the protocol level, he explained, “There’s a very good chance that these market dynamics could force the same kind of trends to play out” in other ecosystems. “In that sense, I think the first ecosystem that comes together, addresses new business models and effectively addresses royalty enforcement solutions will thrive,” Lu said.

“With these kinds of major structural changes,” he added, “there’s a ton of opportunity to be unlocked.”