OpenSea again changes course on NFT royalties after more Creator Pushback

Leading NFT the OpenSea marketplace recently took action on royalty feeslaunches a tool that creators can use to ensure that newly launched NFTs cannot be traded on platforms that reject royalties. But the approach and implementation didn’t sit well with everyone, and now OpenSea is once again changing its policies after complaints from some Web3 builders.

Creator royalties are fees associated with the sale of NFTs, typically set between 5% and 10% of the sale price, paid by the seller to the creators of a given NFT project. For projects that generate significant trading volume, these fees can be a significant source of revenue. And the rejection of these fees in recent months by NFT traders and most marketplaces has threatened these revenues.

IN a tweet thread todayOpenSea revealed a number of adjustments to its own approach to NFT royalties, including the creation of Creator Ownership Research Institute (CORI), a group that will oversee the curation of the list of Ethereum marketplaces blocked by what is known as the “Operator Filter” tool, as well as policies related to its development.

CORI includes OpenSea, along with a number of other NFT marketplaces and smart contract builders including Nifty Gateway, Zora, Manifold, SuperRare and Foundation. The companies will use a multi-signature wallet— the kind that requires more than a single actor to sign off on a transaction — to make changes to the registry, and OpenSea tweeted that it is also “expanding the governance of the registry to include more stakeholders, including – critically – voices in the creator community. “

It’s just part of OpenSea’s changing approach in the face of criticism regarding the rollout of the blocklist tool. Another has to do with how quickly it required the tool for new projects. On November 8, just days after advertise the tool, OpenSea began enforcing royalties to creators on new NFT projects that implemented the code into their smart contracts. A smart contract contains the code that runs autonomous decentralized apps (dapps), including NFT projects.

The next day, OpenSea said it would too continue to enforce royalties on all NFT projects that were minted before this date backlash from the creators over potential changes. However, any project implemented on or after November 8 without the Operator Filter tool implemented will no longer receive royalties from trades on OpenSea.

This detail may have been unclear to some creators. In other cases, creators have chosen not to use the tool, seeing it as a violation of decentralization or a monopolistic move by a market leader acting against rivals who threatened its dominance.

Earlier Thursday, Art blocks founder and CEO Erick Calderon described OpenSea’s approach as a “bully move” in a tweet thread, calling the tool “malware.” An Art Blocks project launched this week without the tool equipped, and OpenSea had not required traders to pay creation fees, prompting Calderon’s response.

OpenSea said today that it will instead adjust its enforcement deadline to January 2, 2023, meaning that new projects launched on or after November 8 that did not implement the blocklist tool will now have creator royalties on the market anyway.

OpenSea especially mentioned Manifold, a partner in the formation of CORI, as a smart contract creator that had been adversely affected by the changes. Manifold tweeted recently that it “worked with OpenSea and fought to get creators’ royalties activated” on projects deployed between November 8 and 30 using the contract code.

“This has been a very difficult month for the community, and we recognize that at times the choices we made were rushed and unresponsive to the needs of some creators,” OpenSea tweeted in the thread. “Ultimately, there are no perfect solutions to the industry’s operation apart from respecting creator fees.”

If NFT creators launch projects on or after January 2 without the Operator Filter tool enabled, they will be able to set a royalty fee that will be “optional for collectors to comply with,” OpenSea tweeted. It will mark the first time OpenSea has made royalties optional for traders, albeit only for the special subset of future collections.

The operator filter tool will also be updated to require creators to use Ethereum’s EIP-2981 standard to be “their objective source of truth for creator fee preferences,” OpenSea tweeted. This requirement comes into force from 2 January.

OpenSea acknowledged in the thread that it had “heard compelling feedback from creators about the lack of an alternative mechanism to earn creator royalties on OpenSea outside of leveraging our enforcement tool.”

Creator royalties have been under attack in the NFT room the last few months. New platforms cut royalty fees or made them optional in a bid to attract traders, and the growing momentum cut the market share of managers who had already enforced them. Top Solana marketplace Magic Eden followed and made royalties optional for buyers to pay instead.

Last week, Magic Eden launched its own similar Solana blocklist tool, saying it would enforce royalties for only those collections — while blocking marketplaces that don’t support it. Existing projects on Solana still do not have rights enforcement protection on Magic Eden.