OpenSea breaks silence on NFT royalties, but creators don’t like what they hear

So many NFT platforms moved away from honoring creator royalties in recent weeks, top marketplace OpenSea had been silent on the subject, apparently weighing its options. Saturday night was $13.3 billion startup finally showed its hand – but OpenSea’s recently expressed strategy does not sit well with many prominent Web3 creators.

IN a Twitter threadshared what OpenSea called a “thoughtful, principled approach” to NFT royalties, including rolling out a system that would allow creators of new projects to blacklist certain marketplaces that don’t require traders to pay royalties. That system comes into effect on November 8.

OpenSea said it is still considering what to do with existing NFT projects and will seek further feedback from the community ahead of a self-imposed December 8 deadline. After that date, the marketplace will make a decision — which could eventually include making the payment of royalty fees optional for traders, as some other marketplaces have done.

“In transparency, consideration of what happens after 8 December is open -[with] options ranging from continuing to enforce off-chain fees for some subsets of collections, to allowing optional creator fees, to collaborating on other on-chain enforcement options for creators,” the marketplace tweeted.

In a accompanying blog post, OpenSea co-founder and CEO Devin Finzer detailed the firm’s history of honoring NFT royalties—typically a 5% to 10% fee set by the creator, which is paid by the seller on any secondary market sale. These royalty expectations are not fully enforceable on-chain, but the largest marketplaces (including OpenSea) have typically respected them.

In recent months, many upstart and rival marketplaces have attempted to take away market share by offering zero-royalty trading, or making them optional. Nearly all Solana The NFT market now operates with these modelsafter Magic Eden made royalties optional for merchantsand Ethereum platforms such as X2Y2, LooksRare and Obscurity have followed.

When creator royalty fees are not required, many traders choose not to pay them. Data from X2Y2 at the end of October, divided by pseudonym Proof Director of Research Punk9059, showed that only 18% of traders bothered to pay royalty amounts. “Free riding is too easy,” they said.

Finzer tried to take a firm stance in his post, writing in partially bold text: “It’s clear that many creators want the ability to enforce fees on-chain; and fundamentally we believe that the choice should be theirs to make – it should not be a decision made for them by marketplaces.”

However, OpenSea’s overall message is not as clear as the individual comment, with many NFT creators sounding the alarm on social media over what they believe to be misleading comments or unclear intentions about the marketplace’s true path forward.

Blacklist rivals

OpenSea’s new enforcement system provides code for Ethereum NFT creators to insert into their newly launched NFT smart contracts, which points to a blacklist that blocks these NFTs from being traded on some listed zero-royalty or royalty-free marketplaces. Smart contracts contain the code that powers NFT projects and autonomous decentralized apps (dapps).

It’s a similar approach that noted generative artist Tyler Hobbs recently took for his new QQL project. Hobbs and partner Løvetan Wist implemented a similar blacklist which prevents NFTs from being traded on platforms that do not respect royalties. X2Y2 in particular complained about being blacklisted, suggests that it compromised NFT owners’ rights.

Other creators broadly supported Hobbs and Wist on their project-centric blacklist. But in OpenSea’s case, the blacklist is a who’s who of direct competitors: X2Y2, LooksRare, Blur and SudoSwap. The firm’s guidance for creators to block these marketplaces looks anti-competitive to some NFT traders and creators, who have sounded off on Twitter.

“OpenSea is losing market share to other marketplaces that charge royalties for creators,” tweeted Bobby “Bobby Hundreds” Kimco-founder of the fashion brand The Hundreds and the Adam Bomb Squad NFT project. “So this solution is a practical value proposition. It blocks out their competition AND ensures that artists on their platform get paid for secondary sales.”

Angharad “Harry” Thomas, Director of Product at Proof, tweeted that the move can only further centralize market power and dominance for the platform. “OpenSea royalties are completely off the chain,” she wrote. “They’re actually saying, ‘If you block our zero-royalty competitors in your contract, we’ll turn on royalties for you in our centralized system.’

“Misleading” messages

Perhaps the bigger question is what OpenSea’s plans mean for creators of existing NFT projects. The firm said it could make royalties optional for traders, but it could also enforce them for “some subsets of collections” or use other potential enforcement methods going forward. Creators may need to modify their projects and deploy new contracts to use such methods.

Everything is unclear for now, and Finzer’s confirmation of honoring royalties isn’t much of a certainty for some creators and merchants. After all, top Solana marketplace Magic Eden supported royalties and said it would continue to honor them– and then flip-flopped just days later while rivals chewed on market share. Some have alleged similar smoke and mirrors tactics by OpenSea.

“[In my opinion]The OpenSea announcement is a smart reimagining of taking existing collections to zero royalties.” Betty wrotethe pseudonymous co-creator of the NFT project Deadfellas. “This will disproportionately screw emerging artists and marginalized creators who have to turn to VC funding. Statistically, over 95% of VC funding goes to men.”

She remained unconvinced after speaking to OpenSea executives today. “It feels like there is no plan and no clear answers were given regarding existing collections and artist royalties,” she tweeted. “Communication has been misleading and the facts are not there.”

Artist Ryan “ThankYouX” Wilson proposed that the announcement was “another slap in the face from OpenSea to creators,” and that “they just want to confuse people into thinking they care and are helping us.” He added that the news was due out on Monday and that OpenSea “rushed it out” to avoid concerns from creators over the initiative.

By setting a deadline of at least one month out, OpenSea takes a more deliberate and public approach to determining royalties than many of its competitors (although Rarible has already taken a stand for royalties). Still, some artists are skeptical of OpenSea’s goals, and are trying to rally people in the NFT space to help get the message out.

“Philosophically speaking, abandoning royalties from the creator throws off the entire mission of Web3/NFTs” Bobby Hundreds tweeted. “Until now, the main task of this remarkable technology has been to ensure that artists are paid for their work.”

“Therefore, it is now up to you, the collectors, creators and critics, to be heard and decide what happens,” he added. “As the largest mainstream NFT marketplace, it will significantly impact the entire ecosystem if OpenSea deducts royalties for creators.”