Royalties Chaos Shows Ethereum NFT Market ‘More Serious’ Than Solana: Fidenza Artist Tyler Hobbs

The NFT space is changing amid the ongoing crypto bear market, as many marketplaces choose to either ignore or allow traders to choose whether to pay royalties to the creator. The debate about royalties has raged for months among artists and collectors, but now the trend is quickly taking hold in parts of the NFT industry.

On Friday, the last big domino fell Solana NFT market as Magical Eden— by far the largest marketplace on Solana — said creator royalties would no longer be mandatoryafter that lost significant market share to royalty-clouding upstarts. Almost all Solana NFT marketplaces with significant market share have now rejected royalties or made them optional. This means that NFT traders on Solana no longer pay between 5% and 10% in fees for each trade, which can increase profit margins for sellers, but at the expense of revenue for project creators and founders.

Ethereumstill the largest blockchain platform for NFTs, has seen marketplaces such as X2Y2 and Sudoswap gain steam as they push back on royalties to some extent. However, top marketplace Open sea still honors royalties to the creator, as others do, so the Ethereum market has not seen as widespread a “race to the bottom” on fees as the Solana market.

Many artists settle with marketplaces that reject royalties. Tyler Hobbs is the generative artist behind the valuable Art blocks: The Fidenza collection and co-creator of new QQL projectboth minted on Ethereum.

He told Decrypt this week that while there is a possibility that the Ethereum market could similarly reject royalties on a mass scale, he sees a different kind of sentiment among both creators and collectors compared to those at Solana.

“I think the Ethereum space is really much more serious,” he said. “The serious artists and serious collectors tend to be in Ethereum, rather than on Solana. It’s a much better test of those systems, and I think the creators will fight a lot more when it comes to Ethereum.”

Much of the NFT art market resides on Ethereum, which has a thriving scene thanks to platforms such as generative art project Art Blocks, as well as the single-edition artwork marketplace SuperRare. Solana does not have as large or as valuable an art market, and the NFT space is dominated by profile picture collections and video game NFT projects.

A Solana NFT art-centric marketplace, Exchange Art, has vocally rejected the moves of Magic Eden and others. The platform tweeted on Saturday that a “social contract was broken” by marketplaces rejecting royalties, and said it would offer a tool that would allow creators to block their NFTs from being traded on such marketplaces.

Solana’s broader shift from honoring royalties to creators could also affect future developments in the space. The creator of the NFT project Taiyo Robotics, who goes by Tom, tweeted today that he has spoken to project creators switching to Ethereum, citing higher average primary sales prices and that “people are mostly happy to pay royalties on secondary.”

“In my mind, this is the biggest threat to the 0% royalty thing going forward,” Tom continued. “What’s the incentive for new creators to come to SOL when they already usually make less money on mint here for quality projects and now there are no royalties?”

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Hobbs and his QQL Collaborator Dandelion Wist has already shown his determination on the royalty front. QQL smart contract– or code that operates autonomously, decentralized Web3 apps – includes a blacklist that prevents listed Ethereum marketplaces from interacting with the NFTs on behalf of their owners. QQL NFTs cannot be traded through these platforms.

QQL was launched at the end of September and moved up nearly $17 million in primary salesadd over 28 million dollars in the secondary market to date. X2Y2 did not handle any of the latter trades due to the blacklist, like the marketplace complained about in a tweet threadsuggesting that Hobbs and Wist compromised the owners’ ownership rights via the coded method.

Hobbs told Decrypt that he has otherwise seen many positive reactions, not only from NFT artists who might consider similar tactics, but also collectors who see the benefits of supporting artists by paying a fee when they sell a piece on the secondary market.

“I think they also understand that giving artists that stability and giving artists a little bit more power is really in the best interest of the artwork, and that everybody will benefit from having that in place,” he said. – People have been very supportive.

Hobbs of course has a real stake in the debate as an artist. He became a central figure in the NFT art world with last year’s release of Fidenza on art blocks—a collection of 999 Ethereum bits, each generated by an algorithm distributed on a blockchain. Fidenza has given several seven-figure salesand the cheapest available NFT right now is listed at almost $128,000.

Hobbs’ success in the NFT space – compounded by the recent launch of QQL – has been greater than most other artists. But he still strongly believes that ongoing royalties are essential to the equity and long-term stability of all creators in the Web3 space.

“It’s one of the biggest, positive changes that NFTs have opened up for artists compared to the traditional art markets,” Hobbs said of royalties. “I think it would be a real tragedy for them to get away. It just makes such a difference in the lives of artists and how much opportunity an artist has to support themselves through their work.”

In defense of royalties

Currently, NFT royalties on both Ethereum and Solana cannot be fully enforced on a technical level, although developers are working on potential solutions to do just that. Hobbs acknowledged that even the QQL blacklist can potentially be overcome. But future innovations to NFT standards and smart contracts could enable stricter royalty methods.

“One of the beauties of NFTs and Web3 is that a lot more power is in the hands of the creator. The approach we took is not bulletproof. There are ways around it. There are always ways around these things,” he said. But he acknowledged that it was a “relatively simple” step that other creators could adopt to deter “behavior they disagree with.”

Ultimately, though, he doesn’t think NFT’s royalty enforcement comes down solely to the code. Collectors need to understand why artist royalties are important, he said, and platforms and marketplaces need to reach a similar cultural consensus.

“It’s a cultural problem, not a technological problem,” Hobbs said. – The case must be made culturally about why this is a valuable policy for us to commit to, and I am willing to be part of that discussion as well. I think it will take time before the cultural norms really develop and solidify.”