We need a new plan for NFT marketplaces

One of the main reasons I was drawn to Web3 was the concept of a new ecosystem where creators are fairly compensated for their work. Verifiable ownership of digital assets, on-chain provenance, and the ability to create and record immutably—Web3 has the potential to completely disrupt the wonderful but exploitative industries of art, technology, finance, music, and more.

To me, this looked like the future. I still feel that way. Despite the current actions of the marketplaces, I am confident that as an industry we will correct course and remember why we are here to build this together.

For me, discovering Web3 was a completely life-changing moment.

I had begun to feel increasingly frustrated with operating within systems with many barriers to innovation and progress. I was a co-director at a creative production agency. I spent the rest of my time organizing support systems at the community level for women and gender diverse people to access everything from mutual aid to workshops. I was passionate about my work, but I had begun to doubt the effectiveness of the impact and was looking for ways to challenge systems I felt failed me while building something new.

The day I became aware of Web3, I felt I had found the answer.

I discovered that in Web3 I could build communities around shared ideas, values ​​and intentions. The concept of royalties meant that, after the first minting of a work of art (or works of art), a creator could support themselves from the income they received from the asset that changed hands. They could continue to profit from the value they created and also continue to build. A new value exchange between creators and consumers had emerged – one that served as a springboard for creators to accelerate the development of their projects without relying on external funding.

Decentralization in Web3 covers many things. But in relation to this subject it is the distribution of opportunity, wealth and power. Creators should have the power to decide their royalty percentage and how (and where) their work is sold—and merchants can choose whether or not to collect those pieces. Decentralization should not mean distribution of power to traders to exploit the artist.

We should all have the opportunity to choose how we participate in this ecosystem. We should not have the ability to decide what other people should or should not receive for the value they bring to the world.

How royalties benefit us all

The circular value exchange created by royalties in Web3 has changed the lives of many artists. It has also provided funding and capital to almost every major NFT pool up to this point and built the landscape of this industry. Today, there is not a project in this area that has not had its initial development facilitated by royalties in some way.

The valuations of the companies that have emerged from the last two years — as well as the valuation of the marketplaces themselves — are all due to royalties and fees. These payment structures sent strong signals to the Web2 industries, encouraging them to participate. They also strengthened confidence in the continued investment in the space and elevated us beyond isolated technology developers and crypto traders by creating communities that change culture.

It is also important to note that this model has benefited underrepresented individuals in the arts, technology and finance in particular. These payment structures allowed them to build something themselves without having to cross the gate landscape of venture capital. It is a disappointing but very real fact that less than two percent of VC funding is given to women, and even less goes to black women and women of color. And only eight percent of venture capitalists are women.

The systems and structures in Web2 are not designed for everyone to have equal opportunities, and inherent biases affect all levels of development. Having a system that breaks down those walls and allows people (like myself) to have immediate breakthrough despite the obstacles has been a paradigm shift and has felt like the catalyst for very meaningful social change.

The problem we face

The problem we face right now is the disruption of the important circular dynamic between creators, collectors, traders and marketplaces. Third-party platforms (in this case, marketplaces) have the ability and authority to intervene and disrupt this direct relationship. They would replace this fairer exchange of value for short-term gain for a few—ultimately pushing us back toward the unfair, opaque exchange of value that currently exists in Web2.

This only benefits the marketplaces and traders, but completely cuts out the advantage previously given to artists and collectors. To eliminate aspects of an ecosystem is to invite imbalance and chaos. And without any discernible long-term strategy for the benefit of all participants, this feels like a race to zero.

There are currently not many places to buy art that benefits the creator on a large scale. The marketplaces with the highest volumes now cater only to traders. This has shifted the association of many projects from “culturally valuable” to “tradable”, undermining the positive value and impact many projects have brought to the world.

It removes the ability for the artist/creator to use royalties to facilitate further meaningful change, which many projects did before this, such as Ed Balloons Run Ed, run. In Ed’s case, 50 percent of royalties from the project went to buy art from black and brown artists.

This is no longer possible due to current guidelines.

Trading and flipping is an undeniably important part of this space, but it is not the foundation of value, and to reduce the artistic expression of the brilliant people here to tradability undermines the value of creative expression itself. We might as well trade colored squares.

Solutions and the way forward

Collaboration is one of the fundamental cornerstones of this space. Typically, you see creators in Web3 operating from a space of abundance rather than scarcity. Your opportunity does not mean my lack of opportunity. Your value is not my lack of value. Instead, we generally work together and strengthen each other as we go, opening doors for others to do the same. Unlike Web2, most creators in the space recognize the importance of this and embrace it to energize their communities.

At this particular moment, as a byproduct of the bear market and the increasing greed of traders, we are seeing major players in the space abandoning the concept of cooperation.

What we’re seeing in this race to zero are multi-billion dollar companies burning the bridges of trust with artists and creators by setting new policies that are in direct opposition to the benefits of the creators that made their platforms valuable in the first place. A marketplace cannot exist without creators producing art to sell.

An obvious solution to this is for individuals to create their own marketplaces and own the trade that comes from trading and collecting their creations. This is a good solution for larger, established companies and creators, but it removes the aspect of discovery, breaks the attention to the market and creates homogenous communities without collaboration and crossover. These solutions are also not easy to use by new creators, encouraging the ever-widening gap between smaller artists and larger communities to grow.

Another solution is to use creative tools and resources. There are several smaller marketplaces that offer structures that benefit artists; however, these marketplaces do not have the volume or attention often desired by artists. There are several incredible companies focused on developing resources so that creators can remain in control of their work – and I would encourage anyone reading this article to check them out.

What we really need, and what I know several people are working on, is a new marketing plan that benefits all participants in the ecosystem equally. One that embraces the creator, the trader, the collector and the culture. The concept of royalty payments is essentially a social contract. So how do we encourage individuals and organizations to honor that contract?

I firmly believe that positive reinforcement is the best way to encourage someone to do anything. So we must carefully choose which platforms we use and engage with and give our support to those that align with our values. Instead of complaining about others, we should lift up those who share our goals.

Final thoughts

Many people may be reading this and feel strongly that creators should not rely on royalties as income. And I actually agree. Deadfellaz and most other projects launched in 2021 are no longer dependent on royalties and have established multiple revenue streams. However, we were only able to do so with the initial fuel of royalties.

The reason I’m speaking out is not for Deadfellaz or myself, but for non-established projects and new artists. I believe they should be given the same opportunity we were given when we launched in 2021. For the Web3 ecosystem to continue to exist, it requires us to maintain healthy entry points for others to come up. We cannot disrupt the status quo and continue to grow this industry if we close doors behind us when a select few reach certain heights.

And if we support a landscape where centralized platforms dictate an artist’s ability to build, we further marginalize already underrepresented creators. For many, royalties have meant paying rent, buying groceries or accessing equipment they previously couldn’t. For most people, that doesn’t mean making millions.

Action and dialogue is necessary to instill change, and so I will continue to use the platform and visibility I have, along with my colleagues, to speak out in hopes of setting our industry standards with humanity in the centre, while supporting people who build solutions. To the leaders reading this who are responsible for recent events, I would urge you to consider why you started working in this area – and focus on building bridges instead of burning them.

Betty is the co-founder and director of Deadfellaz, a collection of 10,000 zombie-themed NFTs that live on the Ethereum blockchain. She has emerged as one of the NFT space’s leading voices in the fight to protect royalties for creators.