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Once an NFT leaves the marketplace where it was sold, there are no guarantees that the original creator will ever see another penny again. But it doesn’t have to be this way.
With everyone and their grandmas trying to figure out how to cash in on NFTs, new questions regarding the future of these one-of-a-kind digital collectibles and the creators selling them are popping up every day. One burning issue that has yet to be addressed is resale royalties. Is there any way to make sure creators can keep getting paid each time their work is resold?
Let’s first take a look at the current state of affairs with NFT marketplaces. Some marketplaces, like Zora, are attempting to solve the resale issue by implementing a “creator share,” or a percentage the original creator gets for each subsequent resale. Users minting NFTs on the platform can set this custom percentage and continue to get paid royalties for as long as their work is resold within the platform.
This is a great first step, but there’s one crucial flaw. The logic that underlies the creator share is only implemented at the application level, not on the blockchain itself. NFTs can be resold outside the platform at any time, and as soon as they leave it, the creators have no way to claim any share of its resale. To ensure that creators continue to receive a percentage of subsequent sales, some kind of logic needs to be integrated into the NFT itself at the blockchain level.
At Tatum, we provide next-gen blockchain infrastructure for over 20 blockchains, and we have recently implemented functionality that allows developers to create NFTs that pay out royalties to creators forever. Every resale of an NF(royal)T automatically pays out a specified fee to the creators, and since it is at the blockchain level, there is no way to alter or bypass it. As long as a token is still bought and sold within the original marketplace, application-level creator share functionality still applies, and once it is transferred outside of it, the blockchain-level royalty payment functionality continues to pay out with every transfer for as long as the NF(royal)T exists.
NF(royal)Ts pay creators a fixed fee, and one token can pay multiple creators according to predefined amounts that are set and embedded into the token’s smart contract. This feature is especially promising for collaborative works sold as tokens or for splitting royalties between musicians and music labels, for example. It could also prove to be very useful for industries in which aftermarket resale profits have been previously inaccessible to manufacturers, such as with high-end sneakers and luxury apparel. In these cases, the NFTs would function both as a transparent and traceable certificate of authenticity, and as a royalty payment mechanism for any future sales of the items. Selling the items without the NFT would be less appealing to potential buyers, as they would not have the original certificate of authenticity.
However, the question of implementation still remains. Blockchain development is well-known for being difficult, time-consuming, and blockchain projects traditionally have a failure rate of over 90%. But we’re trying our best to make this easier for you. In addition to running the blockchain infrastructure, we have also spent a lot of effort on creating a powerful API to speed up and simplify development for non-blockchain developers. It requires no smart contract or blockchain development experience, and it supports more than 20 blockchains. You can currently create and work with NFTs on Ethereum, Celo, and Binance Smart chain, with more blockchains like Flow, PolkaDot, Solana, Near, and Cardano on the roadmap for integration.
We have posted a guide on creating and working with Tatum NF(royal)Ts, and you can sign up for a free API key to try out the platform. You can build full integrations with a free plan, the only limitation is that you can perform a maximum of 5 API calls per second.
However, the entry-level plan is $9 a month and gives you 200 API calls per second, so it’s not a huge investment. Our team is very responsive on our Telegram channel and subreddit, and we have a community of over 7,500 developers who can help you out.
Royalty payment NFT functionality could very well be a crucial step towards ensuring creators of all kinds get the payment they deserve. They open up a multitude of possibilities for NFT marketplaces and blockchain applications. It will be interesting to see how they are received, implemented, and improved upon in the coming months.
We can’t wait to see what you build with them!
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