OpenSea, the biggest NFT marketplace, hadn’t said anything about it for a few weeks while other NFT platforms stopped recognizing creator-set royalties. It seemed to be measuring its options. The $13.3 billion startup finally made a move on Saturday night, but many well-known Web3 creators aren’t happy with OpenSea’s new plan.
In a Twitter thread, OpenSea talked about its “thoughtful, principled approach” to NFT royalties. This included introducing a tool that would let creators of new projects ban certain marketplaces where traders don’t have to pay royalties. This system will start to work on November 8.
OpenSea said that it is still trying to figure out what to do with the current NFT projects and that it will get more feedback from the community before a deadline it has set for December 8. After that, the market will decide, which could mean, as some other markets have done, that traders don’t have to pay royalty fees.
In an effort, the marketplace tweeted, “In transparency, the consideration set for what happens after Dec 8 is wide 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.”
In an attached blog post, Devin Finzer, co-founder and CEO of OpenSea, talked about the company’s history of paying NFT royalties, which are usually a 5% to 10% fee set by the creator and paid by the seller on every secondary market sale. Even though these royalty expectations are not always enforced on-chain, the biggest markets, like OpenSea, have usually met them.
Recently, a lot of new & competing marketplaces have tried to get a bigger share of the market by offering trades with no fees or by making fees optional. After Magic Eden gave traders the option of not paying royalties, other Ethereum platforms like X2Y2, LooksRare, and Blur did the same. These models are now used by almost the whole Solana NFT market.
When they don’t have to, many traders choose not to pay royalties to the creators. A fake Proof Director of Research named Punk9059 published data from X2Y2 from late October that showed that only 18% of traders paid any royalty fee. “Free riding” is too easy, they said.
Finzer tried to take a strong stance in his essay by saying, “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 shouldn’t be a decision made for them by marketplaces.”
OpenSea’s overall message isn’t having the same effect as that one comment because many NFT creators are complaining on social media about what they see as misleading comments or unclear intentions about how the market is really going to develop.
OpenSea’s new enforcement system includes code that Ethereum NFT creators can use in their recently released NFT smart contracts. This code leads to a blacklist that stops their NFTs from being traded at any listed zero-royalty or royalties-optional marketplaces. In smart contracts, the code for NFT projects and self-run, decentralized apps is written (dapps).
The famous generative artist Tyler Hobbs just used the same method for his latest QQL piece. Hobbs and his partner Dandelion Wist made a similar “blacklist” to stop NFTs from being traded on sites that don’t give creators their fair share. Especially X2Y2, who was upset about being put on the blacklist, said that it put the rights of NFT owners at risk.
Hobbs and Wist were added to their project-focused blacklist by many more creators. OpenSea’s blacklist, on the other hand, is full of its main competitors, such as X2Y2, LooksRare, Blur, and SudoSwap. Some NFT traders and creators have said on Twitter that the company’s advice to creators to limit some marketplaces is bad for competition.
“Bobby Hundreds” Kim, who started the clothing line The Hundreds and the Adam Bomb Squad NFT project, said in a tweet that “OpenSea is losing market share to other marketplaces that are excising creator royalties”. So, this method has a real-world value proposition. It also makes sure that artists who use its platform get paid from secondary sales by keeping their competitors from doing so.
Proof’s Director of Product, Angharad “Harri” Thomas, said that the decision could make the platform even more powerful and dominant in the market. OpenSea royalties are completely off-chain,” she said. “They are actually saying, ‘If you block our zero-royalty competitors in your contract, we’ll turn on royalties for you in our centralized system.’”
The probably more important topic is what OpenSea’s plans mean for the people who are making NFT projects right now. The company said that traders should be able to choose whether or not to pay royalties, but it also said that it might force traders to pay royalties for “certain subsets of collections” or use other enforcement methods in the future. To use these methods, the people who make things might have to change their products and make new contracts.
At the moment, nothing is clear, and Finzer’s promise that he will pay royalties doesn’t convince many creators and traders. Even the biggest Solana market, Magic Eden, which supported royalties and promised to keep them, changed its mind a few days later as competitors took away some of its market share. OpenSea is said to use similar “smoke and mirrors” tricks.
“[In my opinion], the OpenSea announcement is a clever reframing of taking existing collections to zero royalties,” said the pseudonymous co-creator of the NFT project Deadfellaz Betty. “This will disproportionately fuck over emerging artists and marginalized creators who will need to turn to VC funding. Statistically, over 95% of VC funding goes to men.”
Even after talking to OpenSea’s leaders today, she was still not sure. She wrote on Twitter, “It feels like there is no plan, and no clear answers were given in regards to existing collections and artist’s royalties. Communication has been misleading and facts are not there.”
Artist Ryan “ThankYouX” Wilson said that the announcement was “another slap in the face to creators from OpenSea,” and that “they just want people to think they care and are helping us,” he said. He went on to say that the announcement was supposed to be made on Monday, but OpenSea “rushed it out” to calm creators’ worries about the project.
OpenSea is more careful and open than many of its competitors when it comes to figuring out royalties. It has set a deadline that is at least one month away (although Rarible has already taken a stand for royalties). Even so, some artists are still not sure what OpenSea is trying to do and are trying to get the NFT community to help spread the word.
“Philosophically, abandoning creator royalties throws the entire mission of Web3/NFTs off,” Bobby Hundreds tweeted. “Until now, the primary thesis for this remarkable technology has been ensuring that artists get paid for their work.”
So, he said, “Therefore, it is now on you, the collectors, the creators, and the critics, to be heard and decide what happens. As the biggest mainstream NFT marketplace, if OpenSea subtracts creator royalties, it will significantly impact the entire ecosystem.”