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December 9, 2024
Is Magic Eden’s Royalties a game changer? One of the most controversial features of the NFT market is its royalties model. Up until now, a creator of an NFT piece not only received payment whenever he sold his art but also received a certain percentage of royalties every time that art was resold again. In some ways, though the artist sold his ownership rights in the art, he still retained partial rights to it.
When the NFT market was booming, and the trading volume was going to the moon, it seemed that everyone was happy. However, these days are the cold days of the bear market, and trading volumes are at their lowest. In this climate, when it is harder to make a sale, holders feel less “generous” towards the artists and resent the continuous royalties payment. And now, things are starting to change.
First, the X2Y2 marketplace decided on a royalty-free model of trading art. Now, the new and successful Magic Eden has announced an optional royalties model.
🧵After some difficult reflection and discussions with many creators, we’ve decided to move to optional royalties on @MagicEden.
— Magic Eden 🪄 (@MagicEden) October 15, 2022
Effective later today, we will also begin running a promotion to waive our platform fees.
However, the reason for this change by Magic Eden is not a change in the zeitgeist. The reason for the royalties-optional model is that royalties are not enforceable on chain. Traders just found ways to avoid paying them, so it is best just to let the free market do its thing and make the avoidance of paying royalties easier.
This discussion regarding optional royalties is not as simple as it seems. Collectors, of course, will naturally prefer not to pay additional fees, but what about the artists? On the one hand, it seems natural that they would like to receive their royalties. However, prominent artist Beeple has an interesting view on the matter.
1/ again taking into account that royalties were actually ALWAYS ‘technically’ optional, it never made sense to put that on the seller. They are exiting the project and really have no incentive to pay this beyond purely goodwill towards the creator.
— beeple (@beeple) October 15, 2022
Magic Eden not only allowed for optional royalties, and as a promotional step, they waived platform fees on resales. This is another step for Magic Eden toward gaining dominance in the NFT marketplace competition. Solana’s NFT sales are getting more and more popular and getting a more significant share of the market as opposed to Ethereum’s NFT sales. The “Right” NFT model for NFT marketplaces is emerging these days, and it is exciting to wait and see which will prevail in the end.
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