NFT Royalty Enforcement? Hmm...

NFT Royalties are a great thing but...

When you think about NFTs and some of the ways they can be used, a lot of different topics might come up. If you're a total NFT noob or have no idea what I'm talking about, feel free to check out my master index of fun educational crypto stuff. When it comes to NFT creators, typically they have the option to collect royalties on the secondary market sales of their NFTs. Obviously these royalties can't be hard-coded into the NFT itself so it really is up to the NFT market places to provide that service. Where it gets weird is... When those marketplaces try to enforce royalties.

As much as I can't stand Solana, for a number of reasons I won't mention here, their NFT marketplace Magic Eden is providing tools for creators to enforce royalty payments. It's a bit of a controversial topic just because this is web3, and it's supposed to be the land of the wild west in terms of no regulation. This isn't regulation per se, but it is a force of enforcement, which is a little intimidating in decentralized (supposedly) systems. I do think it's a good thing to give NFT creators the power to enforce the royalties on the assets they create.

This new feature is called MetaShield and it allows NFT creators to do things like blur or flag their NFTs that are listed without royalties being paid. Think about this for a minute, just from a fine art perspective. What if the original painter of a particular piece was able to blur or flag the art piece if it was stolen or if it was sold and they didn't get a cut. Imagine the amount of watermarked art that would be out there because the original creator of a physical piece is not getting royalties.

NFT creators are free to add a royalty fee on the secondary sales of their NFTs. For example, the creator adds a 5.5% royalty so that every time that NFT is sold on the secondary market, they get a small cut. This sounds fair, right? Think about it from a music standpoint. If the artist creates a song and sell it, they earn a royalty every time a streaming platform like Spotify plays it. It's basically the same concept, and NFTs are make this very easy. The problem comes in when each marketplace has their own rules. Like the blurring of the NFT if royalties weren't paid really only works on one single marketplace.

You could easily take that JPEG you bought on Magic Eden to whatever other marketplace and resell it without the royalty enforcement. When a platform chooses to do something like this, we all have the free will to choose which platform to use. As you can imagine, some people on Twitter are losing their minds because this goes against the decentralization aspect which I find hilarious. These NFT marketplaces are mostly centralized platforms... It doesn't take a genius to figure that out. Who do you think runs them? They're centralized (mostly) just like the entire Solana blockchain. Are you surprised?

The MetaShield tool has a lot of different options including marking that a debt ahs been paid to unblur the NFT. It has a built in debt calculator with a date range tool so you can invoice them for every sale. This all sounds like it's a good thing in my opinion, because if you don't want to deal with it... Just use a real blockchain or a less centralized marketplace to do your JPEG trading. I think artists do deserve royalties in some cases, and they should absolutely be able to enforce them. Is this the right way to do that? I dunno. It seems like an experiment that is going to get abused.

People will find a way to abuse this system. Imagine if a hacker has to gain control of the original creator's wallet and then marked all the NFTs in that collection as having an unpaid royalty. Not sure if that's exactly how it works, but it's a scenario I could see happening with a system like this.

What do you think about this?

Article written by: @l337m45732 AKA 0xNifty.nft

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