Are Opensea's Changes to Creator Fees Good for NFTs
Over the weekend, Opensea announced that they would be making permanent changes to their marketplace; specifically addressing the changes in royalty structures across the web3 economy and how Opensea plans to empower creators going forward.
Abandoning marketplace royalty fees
As many already know, the crypto crash that happened over the summer has impacted nearly every aspect of the cryptocurrency industry and NFTs have been hit the hardest with a continuously shrinking ecosystem resulting from the fallout.
Due to this issue, many marketplaces have decided to abandon their royalty fees as a way to continue incentivizing secondary sales between buyers and sellers in an effort to boost their profits without creator fees getting in the way.
Although this is beneficial to the majority of people in the NFT market, it affects the bottom line of creators who were initially drawn to NFTs because of their unique royalty structure. So, in turn, while there is a boost to secondary sales, it is coming at the cost of creators making the initial collections which is arguably more important.
Using on-chain royalties
However, Opensea has made it clear that they are not intending to stifle the appeal of NFTs for artists. Instead of removing royalty fees altogether, their statement from CEO Devin Finzer, explains that they will be moving royalty structures on-chain which does a better job of securing royalties without off-chain marketplace policies setting the fees themselves.
In their effort to move royalties on-chain, Opensea has devised a string of code which can be included in any new smart contract that is related to NFT sales and mints. This code cements royalty structures directly into the smart contract so that marketplaces will not be able to alter the fees meant for creators.
What’s the difference
The code provided by Opensea will also prohibit the sale of NFTs with on-chain royalties from being listed on marketplaces which limits or avoid creator fees to begin with.
While this may limit the number of places that an NFT can be sold, it does enforce the royalties that are written into the smart contract so that the creators will always be able to earn the expected profits from secondary sales on their collections which remain an integral appeal to artists looking to take their work to decentralized platforms.
Unfortunately, this line of code can only be implemented in new smart contracts going forward because of the immutability of blockchain technology; so many collections from the past 2 years will have to make significant changes to their work if they want to implement the new feature.
However, dynamic smart contracts that have already been deployed but are upgradable or modular are still able to use this new line of code for their royalties.
Why the change
The decision by Opensea to make such a drastic change to marketplace fees isn’t much of a surprise. We’ve already seen a large number of protocols and collections such as y00ts, Blur, and LooksRare stating their opinions on NFT royalties and choosing who they support - secondary buyers or creators.
Going forward, this will most likely not be the end of the royalty fee debate between the web3 community. While many support the incentives that royalties provide artists and creators, there is still a stance among buyers who believe that royalties are affecting their bottom line and preventing the market from returning to bullish trends.
