Creator royalties — automatic payments to original artists on every secondary sale — were one of the most celebrated features of NFTs. Unlike traditional art (where artists earn nothing when their work resells for millions at auction), NFTs could enforce royalties programmatically: typically 5-10% of every secondary sale sent back to the creator. This was hailed as a revolution in creator economics.
Then the market broke the promise. In late 2022, new marketplaces realized they could attract volume by making royalties optional or eliminating them entirely. Blur, the platform that eventually dethroned OpenSea, made royalties optional for traders. X2Y2 and SudoSwap also minimized royalties. Traders — who cared about maximizing profits, not supporting creators — gravitated toward platforms with lower costs. The market incentive was clear: the marketplace that charged less won more volume.
Creators were devastated. Yuga Labs (Bored Ape Yacht Club) earned tens of millions in royalties during the bull market. Smaller artists relied on royalties as their primary income stream. When royalties became optional, creator revenue collapsed even faster than trading volume. The community split bitterly: traders argued that forced royalties were anti-free-market; creators argued that royalty elimination was theft of the social contract that NFTs were built on.
Technical solutions emerged but with tradeoffs. ERC-721C (by Limit Break) allowed creators to restrict trading to royalty-enforcing marketplaces. OpenSea’s Operator Filter did similar. But these approaches fragmented liquidity — collections that enforced royalties couldn’t trade on the highest-volume marketplaces. By 2024, the market had largely settled on a grim equilibrium: royalties were effectively dead for most collections, with creators receiving 0-2.5% instead of the original 5-10%. The NFT royalty debate became a case study in how market forces can override social contracts, and how technical enforcement of norms is harder than it appears when users can always choose platforms that don’t enforce them.
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