ccording to a brand-new study published today by Mike Novogratz's Galaxy Digital, royalties from secondary sales on platforms like OpenSea have brought in $1.8 billion for Ethereum NFT producers.
Sal Qadir and Gabe Parker, researchers at Galaxy Digital, revealed that the average royalty rates for NFT artists on OpenSea—the top overall marketplace by trade volume—have increased by a factor of two over the past year, from a 3% share of sales to 6%.
Additionally, the researchers found that royalties were concentrated among just 10 companies, which suggests that the NFT economy may be more centralized than previously imagined.
Nearly half a billion dollars worth of royalties, or 27% of all Ethereum NFT royalties, were received by the top 10. The research, which is based on information from Flipside Crypto, claims that 482 NFT collections combined brought in 80% of market royalties.
NFTs—individual blockchain tokens that represent ownership—are frequently "minted" or sold for the first time on a third-party website made by the NFT developers, or through a specific launchpad made available from some marketplaces. NFTs can then be sold again after the mint on websites like OpenSea, Magic Eden, LooksRare, and others.
Yuga Labs, the company behind Bored Ape Yacht Club, tops the list of companies with the highest NFT royalties collected. The $4 billion startup has reaped well over $147 million from royalties alone and has shifted its focus to creating blockchain games. Given that Yuga's enormous Otherside metaverse land mint earlier this year generated $561 million in total sales in just 24 hours, this is not at all surprising.
Data from Dune Analytics and the Galaxy report, which claims that OpenSea accounts for over 80% of all Ethereum NFT marketplace volume, show that OpenSea continues to account for the majority of all NFT resales despite the fact that new NFT marketplaces are still constantly emerging.
Creators can select the portion of royalties they want to receive from secondary sales when minting NFT projects through OpenSea. The royalties from those sales have brought in a total of $76.7 million for those creators. When taken as a whole, that places you third on Galaxy's ranking.
The teams behind The Sandbox, Doodles, and Gary Vaynerchuk's VeeFriends are among the other famous NFT developers on the list, along with Proof (Moonbirds and Proof Collective), Chiru Labs (Azuki), and Chiru.
earner with $91.6 million in earnings, according to a second data set that solely included historical brands. There are other non-Nike-branded NFT products listed there from RTFKT, a digital studio that Nike bought in 2021. Dolce & Gabbana, Gucci, and Adidas are Nike was the highest among the names on the list.
In the past, royalties have been praised as a crucial component of the NFT ecosystem because they give creators a consistent income stream to keep working on the various plans on their project "roadmaps," such as making video games, hosting token-gated events, or hiring more community moderators, for example.
Although Qadir and Parker refer to royalties as the "fundamental value proposition of NFTs," they also acknowledge that there are some decentralization and self-custody principles that cannot be compromised in order for royalties to be enforced on-chain.
According to rival platform Algorand, on-chain royalty enforcement causes a new type of blockchain trilemma that is somewhat similar to the one Ethereum co-founder Vitalik Buterin has extensively explored. The decision to enforce creator-imposed royalties has traditionally been left up to centralized NFT marketplaces rather than on-chain enforcement.
This month, there has been a lot of discussion over NFT royalties. On October 9, the developer of the pseudonymous Solana NFT Frank decided to completely remove revenues from his DeGods and y00ts profile image NFT collections, referring to the action as an "experiment."
His action followed an increase in Solana markets that either disregarded creator royalties or gave merchants the option of paying them or not. NFT sellers generally avoid paying a 5% to 10% cut of the secondary sale price by not paying royalty fees to creators.
After losing a considerable amount of market share to other platforms, leading Solana marketplace Magic Eden finally declared last week that it will follow suit and make paying royalties optional. The market posted on Twitter that it "understands this move has major ramifications for the ecosystem" and expressed optimism for the creation of "new norms that preserve royalties."
Metaplex, the company that created the current NFT standard for Solana, announced on Thursday that it is creating a new standard that can impose royalties on-chain. Some have criticized Magic Eden for its decision, calling it "by far the worst decision" and a "desperate grasp for market share" on Twitter.
One thing is certain despite the ongoing argument around NFT royalties: by forgoing royalties, creators would be giving up a sizable source of passive income and potentially millions of dollars on the table.