Royalties have become a hot topic the past few months (until violently having their spotlight stolen by the FTX drama) and as a creator and company founder in the space, I feel the need to weigh in.
The aim of this article is not to attack anyone putting out solutions I disgaree with, but to provide a different perspective that may lead the way to a better path forward for everyone.
Let’s get to it.
There are plenty of great sources of information out there on how we came to be where we are, so I’ll be brief. Historically, NFT Royalties have not been enforced on-chain and have been controlled and paid out through marketplaces themselves.
When a few upstart marketplaces decided to allow 0% royalties to grab market share away from the status quo, it worked. It worked really, really well. The big fish faced a major problem; follow suit or defend their desire to protect artists and creators but lose a major amount of business.
Big name players such as OpenSea, Magic Eden, Metaplex and Simpl3r have all released what they think is the best solution. If you are so inclined, I highly encourage you to go out and read up on the full details of each.
What these solutions have in common is they go against everything web3 stands for. Taking routes promoting censorship, centralization and negative reinforcement is NOT “The Way”.
Before we dive into my solutions, I wanted to present my beliefs upon which my solution is formed.
- Seller Fees -> Buyer Premiums
I am a firm believer that if someone wants out of anything in life, they should be able to leave free-and-clear. I don’t believe in crypto token sell taxes and I don’t believe sellers should be the ones paying royalties. Anyone legitimately interested in your art or project, will not balk at a small surcharge to get in.
- Positive > Negative
Much like training a pet or child, I believe positive reinforcement achieves a higher level of success than negative penalties or punishments. Give people a reason to care, a reason to want in; they will gladly fork over their hard-earned cash without a second thought.
- Bad Business Models
If your entire business and revenue model revolves around receiving royalties, you are in trouble. “What about BAYC”? Sure, they made tons of money from royalties which enabled them to achieve the status and position they have. They are also an extremely rare exception to the rule. In any business, you should always strive to have multiple streams of revenue to succeed.
- Solution for the Masses
When thinking about the problems presented, I wanted to create something which applies to as many scenarios as possible. That means existing collections, new collections, free mints, paid mints and multiple chains as well as using existing asset classes.
There is no one-size-fits-all solution. Mine fails to address individual Artists, who are a major part of our industry and community.
Why Selling Time is the Solution
Many of you are familiar with brick-and-mortar arcades which sell you re-chargeable game(time) cards. This is a proven business model that works. Why wouldn’t we apply it to NFTs?
By implementing a new-but-simple standard, we can add power and flexibility to NFTs while opening up new use cases. Best of all, it would be on-chain and permission-less (aside from the setPrice each program would control for their own collections). Anyone is free to use the data as they wish for whatever purpose they see fit.
A set of normalized functions such as addTime, addTimeBulk, setPrice along with some basic views like isExpired and expiresAt would be the minimum to get rolling.
The benefits, as I see them, are:
- Doesn’t override or interfere with existing functions.
- NFTs metadata and images remain immutable (if so desired).
- Creators/Projects can change the rate for the time whenever they see fit, just as they could with royalties previously. They can even automate it through products like Chainlink Keepers and external data though Oracles.
- Encourages projects to actually build and deliver utility and value. If they don’t, they are unlikely to make any money.
- Extremely easy for third-party services to incorporate. For example, collab-land can be configured to only allow non-expired NFT holders access to their privileged roles.
- Marketplaces can easily display details which are important to buyers such as Time Remaining.
- Adding time is permission-less and can be done by anyone, including projects themselves or generous “time faeries”.
- Holders who are unsure about a project can simply buy shorter legnths of time much like a “trial”.
- Marketplace activity is increased as the value thresholds will have wider ranged by factoring in time-left and/or lifetime NFTs.
A Note Regarding Free Mints
If you are thinking the above sounds great for a project that made millions at mint time, but what about those poor free mints? They have options. They can offer complementary products as upsells or leverage their userbase into investment or partnerships.
Free mints are a marketing vehicle and should be treated as such.
I hope anyone reading this enjoyed the time and effort I put into my first article. I plan to do more, on a wide range of topics including some more technical ones, while others will be more fun and open-ended sharing of ideas. Further, I hope it may have sparked your own ideas and how you, as a Creator or Founder, may one day see royalties.