More well-known artists and producers are speaking out about this issue as OpenSea, the top NonFungibleTokens(NFT) marketplace, suggested over the weekend that it might follow the trend of no longer charging author licensing on secondary purchases. Yuga Labs, the company behind the Bored Ape Yacht Club, is now included in that.
Co-founders Greg Solano and Kerem Atalay of BAYC and Wylie Aronow of BAYC wrote in a blog post dated Nov. 8 that they see creator royalties as “the single most critical aspect that pulled them [creators and artists] into the ecosystem.”
An accept list concept has been proposed by Yuga Labs and 10KTF, a digital “tailor” that designs clothing for NFT avatars. It would enable authors to only approve secondary sales through marketplaces that honor royalties. A transaction is carried out when a marketplace’s smart contract is included in the list. In such case, no. They wrote that typical wallet-to-wallet transfers are unaffected.
The authors write, noting “a few facts” at the opening of the paper, “The NFT ecosystem would be a minuscule fraction of what it is now if there were no creator royalties.” If they hadn’t supported them, “the top markets of recent years would have been nowhere.”
The creators point out that Yuga set a 2.5% royalty on secondary sales when the Bored Ape Yacht Club released Ethereum in 2021 at about $220 per share, since OpenSea uses that sum to calculate its own marketplace charge. Its royalty rate, which is normally between 5% and 10% of the sale price, is lower than that of many other NFT creators.
In the end, they claimed that, excluding sales of their other collections, Bored Ape sales on OpenSea’s platform brought in almost $35 million. We never met the founders, but perhaps they have a plaque for us on a beach home somewhere.
The Mutant Ape Yacht Club is one of the projects that Yuga Labs has worked on, and it has generated more than $147 million in creator royalties from the sale of used copies of those titles.
The NFT royalties, as they are currently known, are temporary. They can be programmed by authors into the code that drives NFTs and autonomous decentralized apps, but on-chain enforcement is limited. Markets must decide to respect them, which is what the majority of the major participants up until recently did.