In the blog that OpenSea posted, co-founder and CEO Devin Finzer recalled their history of honoring NFT royalties or creator fees. This is usually a 5–10% fee set by the creator, which is paid by the seller on any secondary market sale.
Although these royalty expectations are not fully enforced on-chain, the main marketplaces (including OpenSea) have generally respected them. However, many new and rival marketplaces have attempted to gain market share by offering zero-royalty trade or making it voluntary.
After Magic Eden made royalties optional for traders, other Ethereum platforms like X2Y2, LooksRare, and Blur soon followed. Nearly the entire Solana NFT market currently runs on such models. As a result, a massive drop in traders paying royalties has been seen, which is a pain for creators.
This has started a lot of discussions about whether an NFT marketplace should allow creator fees. As a response to this, OpenSea announces a new tool to give the final decision about this to the creators.
It’s clear that many creators want the ability to enforce fees on-chain & we believe that choice should be theirs–not a marketplace’s–to make.
So we’re building tools we hope will balance the scales by putting more power in creators’ hands to control their business model
— OpenSea (@opensea) November 6, 2022
How Would This On-Chain Creator Fees Work?
The OpenSea initial on-chain tool is a simple code snippet that creators can insert into their future NFT contracts, as well as existing upgradable ones. In order to add this code to your contracts, you need to follow the steps listed on GitHub.
This code will restrict your NFT sales to marketplaces that enforce creator fees. This means NFT collections with this code on their contracts can’t be traded at marketplaces that don’t support or have optional royalties.
Unfortunately, this will only be available for the new NFT collections starting November 9 at 1 AM PHT. Any existing collections before that time and date won’t be able to enjoy this new feature.
What Will Happen To Existing NFT Collections?
OpenSea stated that they are still deciding what to do with the existing NFT projects. They said that they will get further community input before the December 8 deadline that they have set. After that time, they will decide, which may ultimately involve making traders’ payment of royalty fees voluntary, as some other platforms have done.
In transparency, the consideration set for what happens after Dec 8 is wide open – w/ options ranging from continuing to enforce off-chain fees for some subsets of collections to allowing optional creator fees to collaborating on other on-chain enforcement options for creators
— OpenSea (@opensea) November 6, 2022
Why NFT Creators Are Not Happy With OpenSea’s On-Chain Creator Fees Update?
Existing collections can potentially lose their royalties in the next 30 days with this new update, with no guarantee that they will get them back after December 8. Currently, everything is unclear. Finzer’s assurance that he will respect royalties doesn’t give many creators and traders any comfort.
After all, the leading Solana Marketplace, Magic Eden, supported royalties and promised to keep them. They eventually backtracked a few days later after that promise, as competitors ate away at their market share.
Therefore, you can’t blame NFT enthusiasts for raising concerns about the OpenSea on-chain creator fees update. They believe that OpenSea is using the same “smoke and mirrors” tactics that Magic Eden used with this new tool.
Imo the @opensea announcement is a clever reframing of taking existing collections to zero royalties. This will disproportionately fuck over emerging artists and marginalized creators who will need to turn to VC funding. Statistically, over 95% of VC funding goes to men.
— BETTY (@betty_nft) November 6, 2022
OpenSea is adopting a more deliberate and open approach to determining royalties than its rivals. However, some artists are still skeptical of OpenSea’s true goals. As a result, they’re seeking to organize the NFT community to help spread the word.
Therefore, it is now on You, the collectors, the creators, and the critics, to be heard and decide what happens. As the biggest mainstream NFT marketplace, if OpenSea subtracts creator royalties, it will significantly impact the entire ecosystem.
— bobbyhundreds.eth (@bobbyhundreds) November 7, 2022
What do you think of this new update from OpenSea?