Perhaps the biggest lie any of us were told, was also one of the largest selling points for artists to sell their work as NFTS. In the mass onboarding in early 2021, Smart Contracts were pitched as the solution. Artists were told that if they minted their work, they would receive secondary sales royalties immediately, for life. While this is a possibility, it is NOT guaranteed by the state of smart contracts today. Now, I do not think this was a malicious rumor, but rather stems from a lack of understanding of the underlying technology that we are all using, and I believe that we all must know the TRUTH of where things are at to make decisions that will best reach our goals.
Currently, secondary sales royalties are not paid out by the smart contracts. Secondary sales take place on various platforms, or with platform aggregators like Gem and Genie. When you make an NFT collection, (check out The ABC's of NFT's for a checklist), you will set up a profile on each market place, and set your secondary sales percent. Because these marketplaces are facilitating the sales, (via an additional smart contract) they are the ones who are responsible for distributing payouts. So, lets say you minted your NFT on Superrare, and did not set up your secondary sales on other platforms, but that is where the secondary sale took place. You would not get your secondary sales commission, as the contract had no idea there was one due.
"BUT WHY CANT THE OG CONTRACT JUST HAVE SECONDARY SALES PROGRAMMED IN?"
It can, but smart contracts are only so smart. Because sales are taking place with an additional sales contract, it may not matter. NOW, our good friends at Manifold did develop a royalty registry, an on chain directory of Royalties. In partnership with Opensea, Nifty Gateway, Foundation, Rarible, and Zora Manifold developed a protocol: EIP 2981. EIP 2981 does allow creators to add their secondary sales percent on chain, however, this does not fully solve the problem. Not all marketplaces in existence adhere to or recognize this standard.
"SO IF THIS STANDARD BECOMES THE "LAW" ARE ALL OF OUR PROBLEMS SOLVED?"
Unfortunately, no. There are many ways that a sale could take place that would not satisfy the conditions in a smart contract to send a secondary sales percentage. For example, many people make "OTC" (over the counter) trades. While I must warn you this is risky, and to only do with a person you trust, to avoid platform fees, or someone else buying a piece that is of high demand, many people will directly trade ETH for tokens. Because the NFT is transferred without a sale attached, royalties may not be paid out. Of course, the transfer would show up on chain, and it is possible that you could track down the collector, however this is far from the autonomous instantaneous contract so many of us were led to believe existed.
"BUT IT SOUNDS LIKE EVERYONE IS WORKING TOWARDS SOLUTIONS... SO IT SHOULD BE GOOD EVENTUALLY RIGHT?"
Not all incentives are aligned in the favor of artists / creators. Sudoswap launched a decentralized marketplace in July where sellers could choose the Royalty percent they wanted to pay. In efforts to compete with this, X2Y2 announced they would mirror the option. However, x2y2 was met with a ton of pushback. This particular event has its own post, but it is safe to say that there will always be people building in this space for a multitude of reasons, and not all will honor artists royalties. The blockchain is set up to be permissionless, and as always I want artists to make decisions based in reality to protect the future of their careers.
Additional reading on other revenue structures inherently supported by the blockchain:
https://0xfoobar.substack.com/p/on-royalties (and highly reccomend following 0xfoobar on twitter)
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