NFT royalties are percentage-based fees paid to the original creator each time an NFT is resold on the secondary market. A creator sets a royalty rate (commonly 2.5-10%) in the NFT’s smart contract or marketplace listing. In theory, every secondary sale automatically routes that percentage to the creator’s wallet — providing ongoing passive income as the work appreciates in value. In practice, royalties proved technically unenforceable at the blockchain level, leading to a marketplace war in 2022-2023 where competing platforms made royalties optional — devastating creator income — before an uneasy partial resolution.
How NFT Royalties Were Supposed to Work
Original design (ERC-2981, Ethereum):
- Creator mints NFT with royalty parameter: 5% to creator_address
- NFT sold on OpenSea ? OpenSea checks royalty data ? routes 5% to creator automatically
- Secondary sale: same process ? creator receives royalties indefinitely
EIP-2981 (NFT Royalty Standard):
A standardized on-chain field specifying royalty recipient and basis points:
“`
function royaltyInfo(uint256 tokenId, uint256 salePrice)
returns (address receiver, uint256 royaltyAmount)
“`
This makes royalty data readable by any marketplace — but critically, it does NOT enforce payment.
The enforcement problem:
Royalties are NOT enforced at the EVM (smart contract execution) level. The ERC-721 transfer function has no hook for royalty payment. Payment depends entirely on the marketplace voluntarily routing fees. Any marketplace unwilling to enforce royalties can list NFTs without paying creators — and undercut competing marketplaces on fees.
The Royalty Wars (2022-2023)
Background:
OpenSea dominated NFT trading from 2020-2022, enforcing 2.5% royalties on most collections. This generated hundreds of millions in creator income during the 2021 bull market.
Blur’s Zero Royalty Strategy
Blur (launched October 2022) was a new NFT marketplace targeting professional traders:
- Zero trading fees (vs. OpenSea’s 2.5%)
- Optional royalties (traders choose 0%)
- BLUR token airdrop to active traders as liquidity incentive
- Launched during bear market ? attracted volume-hungry traders
Blur’s market impact:
By early 2023, Blur overtook OpenSea in Ethereum NFT trading volume. Traders flocked to zero-fee, optional-royalty Blur. Creator income collapsed as volume shifted.
OpenSea’s Capitulation
OpenSea’s response (February-August 2023):
- Initially stood firm on creator royalties
- Then announced “operator filter registry” — tools for creators to block marketplaces that don’t enforce royalties
- August 2023: Reversed course; announced dropping mandatory royalties to stay competitive
- Reduced its own fee to 0% for a period
Community reaction:
The NFT creator community was furious. Major collection creators (Yuga Labs/BAYC, Art Blocks, others) saw royalties as fundamental to the ecosystem’s promise to artists.
Creator Responses
Royalty enforcement approaches after the wars:
- Transfer restriction contracts: Creator’s contract programmatically blocks transfers if the marketplace doesn’t enforce royalties (Pudgy Penguins, some Art Blocks pieces tried this)
Problem: Prevents trading on secondary markets ? destroys liquidity and NFT value
- On-chain royalty pools: Advanced contract designs requiring marketplace fees on-chain
Complex to implement; breaks composability with existing infrastructure
- Selective marketplace support: Major projects publicly listed only on royalty-enforcing marketplaces
Reduced liquidity ? often abandoned under pressure
- Negotiated royalties: Some collections settled for lower optional royalties rather than zero
Most common practical outcome
Solana solutions:
Metaplex (Solana’s NFT standard) introduced Programmable NFTs (pNFTs) with transfers controllable by creator-defined rulesets — the most technically robust royalty enforcement approach implemented at scale. Major Solana collections (Tensor marketplace) moved to pNFTs.
Economics
Scale of royalty income at peak (2021-2022):
- Bored Ape Yacht Club: $100M+ in royalties paid to Yuga Labs across BAYC/MAYC/Otherdeeds at 2.5%
- CryptoPunks (after acquisition by Yuga): Began enforcing 2.5% royalties
- Art Blocks (generative art): Royalties enabled artists to earn income proportional to collection appreciation
- Individual artists: Beeple, XCOPY, Pak — Ethereum NFT art royalties generated millions in secondary income
After royalty wars:
Major collection royalty income dropped estimated 60-80% as Blur volume dominated without royalties. For solo artists, the collapse was more severe.
Long-Term State
By 2024:
- Most high-volume NFT trading on Ethereum occurs on Blur at 0% royalties
- OpenSea settled on 0.5% fee + optional creator royalties
- Some projects successfully use Metaplex pNFTs on Solana with enforced royalties
- The ecosystem’s promise of “automatic royalties forever” largely failed to materialize due to marketplace competition dynamics
Social Media Sentiment
The royalty wars are largely settled — optional royalties won. CT debate has quieted from the heated 2023 period. Creator communities remain bitter but most have accepted the new reality of 0-2.5% optional royalties. Solana’s pNFT implementation is mentioned in technical discussions as the most robust royalty enforcement attempted at scale, though even it has faced adoption challenges.
Last updated: 2026-04
Related Terms
Sources
Wang, Q., Li, R., Wang, Q., & Chen, S. (2021). Non-Fungible Token (NFT): Overview, Evaluation, Opportunities and Challenges. arXiv:2105.07447.
Fairfield, J. (2022). Tokenized: The Law of Non-Fungible Tokens and Unique Digital Property. Indiana Law Journal.
Rochet, J. C., & Tirole, J. (2003). Platform Competition in Two-Sided Markets. Journal of the European Economic Association, 1(4), 990-1029.
Xu, T., Garcia-Alfaro, J., & Brunie, L. (2022). A Survey on Smart Contract Security. IEEE Access.
Chalmers, D., Fisch, C., Matthews, R., Quinn, W., & Recker, J. (2022). Beyond the Bitcoin Bubble: The Legitimacy of Blockchain-based Technologies in the Art World. Humanities and Social Sciences Communications, 9(1), 1-13.