NFT royalties are a social practice, not a technical one

Author: punk6529

Source: Twitter @punk6529

Recently, discussions about NFT royalties have arisen on Twitter. Big V @punk6529, who has 390,000 followers, tweeted his thoughts on royalties.

Overall, @punk6529 thinks:

• Royalty is a social practice, not a technical one
• their structure is not perfect
• They behave differently for different art types
• People who don't support royalties are mostly selfish
• Artists need a backup plan in every situation

You can't make royalties enforceable on-chain, and I don't think there's a practical technical solution even in theory. People pay royalties because they believe in social conventions of buying and selling within the rules set by the artist/creator.

Also, the royalty structure isn't perfect. For many, the royalty of the "only up" market is acceptable. However, if your PFP value drops by 90%, many people will feel bad about paying royalties.

To be precise, a royalty should be a tax on gains, not losses, but that's not trivial.

For different NFTs, people have different views on their royalties:

• 1/1 NFT or generated art NFT
• Well Performed PFP Series
• Poor or shoddy PFP series

I don't quite agree with the previous "I don't want to pay royalties" theory. This is a very good point, but in this case, you should go for the royalty-free NFT.

Because not letting artists/creators set the rules of the game seems anti-capitalist to me.

The crowd against royalties is this:

• Enter a Rule X system
• Effectively cheat the system
• Saying others cheating is inevitable
• Brandishing "free markets" as if every real world market doesn't factor transaction costs into prices.

If you bought a BAYC, the price might have been suppressed because people were pricing with royalties in mind.

Of course, you can get excess returns relative to your peers by buying NFT at a “royalty-reduced price” and then selling it at a “royalty-free price,” but that’s not something to brag about.

Correspondingly, a business model that advertises "we don't respect royalties" as a competitive advantage is both lame and at best temporary growth hacking. If it does work, then the rest of the market won't respect royalties and the competitive advantage will disappear.

The morally correct thing to do is to put your money where you say it is, investing in a royalty-free collectible (or minting one, if you're sure it's easy).

"Sell BAYC, buy Nouns" to express your belief in royalty-free, which is how the market dictates royalties.

Buying BAYC at a royalty-depressing price, unilaterally altering the contract with Yuga in a self-serving manner, and selling it for no royalties” is morally incorrect.

Enjoy your extra 5% but I won't praise you.

Many things in society are not automatic. For example, in the United States, no one can legally compel you to tip a waiter. If you don't tip, you can get 15% off your meal bill. But, you'll be a jerk and indirectly put the cost on the tipper.

Someone will argue, "but Yuga is a big company and I can barely make ends meet, why are you laughing at them" etc.

Maybe all of this is true, but setting a cultural principle in the NFT space that we can only do things with the lowest common denominator would drastically reduce the design space.

"Whatever you think, you're naive. It's an anonymous/pseudo-anonymous blockchain, market routes around transaction costs, etc."

Well, that's probably true, so let's side with the artist for a moment.

Artist friends, are you anxious about all the crypto pseudo-economists telling you that "royalties are predestined, that's how markets work"?

Here are some suggestions for you.

As with all advice it may not apply to your situation, these are just a set of tools you can use in your own thinking. These suggestions may apply in different situations if you are a PFP/generative art/1/1 artist, if you are famous, if you are rich, or based on your goals.

Strategy 1: Maybe they're right? Perhaps your collection would benefit from zero or less royalties?

Giving the "it's just an altcoin" crowd a token setup to play, buy and sell, driving liquidity, which you can cash out with subsequent airdrops as your collection progresses.

Strategy 2: Maybe you're cool? You are a generative artist or one of 100 1/1 artists with a vibrant collector base.

Your work is too irreplaceable to fit the AMM model. Most collectors pay royalties, sometimes OTC does not pay, you still choose to airdrop the first NFT, everything is fine.

Strategy 3: Collect your own writing.

You're making 20 versions, keeping 1. You airdropped 100 versions, keep 10.

You ally with your collectors and like them HODL, not trade.

This is an underused tactic by artists!

Strategy 4: Fight Back

You think your collection is great, you want to keep the royalties, angry at the trade market that created a royalty-free market in your art?

The solution is simple. Trading of NFTs from the airdrop is prohibited on this market.

If a buyer complains, introduce them to the CEO of the royalty-free marketplace, along with your previous letter asking that marketplace to take your NFT offline; if the CEO complains to you, explain transparent blockchain to them How the free market works.

I think we should avoid going into the fourth scenario because it ends up being bad for everyone. I think the "royalty-free = better market structure" crowd should take the initiative to make their point, not force others.

We could start with royalty-free collections or artists willing to tolerate this kind of experimentation.

My point a year ago was that artists were too conservative in their IP model. I tweeted my opinion, explained my views, and purchased some CC0 art as well as a ton of officially licensed art.

I did not unilaterally infringe on other people's intellectual property rights.

My take on the free market is that you don't force your opponents under the pretense of "it's not realistic to sue me."

Instead vote for your beliefs by exchanging them with a willing opponent.

The market will take it all into account and make a decision.

This is more difficult. Collectors, the market, and artists all need to think about the first, second, and tertiary impact of their actions and speak up about it.

There is no perfect method, we still have a lot to learn and experiment with NFT copyright, but don't force others.