What are NFT royalties?
- Author
- CRYPTO PORT Editorial
- Published
- Updated
- Reading time
- 5 min
In short
A royalty is a share of each secondary sale paid back to the creator. In most implementations, though, paying it is up to the marketplace rather than enforced by the chain — which is why the same NFT can pay a royalty on one venue and none on another.
Key points
- A cut of each resale routed back to the creator
- EIP-2981 only standardises how the rate is queried
- Whether it is paid depends on the marketplace
- Some collections enforce it by restricting transfers
Definition
An arrangement under which a percentage of each resale goes to the creator or another designated recipient. EIP-2981 standardises a function for querying who should be paid and how much.
The transfer functions in ERC-721 and ERC-1155 have no concept of a price. Sales are brokered by a marketplace contract, so whether a royalty is deducted is that contract's decision. EIP-2981 merely defines a function that answers 'this token's rate and recipient are X' — it does not compel payment.
Because of that, once venues appeared that made royalties optional, the same NFT could return a different amount to its creator depending on where it sold. Some collections respond by restricting transfers to approved venues in the token's own transfer logic. From a holder's side, that also means less freedom over where to sell.
Royalty settings can usually be changed in the contract or the marketplace dashboard, and are sometimes lowered after launch. A rate quoted before purchase is not a guarantee for the future.
Watch out for
- · Any pitch built on royalty income is shaky when payment is optional
- · Transfer-restricted collections can only be sold on approved venues
- · Rates can be changed later, so the figure shown at purchase is not permanent