NFT Royalties: How They Work

 🔁 What Are NFT Royalties?


NFT royalties are automatic payments made to the original creator (or a designated wallet) whenever the NFT is resold. These royalties are defined in the smart contract when the NFT is minted.


For example:


An artist mints an NFT and sets a 10% royalty.


If a collector buys it for 1 ETH and later resells it for 5 ETH, the artist receives 0.5 ETH (10% of 5 ETH).


🛠️ How Are Royalties Enforced?


Smart Contracts


When an NFT is minted, a smart contract can include royalty terms (e.g., percentage, payout address).


These contracts are deployed on blockchain networks like Ethereum, Polygon, Solana, etc.


Marketplace Support


Royalties are not enforced by the blockchain itself, but by marketplaces (like OpenSea, Blur, Rarible, etc.).


The platform reads the royalty terms in the NFT’s metadata or through standards like ERC-2981

 (for Ethereum-based NFTs).


📉 Recent Changes: Optional Royalties


In 2023–2024, some marketplaces (e.g., Blur, OpenSea) shifted toward optional royalties:


Buyers/sellers can choose whether to honor the royalty.


This was controversial, as it undercuts creator income.


Some platforms still enforce royalties, especially creator-friendly ones.


📊 Royalty Standards


ERC-2981 (Ethereum) – A standard for NFT royalty info in Ethereum smart contracts.


Metaplex (Solana) – Uses off-chain metadata to define royalty distributions.


RMRK (Kusama/Polkadot) – On-chain royalties built into the NFT protocol.


💡 Key Considerations

Topic Details

Who sets royalties? Usually the creator, at mint time.

How much? Typically 5–10%, but can vary.

Can royalties be changed? Usually not, unless allowed by the smart contract.

Are they guaranteed? Only if the marketplace honors them.

Do buyers pay them? Usually taken from the seller’s proceeds.

✅ Pros of NFT Royalties


Recurring income for creators.


Incentive for creators to participate long-term.


Encourages innovation in digital art, music, gaming, etc.


❌ Cons of NFT Royalties


Not always enforced.


Complicated by multiple marketplaces.


Can discourage resale if fees are too high.

Learn Blockchain Course in Hyderabad

Read More

Intellectual Property Rights in NFTs

The Technology Behind NFT Metadata

How to Create and Mint Your First NFT

NFTs & Digital Ownership


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