NFT royalties are a crucial revenue stream for creators and projects in the NFT ecosystem, but they are also a contentious and complex topic. We’ll explore the various approaches to NFT royalties as well as the role marketplaces, creators and owners play.

NFT royalties are a type of payment that creators receive when their digital assets are resold on the secondary market. These payments are a way for creators to continue to benefit from their work and are an important revenue stream for many artists and projects in the NFT ecosystem. However, it's important to note that royalties are purely a social convention and cannot be enforced on-chain. This means for example, that whether or not a marketplace chooses to honor royalties is entirely up to them.

In recent months, there has been a trend to either eliminate or make royalties optional for creators. This has led to a number of artists reacting by blacklisting these marketplaces and refusing to allow their work to be sold on them. Some marketplaces, such as RARI, have taken a different approach and have chosen to reward users who honor royalties on their platform. **
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There are a few different ways to think about NFT royalties. Some people see them as a type of tip, similar to what you might leave at a restaurant, while others see them as a form of capital gain tax that owners pay to the collection after profiting from a sale. The problem, of course, is that not all trades are profitable which makes some more reluctant to share a portion of the proceeds with a collection after an unsuccessful trade. The reality is that royalties are a nuanced topic and it's likely that they will come in a variety of different forms and sizes depending on the specific community and type of digital asset in question. In a similar way that tipping at a Michelin star restaurant is a quasi-universal social convention, while getting your car fixed doesn’t require tipping. We believe there’s a good chance royalties will be different depending on the item that is being transacted. 

One development in the space that has garnered attention is the idea of on-chain royalties and the EIP-2981 proposal. This proposal aims to provide a method for determining the appropriate creator fee for a sale, but it does not provide any mechanism for on-chain enforcement of those fees. Another example is the CORI institute, which aims to create and govern sustainable tools and standards for protecting creator royalties in the NFT ecosystem. This has led to a debate about whether centralized enforcement or decentralized social conventions are the best approach for the NFT space.

One question that has come up in this debate is whether or not marketplaces should be able to impose their views on items transacted on their platform. On the one hand, some argue that creators should have the freedom to choose which marketplaces they want to sell their work on, and therefore marketplaces should honor the royalties set by creators. On the other hand, marketplaces may argue that they should have the right to set their own policies around royalties, especially if they are providing valuable services to creators and collectors. Also, users who are the ones putting their money on the line, should also have an opinion at the table as they might earn or lose money with an item making their sympathy for royalties be very different depending on the situation. 

Ultimately, the answer to this question is complex and will likely vary depending on the specific circumstances. Florida Street believes that both creators and marketplaces should have a say in these decisions and that it's important to find a balance between the needs of both parties. At the same time, we also believe that it's important to respect the rights of NFT owners and allow them to freely trade their assets on whichever platform they choose. Tyler Hobbs, creator of the  Fidenza NFT collection, has suggested that royalties could be paid by buyers instead of by sellers if there would be special benefit or access for buyers who contribute royalties when joining a community. This hasn’t played out yet but it is an interesting suggestion to align incentives between holders, creators and marketplaces.  **
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As the NFT space continues to evolve, it's likely that we will see a range of different approaches to NFT royalties. Some communities may choose to adopt more formalized structures, while others may opt for more informal arrangements. At Florida Street, we believe that it's important to be flexible and open to different approaches and to work collaboratively with the community to find solutions that work for everyone. So, we encourage marketplaces and creators to come to the table and discuss how to best support and empower each other. As an aggregator, Florida Street is committed to building long-lasting relationships with NFT marketplaces, creators, and collectors and to creating a thriving, sustainable NFT ecosystem.