Cirth Inscriptions, based on the Ferc721 protocol, are a special type of NFT built on the EVM and smart contracts.

In the Cirth world, the deployer(or creator) plays a core role. The deployer can be an anonymous deployer, a NFT creator, an illustrator, an IP rights holder or IP licensed product manufacturer, or a distributor.

Incentivizing the deployers is vital for the long-term development of the Cirth world. To provide ample incentive to the deployers of Cirth Inscriptions, the beneficiary of the royalty from NFT inscription transaction (defaulted to 2% of the transaction amount) is very important.

The deployer's entitlement to the royalty is one of the key features that make Cirth Inscriptions apart from existing Indexed-inscriptions (such as Brc-20).

To achieve this feature, Cirth Inscriptions require the Enforced Royalty functionality during NFT transactions on the marketplace.

Problem

Last weekend (12th January 2024), when the Cirth.meme team deployed the platform on the Ethereum mainnet and integrated it with Opensea, we found that the deployer couldn't ensure to receive the royalty on Opensea.

Considering that the deployer's royalty is one of the most important feature of Cirth Inscriptions, the Cirth.meme team decided to resolve this issue is a prerequisite before the official launch.

Over the past week, the technical team conducted research and attempted more than a dozen solutions, and we have now found a resolution.

To prevent compatibility issues between products on Ethereum testnet(goerli) and external applications from recurring, the Cirth.meme team has completed a full deployment on the Polygon mainnet. We refer to this version deployed on Polygon as the Preview version and Cirth Inscriptions minted by users on the Preview version can be traded on the OKX NFT marketplace, with the royalty going to the deployer.

Note: All assets on the preview version have no real value, and the official version will be deployed on the Ethereum mainnet soon.

Here we wrote this blog to explain the issue and detailed explanation of the solution.

Why the problem happen?

Royalty acts one of the most important feature of NFTs. Between 2021 and 2022, millions creators drove innovation and development in the NFT industry due to the incentive of royalty fees.

However, things started to change at end of 2022. On October 22, 2022, Blur, a new NFT marketplace that touted zero trading fees and zero creator royalties, launched. Through airdrops and other methods, Blur quickly became the platform with the highest trading volume for NFTs.

Traditional industry leader Opensea, faced with the challenge from Blur, had to take immediate action to maintain its leading position and protect the royalty of creators. In early November 2022, Opensea introduced an on-chain enforced royalty tool (Operator Filter), also known as the Blacklist to prevent sellers on Opensea from trading on other platforms and enforce royalty fee to creators.

However, this approach required integrating some code into the NFT smart contracts, and because smart contracts are immutable, this solution was not backward compatible, meaning it couldn't enforce royalties on NFTs issued before November 2022.

In fact, this measure faced strong criticism from the community and had minimal impact. Instead, many NFT marketplace, in order to attract traders, started offering no creator royalties or optional royalties, leading to a continuous decline in Opensea's market share.

In August 2023, Opensea ultimately abandoned Enforced Royalties and decided to join the zero creator royalty camp. They first introduced Optional Royalties for sellers. However, in practice, few NFT sellers are willing to pay royalties to creators. As a result, Opensea effectively made creators provide their services for free while charging a 2.5% Transaction Fee (Opensea platform fee).

This event, often referred to as the Royalty War ultimately resulted in NFT creators losing income, stifled innovation, halted market operations, and caused a market crash. A small number of "smart" creators manipulated the market by holding a large part of NFTs and dumped them at high prices to fetch their own profits. Meanwhile, more established creators began establishing their own online stores to sell NFTs.

The decline in the NFT market value since the end of 2022 has, from a timing perspective, proven that the Zero Royalty caused by malicious competition was one of key factors in dragging NFTs into a bear market. The NFT market, devoid of the creative power of creators, has become a zero-sum game.

For Cirth Inscriptions, without the incentive of royalty, it may quickly fade away and lose the driving force for long-term development. Therefore, ensuring the royalty income for deployers and creators is the most crucial consideration and an uncompromisable focus for Cirth.meme.

Objectives

To solve this issue, the Cirth.meme team must find a solution that meets the following three criteria:

• An NFT trading market that supports Enforced Royalty for creators and free Transaction Fee.

  This can be a public marketplace or a white-label NFT market. Ideally, it should integrate the ERC2981 protocol and execute enforce royalty on chain.

• Whitelist in the NFT contract for NFT marketplaces to limit users to trade on these markets.

• The parameters of the whitelist, such as royalty rate, royalty beneficiaries must be maintainable.

Solution

After researching and testing more than a dozen solutions, the following approach is adopted:

• Switch the default exchange from Opensea to OKX NFT marketplace. The OKX NFT marketplace integrates ERC2981 and enforces royalties. While the trading engine of OKX also uses Seaport developed by Opensea, trading on the OKX incurs no platform fees and enforces creator royalties based on the ERC2981 standard.

• Integrate the Cirth Inscriptions contract with the ERC2981 protocol (which has been audited and adopted by multiple NFT projects) to enable querying and maintenance of royalty rates and beneficiaries.

• Integrate the Cirth Inscriptions contract with ERC721-C protocol (which was introduced by LimitBreak and has been audited and widely adopted) to enable querying and maintenance of the trading market whitelist, NFT transfer security policies, etc.

• Since both OKX and Opensea use the same Seaport trading engine and the same Conduit contract, setting Seaport and Conduit contracts to the whitelist means that Cirth Inscriptions can only be traded on these two markets. On OKX, there are no platform fees and a 2% royalty, totaling 2%. On Opensea, there is a 2.5% transaction fee and a 0-2% royalty(set by seller), totaling 2.5%-4.5%. While some users may choose to trade Cirth Inscriptions on Opensea, OKX has a significant advantage for sellers. So, okx is preferred nft marketplace.

After the launch of the mainnet of Cirth.meme, the technical team will develop their own NFT trading market. The trading engine used in this market will be compatible with Opensea's Seaport 1.5 and ERC721-C, with further optimization in areas such as batch transaction gas. Additionally, the frontend will integrate Cirth's cultural elements, creating an NFT trading market for the Cirth fantasy culture community.

In this market, all creators, illustrators, IP brands, and manufacturers can drive the long-term development of the Cirth world under the incentive of creator royalties.

References:

• Changes to creator fees on OpenSea https://opensea.io/blog/articles/creator-fees-update

• Opensea start operator filter https://twitter.com/opensea/status/1589058773196636160?t=Nc3pDtsuCeHv6vJVKoFV-Q&s=19

• Introducing ERC721-C: A New Standard for Enforceable On-Chain Programmable Royalties https://medium.com/limit-break/introducing-erc721-c-a-new-standard-for-enforceable-on-chain-programmable-royalties-defaa127410

• ERC-2981: NFT Royalty Standard https://eips.ethereum.org/EIPS/eip-2981