As collectors, builders, and creators in the NFT world, it’s impossible not to think deeply about the impact of decentralisation & permissionless innovation on creator royalties. NFTs are redefining ownership - as much for the Collector as for the Creator. At its core, Web3 gives creators the tools to stay eternally attached to their creation. In practice however, decentralisation and the nature of smart contracts create incentives. Incentives that cause this eternal bond between creators and their creations to be tested, and even broken. In this short essay, I’d like to let everyone know where my team and I stand on creator royalties, and what our plans are as we prepare for Stage 2 of the Mutant Hounds drop - the Hounds mint.
Why Royalties Matter
At every turn, royalties only ever empowered Creators and collectors in web3. Royalties created long-term alignment between creators and collectors by keeping the creator exposed, and thus accountable to the long-term impact of their creation. While royalties might seem extractive to the uninitiated, the NFT space has thrived off of this new reality. NFTs turned royalties into a viable business model for Creators, and companies like OpenSea rose to incredible heights thanks to the royalties model. Royalties are not unique to web3 - but here, we can empower that concept in a much deeper way. Before you take a position, let me explain how this market works, and why royalties are even debated so hotly right now.
Three major constituents of the NFT market today are the creators, the collectors, and the marketplaces. It’s a really deep subject, but here’s all you need to know: without marketplaces, there’s still an NFT market; inefficient and non-inviting, but it’s there. Without creators, there’s no NFT market. Marketplaces are important, but not more than creators - without whom marketplaces have no business in the first place. Marketplaces are middle-men - exactly what web3 has been stepping away from. Middle-men can provide great services, but are also the first to be corrupted. A helpful but misaligned middle-man is the hallmark of markets, and in the NFT market, it’s no different.
See, the most important number for marketplaces like OpenSea/LooksRare/x2y2/Blur is Volume. This means that so long as the collectors are buying (not privately or over the counter), marketplaces are thriving. This worked perfectly for a while, but marketplaces are getting greedy. They’re realising they can drive more volume by dropping the creator royalties fee, or making it optional. This puts the onus of honouring royalty fees on the collector (buyer or seller), thereby removing the creator completely from that transaction. This misalignment in incentives between marketplaces and creators has already caused some damage, and could hinder the growth of the NFT industry moving forward.
Royalties are the Future, not the Past
Gordon summed it up perfectly in a post in November - royalties are important, and they’re a foundational part of what makes NFTs so special for creators. We should align between creators and royalties, both culturally and at the smart contract level. We believe that it’s time for creators to leverage bleeding-edge tech and promote new ideas to hold on to that sense of ownership & control. Creators have more power than they think - we think that best practices around royalties can be established through the adoption of the right solutions, spearheaded by the right leaders.
The Hideout was our first response to the creator royalties debate. To create a more direct link between us and our collectors, we built a marketplace that runs on 0 platform fees, offers a unique trading experience, and connects users to various other branches of the Cartel’s activities. Apes and Cartelians are welcome to use it - it’s free, and we will continue to grow this product. Today, with the Mutant Hounds howling at the gates, we’re taking another step in solidifying our pro-royalties stance.
A New Discovery & Taking Initiative
Recently, we’ve been looking at the best ways to maintain a direct link to our community and strengthen it as we continue to develop the Hounds world*.* Unsurprisingly, we’ve been super impressed by the innovation of some builders in the NFT space. Moving forward, we plan to adopt a solution that relies on technological, but also social proofing to approve marketplaces that align with the creator’s interests. We heard about its development and have been monitoring it closely. In short, it will allow creators to have a better understanding of how their work is being traded, as well as give more control over its future when it comes to marketplaces that trade a creator’s work. We’re not ready to divulge the full details of it just yet (a little mystery never hurt no one), but we think it’s a game-changer. Web3 is where incredible tech and amazing people come together to create better systems. We believe that with enough adoption of this solution, the NFT industry as a whole could set a new standard for creator royalties, and solve for the misaligned incentives now rampant throughout the NFT space.
In web3, new standards are set by consensus, a distributed and far-reaching agreement on the state of things. For us to reach consensus, leaders within the community need to take the first steps. And today, we’re honoured to be standing up for this incredibly important change in the market and in the industry. We feel lucky to be learning about game-changing innovations almost every day, and we believe that the impact of early adoption is massive. For this reason, we’re very excited to be one of the first collections to be launching using this tech.
On the Way Forward
The Mutant Hounds mint is getting close - and the Hounds will be among the first fully autonomous, pro-royalty collections in NFTs. We’re really excited for that. To be among the first to launch a collection using this solution, we’re doing the necessary to get everything perfect. Until the Burn, we’ll be working with close partners to ensure we’re ready to deploy the Hounds contract by the 11th of January, if not earlier. At the time of publishing, that’s in 9 days for all you degens! The technical specs of the Hounds contract are still being finalised, which is why we prefer to not reveal too much until the moment of truth. When we do, I think everyone will be very happy with the outcome.
The Mutant Hounds saga is defining a whole new category for the NFT industry. It’s only a matter of time until the BAYC & other universes in web3 see the growth of “Layer 2” projects built on top of these base layers, and we’re excited to be spearheading this movement and proving out this concept. After all, this is the thesis of web3, decentralisation, and true ownership playing out in full force. We’re conscious of this monumental undertaking, and we hope to become a guide for the “Layer 3” and beyond. Today, we’re taking a stance in favour of creators and their creations. Today, we’re hoping to add to the cultural movement that empowers creators and collectors in ways that were not possible without web3.
Reflecting on the last few weeks, all I can say right now is thank you to the community that’s formed around this project. It’s still wild that I’m even writing this right now. We’re building a hell of a pack here, and I’m insanely excited for what’s to come. I believe that good leadership in this space is crucial, and we’d like to walk the walk with the Hounds collection. The Hounds team prepared so much insane stuff, hope you guys enjoy it.
