We’ve been living in a passive income paradise. The NFT world has grown accustomed to creator royalties, enforced by the major marketplaces, and ensuring that income is earned on each and every secondary transaction.

I know it's tough, but it’s time to wake up to the fact that there is absolutely no way to enforce royalties on the secondary market.

As soon as an NFT is minted to the wallet of the user that initiated the first transaction, the enforcing of royalties falls in the hands of the marketplace. Until recently, some took this for granted. But, Sudoswap has emerged as a royalty-free NFT marketplace, a potential sign of what’s to come. Their launch has demonstrated the market demand for this type of platform, already doing over $30 million in volume. In less than a month they have achieved about a 16% market share compared to OpenSea.

Now, traders can bypass creators and transact without handing over fees that commonly range between 2.5-10%. This is a no-brainer for collectors and traders because it simplifies the transaction process and eliminates a fee, increasing profits. When you consider high-value transactions, these fees add up. Take for example Bored Ape Yacht Club. The current BAYC floor is 80 ETH, meaning the savings collected by eliminating the 2.5% royalty fee equals 2 ETH.

Sure, some well-intentioned collectors will choose to support creators by opting into royalties, but the majority of humans want to save money and increase profits. This changes the trajectory of revenue for NFT creators, but is that necessarily a bad thing?

Marketplaces Wield the Power

The choice to grant royalties to creators will now come down to the marketplaces facilitating transactions. At the protocol level, something living on the blockchain doesn't enforce royalties. Private applications such as OpenSea, which is not decentralized, can choose to remain compatible with royalty standards. X2Y2 NFT marketplace is already exploring the possibilities, allowing users to choose the amount of royalties contributed to projects.

The power balance is shifting, and it demonstrates the value that marketplaces represent. These ecosystems are the epicenter of NFT commerce. While the standard royalty payments remain consistent among the leading marketplaces, applications will continue to arise that provide options to traders. It’s becoming the creator’s responsibility to send their audience to the right marketplace, similar to sharing an affiliate marketing link.

Since the asset lives on-chain, it is everywhere at the same time. But there is still the power to promote the platform on which you hope to direct sales. As applications choose whether or not to collect royalties, creators choose where to prioritize their listings. I believe the winners will be the applications that simplify the process for users, as no one wants to opt into a more challenging and time-consuming process.

It’s Time to Get Creative

I love this discussion of royalties because it forces us to push for new ways of monetization. For many, one of the biggest value propositions of NFTs was the ability to payout creators indefinitely through royalties. There was an expectation that each secondary sale would deliver passive income well into the future. This led to an incentive for projects to reach high trading volume. So, when the collection rug pulled everyone, causing a massive selloff, the creators could still profit massively.

So let’s start thinking about this issue creatively. Let’s assume no one is paying royalties. How can we still reward creators? It’s a deeper discussion than just accepting no royalties. It’s about unlocking ways to control your business model as a creator. Some of the answers might not be enforceable in every context, but we still have power over how we monetize.

I believe that royalties will completely disappear, and everything will be baked into platform fees. These platforms will likely offer some type of cashback system, in which contributors and shareholders receive their percentage of platform fees. This process would require deals between creators and platforms, ensuring that creators get their cut for bringing a new audience to the platform.

Taking Ownership of Your Business Model

The proliferation of creator-owned marketplaces is another emerging trend. These dedicated platforms will provide customization around fees, enabling the creator to take control of their business model. Sales are bound to occur outside of these dedicated ecosystems, bypassing fees through processes like OTC. Regardless, taking ownership of your business model as a creator starts with owning your storefront and redirecting your audience to platforms that you have more control over.

These creator and community-driven platforms provide a big opportunity to use the shifting dynamics to the advantage of all participants. For example, the creator can set 20% fees on the platform, redirecting a cut to a community fund. This becomes a marketing power, incentivizing users to utilize the platform and gain access to this income through participation. This is where things get really interesting and creative.

While the topic of royalties is just now gaining traction, it has been something I’ve been focused on for nearly a year. At my company Liteflow, we are working to help businesses position themselves for long-term success in the space. From our perspective, this starts by taking control of your business model by deploying an NFT marketplace with help from our infrastructure and tooling.

We love being able to help any business grow using NFTs, and marketplaces represent one of the biggest opportunities for sustainable growth in Web3. If you’re interested in bringing your ideas to life, reach out to us at Liteflow or through my Twitter @antho1404.