Introduction
For digital artists and creators, one of the most revolutionary promises of NFTs was the ability to earn a percentage every time your work is resold—forever. This concept of royalties promised a sustainable income stream, fundamentally changing the economics of art. But this promise has faced a fierce battle between creator rights and free-market pressures.
The royalty landscape in 2025 is complex, fragmented, and highly contested. What was once a simple code parameter is now a defining ethical and technical choice for platforms, creators, and collectors.
This guide will demystify how NFT royalties work, explain the different enforcement models that have emerged, and provide a clear-eyed view of what creators can realistically expect and how collectors can make informed, ethical choices.
1. The Basics: How NFT Royalties Are Supposed to Work
At its core, an NFT royalty is a percentage of a secondary market sale that is automatically sent to the original creator’s wallet.
- The Original Vision: A creator sets a royalty percentage (e.g., 5-10%) in the NFT’s smart contract during minting. Every subsequent sale on any marketplace would automatically split the proceeds, sending the royalty to the creator. This was programmed and automatic.
- The Flaw: This vision relied on marketplaces to voluntarily read that on-chain royalty setting and enforce it. The blockchain itself does not force marketplaces to comply.
2. The Royalty Crisis: Why Enforcement Broke Down
The system began to crumble as highly competitive, trader-first marketplaces emerged.
- The Incentive to Skip: Marketplaces like Blur and SudoSwap realized they could attract more volume by making royalties optional, allowing sellers to keep more of the sale price.
- The “Tragedy of the Commons”: While individual sellers benefit from skipping royalties, widespread adoption of this practice defunds the creators, ultimately harming the ecosystem and the long-term value of the collections they trade.
- The Result: A fractured system where royalty payment is no longer a guarantee but a choice influenced by platform policy, collector ethics, and new technical enforcement mechanisms.
3. Modern Royalty Enforcement Models in 2025
The market has responded to the crisis with several competing models.
a) Operator Filter (On-Chain Enforcement)
Pioneered by OpenSea, this is the most robust method for new collections.
- How it Works: Creators deploy their smart contract to block marketplaces that do not enforce royalties. Only marketplaces that respect the creator’s fee can facilitate trades. Sellers cannot opt-out.
- Pros: Strong, on-chain protection for creator income.
- Cons: Only works for new collections. It fragments liquidity by blocking certain marketplaces.
b) Optional Royalties (Off-Chain Enforcement)
Used by platforms like Blur.
- How it Works: The marketplace provides the option for sellers to pay full, partial, or zero royalties. To incentivize payment, Blur ties full royalty payment to eligibility for rewards and airdrops.
- Pros: Maximizes trader choice and short-term liquidity.
- Cons: Makes creator income unreliable and unpredictable. Turns royalties into a voluntary tip.
c) Protocol-Level Enforcement
A decentralized approach used by ecosystems like Cosmos and by protocols like Rarible.
- How it Works: Royalty enforcement is built into the core trading protocol itself, making it harder for individual marketplaces to bypass.
- Pros: Creates a more unified and creator-friendly standard across an entire blockchain ecosystem.
- Cons: Not yet widespread on major chains like Ethereum.
4. A Practical Guide for Creators & Collectors
For Creators: How to Protect Your Earnings
- Choose Your Blockchain and Tool Wisely: Use minting tools (like OpenSea’s Studio) that offer on-chain enforcement features like the Operator Filter for new collections.
- Be Transparent: Clearly communicate your royalty expectations to your community. Projects with strong communities see higher voluntary compliance.
- Diversify Your Revenue: Do not rely solely on royalties. Build a sustainable model around primary sales, utility, and other value propositions. Royalties should be a bonus, not your only plan.
For Collectors: The Ethical Choice
- Understand the Impact: Paying royalties is not just a fee; it’s an investment in the creator and the ecosystem. It funds future development and rewards the artist for their work.
- Check Platform Policies: Before you sell, know the marketplace’s stance. On Blur, paying full royalties often makes you eligible for better rewards.
- Support Enforcing Platforms: Patronize marketplaces that prioritize and enforce creator royalties, signaling with your wallet that you value a sustainable ecosystem.
5. The Future of Royalties: A New Social Contract
The royalty debate has evolved from a technical feature to a social and economic one.
- The Shift to Utility: Many new projects are de-emphasizing royalties and instead building value through token-gated access, real-world benefits, and revenue-sharing from other sources.
- Collector Responsibility: The power to fund creators has shifted significantly into the hands of collectors. Their choices will directly shape what kinds of art and projects can be sustainably created.
- Legal Questions: Could creators eventually have legal recourse to enforce royalties coded into their smart contracts? This remains an untested and evolving area of law.
Conclusion: Beyond Code, Towards Consensus
NFT royalties are at a crossroads. The purely technical solution failed, revealing that sustainable creator economies require more than just code—they require consensus.
For the system to work, all parties must agree on its value. Creators must provide ongoing value to justify ongoing support. Collectors must recognize that funding creators is an investment in the health of the entire space. And platforms must balance the need for liquidity with the responsibility of fostering a fair ecosystem.
The future of royalties won’t be written solely in smart contracts, but in the collective choices of everyone who participates in the NFT market.
FAQ
Q: Can a creator change the royalty percentage after their NFTs are minted?
A: Generally, no. For most standard collections (e.g., ERC-721), the royalty fee is set in the immutable smart contract during deployment and cannot be changed. Some advanced, custom contracts might have upgradeability features, but this is rare and often viewed with skepticism by collectors as it introduces centralization.
Q: I sold an NFT but didn’t get royalties. Why?
A: The sale likely occurred on a marketplace that does not enforce royalties or where the seller opted out. You can use a royalty tracking tool like Royalty.io or WatchRoyalties to monitor sales of your work across all platforms and see if royalties were paid.
Q: Are royalties paid on primary sales?
A: No. Royalties are only paid on secondary market sales (resales). The revenue from the initial minting (the primary sale) goes 100% to the creator (minus gas and platform minting fees).
Q: What does “royalty enforcement” actually mean technically?
A: It means the marketplace’s smart contract is programmed to check for a creator royalty setting and then automatically split the funds from a sale between the seller and the creator’s address before finalizing the transaction. If a marketplace doesn’t have this code, the seller receives 100% of the sale