Managing Royalties as a Creator: Your 2024 Guide to NFT Income

Introduction

For digital artists, the promise of ongoing income from secondary sales is a revolutionary feature of NFTs. But many creators discover too late that managing royalties as a creator is not automatic. To the uninitiated, it can seem like a passive income stream. In reality, it requires proactive setup and vigilance.

Getting it wrong can mean missing out on your rightful earnings. Getting it right ensures you are compensated fairly for your work every time it sells, forever.

This guide will demystify NFT royalties. We’ll break down how they work, how to set them up correctly, and the challenges you need to navigate to protect your revenue.

1. What are NFT Royalties? The Basic Concept

Managing royalties as a creator refers to the process of setting up, collecting, and enforcing the percentage fee you earn from every secondary market sale of your NFT. This fee is programmed directly into your smart contract, enabling a decentralized and automatic payment system.

Think of it like a book author earning a royalty on every copy sold after the first. The initial mint is your primary sale. Every subsequent sale on a marketplace like OpenSea is a secondary sale that triggers your royalty payment.

The core mechanism is: Smart Contract Code + Marketplace Enforcement = Royalty Income.

2. The Anatomy of a Royalty Payment: How It Works in Practice

Let’s see how this works when a collector sells your NFT.

Scenario: You set a 10% royalty fee on your “DigitalDoodles” collection.

• A Collector Sells: A holder lists your NFT for sale on a marketplace for 1 ETH.
• A New Buyer Purchases It: A buyer purchases the NFT for 1 ETH.
• The Transaction Executes: The marketplace contract interacts with your NFT’s smart contract to facilitate the trade.
• The Royalty is Automatically Sent: The marketplace reads the royalty information from your contract. It automatically deducts 0.1 ETH (10%) from the sale proceeds and sends it directly to your designated wallet address.
• The Seller Receives the Balance: The seller receives the remaining 0.9 ETH (minus any marketplace fees).

This entire process is executed automatically in a single blockchain transaction.

3. Key Aspects of Managing Royalties

To ensure you get paid, you must understand three critical components.

1. Setting Royalties in Your Smart Contract
This is the most important step. The royalty rate and payout address must be defined in your contract code upon deployment.

• How it’s done: If you use a no-code tool like Bueno or Manifold, you will input your desired percentage (e.g., 5%, 10%) in a simple form before deployment. The platform handles the complex code for you.
• Why it matters: This is the on-chain source of truth that marketplaces reference. If it’s not set here, you have no enforceable claim to royalties.

2. Marketplace Enforcement and Challenges
Not all marketplaces enforce on-chain royalties equally. This is the biggest challenge creators face.

• Optional Royalties: Some marketplaces, like Blur, have made royalty payments optional, allowing the buyer to choose how much to pay. This has significantly reduced creator earnings on those platforms.
• Enforcement Tools: In response, creator ecosystems have developed tools like Blocklist extensions that can prevent your NFTs from being listed on marketplaces that don’t enforce full royalties. This protects your collection’s value.

3. Choosing the Right Marketplace
Where your NFT is sold impacts your earnings.

• Creator-Focused Marketplaces: Platforms like OpenSea and Magic Eden have strong royalty enforcement policies for new collections, making them creator-friendly.
• Pro-Consumer Marketplaces: Platforms like Blur and LooksRare often offer lower or optional fees to attract traders, which can come at the expense of creator royalties.

4. How to Protect Your Royalty Income

Your strategy depends on your goals and the tools you use.

• If you are launching a new collection: Use a no-code platform that deploys contracts with on-chain royalty enforcement. Clearly communicate your royalty rate to your community as a value proposition.
• If you have an existing collection: Explore enforcement tools. For example, you can use a Blocklist to prohibit sales on non-compliant marketplaces, directing activity to platforms that respect your fees.
• If you are a 1/1 artist: The personal connection with collectors can be powerful. You can encourage them to trade on creator-friendly marketplaces to support your ongoing work.

Pro Tip: Always verify your royalty settings after deployment. Use a block explorer like Etherscan to check your contract and confirm that the royalty information is correctly recorded on-chain. Do not assume it was set correctly.

5. The Role of On-Chain Enforcement

The future of royalties is moving toward stronger on-chain solutions.

• What it is: This means the royalty logic is embedded so deeply in the smart contract that it is impossible for a marketplace to bypass it without breaking the transaction.
• Why it matters: This shifts the power from marketplace policy back to the creator’s intent. Newer standards and smart contract designs are making this more common.
• Action: When choosing a tool to deploy your contract, prioritize those that offer robust, on-chain enforcement methods to future-proof your earnings.

6. A Practical Example: The Royalty Workflow

Imagine you deploy a collection with Manifold.

1. Setup: In Manifold’s dashboard, you set your royalty to 7.5% and provide your wallet address.
2. Deployment: Manifold deploys your contract with this information hardcoded.
3. Verification: You check Etherscan to confirm the settings are live on the blockchain.
4. Sale: An NFT sells on OpenSea for 1 ETH.
5. Payout: OpenSea’s contract reads your on-chain settings and automatically sends 0.075 ETH to your wallet. The process is seamless and automatic.

Conclusion

Managing royalties as a creator is an active and critical part of your NFT business. It is your right to earn ongoing income from your creative work.

• Set It On-Chain: Your royalty rate must be programmed into your smart contract at deployment. This is the non-negotiable first step.
• Understand Enforcement: Be aware that not all marketplaces will enforce your fees. Prioritize platforms that protect creator earnings.
• Use Enforcement Tools: Explore and utilize tools like blocklists to defend your royalty model and guide your community.
• Verify Everything: Always double-check that your contract is configured correctly. A small mistake can cost you significantly.

Mastering this process ensures you build a sustainable career, rewarding you for the long-term value your art creates in the market.

FAQ

Q: What is a standard royalty percentage for NFTs?
A: While entirely up to the creator, a common standard is 5-10%. Some projects opt for lower rates to encourage trading volume, while others choose higher rates to maximize creator revenue. The key is to be transparent with your community about your chosen rate.

Q: Can I change my royalty percentage after my NFTs are minted?
A: Generally, no. The royalty settings are typically locked within the immutable smart contract at deployment. This is why it is absolutely critical to double-check all settings before you deploy your contract. Some advanced contract designs allow for changes, but this is not the norm.

Q: What is a blocklist and how does it protect my royalties?
A: A blocklist is a tool that prevents your NFTs from being listed on specific marketplaces that do not enforce full royalty payments. By blocking these sites, you can force trading to occur only on platforms that respect your on-chain fees, protecting your revenue stream.

Q: Why didn’t I receive a royalty for a sale I saw on a marketplace?
A: The most likely reason is that the sale occurred on a marketplace that has optional royalty enforcement (like Blur), and the trader chose to pay a zero fee. Other reasons could be an error in the initial smart contract setup or the use of a marketplace that does not support the royalty standard you used.