What is NFT Royalties?

Introduction

Many creators and traders ask: what is NFT Royalties, how they work, and why they matter across marketplaces and chains. In the simplest terms, these are payments automatically directed to a creator or rights holder when a non-fungible token changes hands on the secondary market. In Web3, the idea emerged as a native way to reward original creators long after the primary sale, aligning incentives in digital ownership. The concept touches core components of the broader blockchain stack, including smart contracts, standards, and marketplace integrations, and it intersects with key themes across cryptocurrency, DeFi, tokenomics, trading, and investment.

Royalties are most commonly associated with Ethereum’s NFT ecosystem and marketplaces, though similar approaches exist on other networks. For example, on Ethereum (ETH), the EIP-2981 royalty standard allows a contract to signal the creator’s payout for a given sale price. On Solana (SOL), the Metaplex metadata standard defines royalty fields used by marketplaces. In practice, how royalties are honored is influenced by marketplace policies and user behavior, not solely by code. This article provides a grounded, cross-chain, and up-to-date overview, with references to primary sources and established research.

Definition & Core Concepts

NFT royalties are creator-defined fees paid on secondary sales of a non-fungible token. Rather than relying on off-chain contracts or complex legal enforcement, NFT royalties are typically implemented as an on-chain signal in token metadata or via a standardized interface that marketplaces can read. On Ethereum, the widely used EIP-2981: NFT Royalty Standard defines a function (royaltyInfo) that returns a recipient address and royalty amount based on the sale price. On other chains, analogous metadata fields are used; for example, Solana’s Metaplex standard specifies seller_fee_basis_points and a list of creators with their shares.

Critically, most blockchain protocols do not force a royalty transfer at the base layer. Instead, marketplaces that facilitate secondary sales choose whether and how to honor the royalty signal. This makes royalties a form of market coordination: creators set expectations, contracts expose royalty data, and marketplaces execute payouts if they adopt those expectations. In 2023, major platforms refined or changed their positions; for example, OpenSea announced it would sunset its operator filter tool and transition creator fees to optional status, with dates and details outlined in its announcement. See OpenSea’s policy update for primary sourcing: On creator fees.

NFT royalties work across multiple token standards. The majority of Ethereum NFTs use ERC-721 or ERC-1155; you can read more about these formats in our overview of Token Standard (ERC-721/1155). For an introductory foundation, see our page on NFT (Non-Fungible Token), as well as the general overviews from reputable sources like Wikipedia’s NFT entry and Investopedia’s NFT guide.

Investors and collectors often track NFTs using base-chain assets such as ETH or stablecoins like USDT to settle purchases. As a result, the effective economics of royalties touch broader crypto markets, including market cap considerations, liquidity, and portfolio-level tokenomics.

For Polygon-based collections, the same Ethereum standards generally apply because Polygon is an EVM-compatible network. Users often pay royalties when transacting NFTs priced in MATIC, but the enforcement model remains marketplace-driven.

How It Works

In a typical EVM scenario, a collection’s smart contract implements the EIP-2981 royalty interface. When a marketplace lists a token for sale, the marketplace contract can call royaltyInfo(tokenId, salePrice) to compute the royalty recipient and amount. The returned tuple generally includes: (1) the payout address and (2) the amount in the transaction’s unit of account, often denominated in ETH or a wrapped equivalent. The marketplace then deducts the royalty from the sale proceeds and forwards it to the creator as part of the settlement path.

Key attributes of EIP-2981 include:

• A standardized function that provides compatibility across marketplaces.
• A percentage-based royalty expressed in basis points, applied to the sale price.
• Flexibility: creators can choose a recipient address and adjust logic within contract constraints.

However, EIP-2981 is a signaling standard; it does not and cannot force a marketplace to pay royalties at the protocol level. This separation is by design, as the Ethereum core protocol focuses on Transaction validity and Finality, not application-specific business rules.

On Solana, the concept is similar but implemented through metadata. Metaplex’s Token Metadata program includes royalty fields, and the open-source documentation clarifies how creators specify fee basis points and creator shares. For details, see the Metaplex docs: Royalties in Token Metadata. Again, enforcement depends on marketplace behavior, and the broader community has experimented with mechanisms and norms to encourage payment.

The marketplace landscape has evolved in response to user demand and competitive pressures. Some exchanges emphasized creator-first models, while others shifted toward optional fees to reduce trading friction. In mid-2023, OpenSea outlined in its own words how and when its enforcement tool would be sunset and how creator fees would transition to optional status, per OpenSea’s creator fees update. Collectors and creators should review marketplace policies before listing or buying.

Royalties also interact with governance tokens and marketplace ecosystems. For instance, communities around projects like ApeCoin (APE), or marketplace tokens such as LooksRare’s LOOKS and Blur’s BLUR, may discuss fee structures and incentives at the DAO or product level. While those tokens are separate from royalties themselves, they influence marketplace competition, trading incentives, and liquidity, all of which can indirectly shape how often and where royalty-paying sales occur.

Key Components

• Royalty percentage and basis points. Most implementations set a fee as a fraction of the sale price. For example, a 500 bps royalty equals 5 percent of the sale price. Standards like EIP-2981 define interfaces for computing this amount.
• Payout address and splits. Many contracts designate a single recipient, while some split among multiple creators. Splitting mechanisms can be implemented within the NFT contract or via separate payment splitter contracts.
• Token standards and metadata. ERC-721 and ERC-1155 encode ownership and transfer rules, while royalty data is signaled via EIP-2981. On Solana, royalty fields live in Metaplex metadata; on Flow, the NFT standard includes a royalty capability for distribution on transfers. These are signals that marketplaces read and act upon.
• Marketplace policy. Whether a royalty is paid depends on marketplace implementation and its current business rules. Policy changes can materially impact creator income streams.
• Payment asset and routing. Secondary sales may settle in base assets like ETH, or in marketplace-native tokens. This affects pricing and potential conversions.
• Transparency and discoverability. Good tooling and metadata make it easier for buyers to understand creator fees before purchasing.

Marketplace-native tokens can influence fee mechanics through liquidity mining or trading incentives. In the past, platforms with tokens such as BLUR or protocols tied to creator economies like Rarible’s RARI have experimented with incentives to attract listings and volume. While these tokens are separate from royalty logic, community governance and liquidity considerations can affect trading patterns that determine how often royalties are actually paid.

Real-World Applications

• Digital art and media. Artists publish works as NFTs, defining a royalty rate that rewards them on every eligible secondary sale. This aligns incentives to grow the brand and community.
• Music and audio rights. Musicians can encode royalty expectations and receive a share on secondary trading of albums, singles, or rights-bearing NFTs.
• Gaming assets. In-game items and collectibles often change hands many times. Royalties help studios fund ongoing development without raising primary sale prices. See our primer on NFT Minting for how game studios create assets at scale.
• Memberships and access passes. Communities that issue NFTs for access can use royalties to fund operations, events, or grants, integrating revenue with DAO treasuries.
• IP licensing and collaborations. Royalties can be split across creators, brands, and contributors to match contractual relationships.

Tezos, known for its art-focused ecosystem, uses FA2 token standards and TZIP metadata conventions where royalties are signaled in JSON metadata fields, read by marketplaces. While not enforced at the protocol level, these signals help support creator income when marketplaces comply. Projects on Tezos are often priced in XTZ, and secondary royalties are part of that ecosystem’s culture and marketplace norms.

Collectors and traders sometimes hedge price exposure by moving into or out of base assets like ETH or rotating across chains such as Solana (SOL). In these cross-market flows, royalty expectations can influence where liquidity concentrates and which marketplaces attract listings.

Benefits & Advantages

• Sustainable creator income. Royalties provide a recurring revenue stream that supports ongoing work beyond a primary sale. This is a structural shift from Web2 platforms where revenue often concentrates in intermediaries.
• Alignment with community growth. Creators earn more if their communities thrive and secondary demand increases, motivating long-term support for holders.
• Transparent, programmable signaling. Standards like EIP-2981 and Solana’s Metaplex metadata make royalty expectations transparent and machine-readable. This enables open competition among marketplaces and wallets.
• Flexible business models. Teams can experiment with lower primary sale prices and rely more on royalties to fund development, or vice versa.
• Composability with DeFi. NFT positions and cash flows can be integrated with Decentralized Finance (DeFi) primitives, such as lending against NFTs or tokenizing future royalty flows.

Flow’s NFT standard also formalized royalty distribution capabilities from early on, supporting creators in ecosystems where NFTs are commonly traded in FLOW. This reinforces the idea that programmable royalties are a cross-chain pattern, not restricted to a single protocol.

Challenges & Limitations

• Marketplace enforcement is optional. The largest practical limitation is that most chains cannot force royalty payment at the protocol level. Marketplaces choose to honor or ignore royalties based on policy and competition. OpenSea’s 2023 update explicitly discussed sunsetting its operator filter and moving toward optional fees, per OpenSea’s announcement. As a result, creators may see variable royalty income depending on where their tokens trade.
• Race-to-zero dynamics. Competitive pressure can drive platforms to minimize fees. If a zero-fee marketplace attracts more listings and buyers, royalty-compliant venues may lose share, reducing creator payouts.
• Fragmentation across chains and standards. While EIP-2981 is widely adopted in EVM ecosystems, other chains use different metadata approaches. Cross-chain transfers and bridges can complicate royalty recognition.
• Wash trading and manipulation. Artificial trading to farm incentives or inflate floor prices can distort royalty income and harm market integrity. Inadequate safeguards can lead to mispricing and skewed volume metrics.
• Legal and tax considerations. Royalty expectations and payouts may have jurisdictional tax implications or trigger regulatory considerations depending on how rights are represented. Creators should consult qualified professionals.
• Technical complexity. Implementing royalty splits, upgradeable logic, or special payout rules can increase smart contract complexity and audit requirements.
• Liquidity sensitivity. If royalties are set too high, buyers might route to marketplaces that ignore them, or overall demand might decline. On networks like Ethereum (ETH) or Solana (SOL), this elasticity can influence where volume migrates.

Industry Impact

Royalties have reshaped expectations of how creators should be paid in digital markets. The concept has influenced marketplace design, tokenomics around platform tokens, and how collectors think about long-term value. For Ethereum, a broad view of network and market context can be found in asset profiles from reputable sources like Messari’s Ethereum page, CoinGecko’s Ethereum listing, and CoinMarketCap’s Ethereum page. These resources contextualize NFT activity within the broader blockchain and cryptocurrency economy.

The debate around enforcement has also accelerated experimentation. Some teams prioritize creator fees for sustainability; others emphasize frictionless trading. Across the industry, this experimentation has prompted new tooling for metadata, optionality in marketplace policies, and better UX to display fee expectations. In EVM-compatible environments like Polygon, NFTs priced in MATIC follow the same standards, so policy competition can quickly propagate across L2s and sidechains.

For a high-level research backdrop on the NFT sector’s evolution, see Binance Research’s overview of the NFT ecosystem. While royalties are one facet among many, they serve as a litmus test of how Web3 balances creator sustainability with trader preferences.

Future Developments

The next phase of royalties will likely involve a combination of technical, market, and governance innovations:

• Better signaling and cross-market compatibility. Even with EIP-2981, collection metadata, and marketplace APIs, there is room to standardize how royalties are displayed and verified across wallets and aggregators.
• Programmable rules. More granular logic, such as different royalties for specific sales contexts or time-based schedules, could emerge. These features must balance complexity against clarity for traders.
• Royalty-aware bridges and cross-chain standards. As NFTs move across chains, royalty signals should persist. The industry is exploring cross-chain metadata formats and interoperability frameworks that preserve creator intent.
• Community governance over fee policy. Marketplace and ecosystem tokens such as APE, LOOKS, BLUR, and RARI may host ongoing proposals about fee settings, incentives, and curation that affect where and how royalties are paid.
• Financialization of royalty streams. Creators might tokenize or collateralize expected future royalties, integrating with DeFi primitives for funding. This could include lending markets, tranching, or secondary trading of revenue rights.
• Clearer UX in marketplaces and wallets. A consistent and prominent display of royalties can reduce confusion and disputes, improving trust.

As this develops, keep an eye on primary standards and references like EIP-2981 and chain-specific docs such as Metaplex’s royalties guide. Also monitor reputable aggregators and data sources for market context, including Messari’s Ethereum profile and CoinGecko for Ethereum. For general background, Wikipedia’s entry on NFTs and Investopedia’s primer remain useful.

Conclusion

NFT royalties are one of Web3’s most significant experiments in aligning incentives for creators and communities. Technically, standards like EIP-2981 and chain-specific metadata allow creators to signal royalty expectations in a transparent, programmable format. Practically, whether those royalties are paid depends on marketplace policies and trader behavior. The resulting tension has catalyzed innovation in standards, UX, and governance, and it will likely continue to evolve.

For collectors and creators, the key takeaways are simple: understand how royalties are signaled on your chain of choice, verify marketplace policy before listing or buying, and recognize that fee structures can change. When trading on Ethereum, price, settlement currency, and royalty rules interact with broader crypto-market dynamics; pairs like ETH/USDT are often used for valuation and hedging. Across chains like Solana and Polygon, consider how liquidity and policy differences influence where royalty-paying volume concentrates.

As with any emerging concept in blockchain and cryptocurrency, rely on primary documents and established research. Review EIP-2981, OpenSea’s creator fee update, Metaplex’s royalties docs, and market references like CoinGecko, CoinMarketCap, and Messari for a rounded view.

FAQ

What are NFT royalties?

NFT royalties are creator-defined fees paid to the original creator or designated recipients when an NFT is resold on secondary markets. They are typically signaled via smart contract standards like EIP-2981 or via chain-specific metadata such as Solana’s Metaplex.

Are royalties enforced on-chain by default?

Generally no. Most blockchain protocols do not enforce royalties by default. Marketplaces choose whether to honor the royalty signal. OpenSea’s policy change in 2023 made creator fees optional going forward, as stated in its official update.

How does EIP-2981 work in practice?

A marketplace calls royaltyInfo with the token ID and sale price. The contract returns the recipient and the royalty amount. The marketplace then routes the payout during settlement, typically in ETH or the asset used for the sale.

What are typical royalty percentages?

They vary by collection and marketplace, commonly in the 2.5 to 10 percent range. The exact rate is at the creator’s discretion and signaled via the NFT’s contract or metadata. High rates may discourage trading; low rates may not sustain creator funding.

Do royalties apply to the first sale?

Royalty mechanisms are designed for secondary sales. Primary sale proceeds go directly to the creator via the mint or initial listing. Future resales trigger the royalty logic.

How do royalties work on Solana?

Solana uses metadata via the Metaplex Token Metadata standard, which specifies fee basis points and creator shares. Enforcement still depends on marketplace policy. See Metaplex’s royalties docs for technical details.

Can royalties be split among multiple creators?

Yes. Many contracts support splits, either natively or by integrating payment splitter contracts. On Solana and other chains, metadata can list multiple creators and their respective shares.

How do royalties affect collectors and traders?

Royalties reduce the seller’s net proceeds on secondary sales. Traders should factor them into pricing, slippage, and expected returns. On Ethereum, many NFTs are priced in ETH, and spreads may reflect royalty expectations.

Are royalty payments impacted by token choice or chain?

Royalties are denominated in the asset used for settlement, such as ETH, SOL, or MATIC. Different chains may use different standards for signaling royalties, but marketplace policy remains the key factor.

How can I check royalty information before buying?

• Read the collection’s official documentation and contract code if possible.
• Review marketplace listing pages for royalty disclosures.
• For Ethereum, verify EIP-2981 support on the collection’s contract.
• Consult reputable sources like Investopedia’s NFT guide and Wikipedia’s overview for general context.

Do royalties interact with DeFi?

Yes. Royalty expectations can be incorporated into lending, fractionalization, or revenue-sharing arrangements. Some creators may tokenize expected royalty cash flows, integrating NFT activity with DeFi strategies.

Are royalties a form of security or investment contract?

Royalties themselves are a payment mechanism, not a classification of the NFT. Whether an NFT or related token is a security is a legal question dependent on facts and jurisdiction. Consult qualified legal counsel for specifics.

How do market cap and tokenomics relate to royalties?

Royalties are a micro-level mechanism within the NFT economy. However, broader crypto conditions, liquidity, and the market cap of underlying assets like ETH or ecosystem tokens such as APE can influence trading behavior, which indirectly affects royalty volume.

Which tokens and marketplaces are relevant to royalty debates?

Ecosystem and marketplace tokens such as LOOKS, BLUR, and RARI are often discussed in the context of marketplace policy and fee competition. Their existence does not determine royalties, but governance and incentives can shape trading flow.

Where can I learn more?

• Ethereum’s EIP-2981: NFT Royalty Standard
• Solana Metaplex Royalties documentation
• OpenSea’s creator fees update
• Market context: Messari, CoinGecko, CoinMarketCap

For related concepts, see: NFT (Non-Fungible Token), NFT Metadata, Token Standard (ERC-721/1155), and Blockchain.