The Future of Royalty Enforcement for Digital Creators

Optional royalties on major NFT marketplaces like Blur and OpenSea have led to ~80%+ royalty evasion, siphoning billions from creators. The core issue is a lack of on-chain enforcement at the protocol level, leaving terms as mere suggestions.

Protocols like Manifold's Royalty Registry and 0xSplits embed royalty logic directly into the NFT's transfer function. This creates a mandatory on-chain settlement layer that marketplaces and aggregators must interact with, making evasion technically impossible.

• Creator-Controlled: Terms are immutable and set at mint.
• Aggregator-Compatible: Works with any marketplace that respects the standard.

The next evolution uses on-chain blocklists and intent-based enforcement. EIP-7504 proposes a standard for blocking non-compliant marketplaces. Oracles like SeaPort Analyzer monitor and flag violators in real-time, enabling dynamic, reactive policy enforcement.

• Real-Time Detection: Identifies royalty-skipping transactions.
• Automated Sanctions: Can restrict transfers to blacklisted pools.

Strict enforcement risks fragmenting liquidity, as seen with Sudoswap's AMM model. The winning solution must balance creator sovereignty with fungible liquidity pools. This is leading to hybrid models where enforcement is gated, applying only after a primary sale or within certain time windows.

• Liquidity Priority: Ensures healthy secondary markets.
• Time-Boxed Rules: Gradual release of control post-sale.

Royalty enforcement must be chain-agnostic. Cross-chain messaging protocols like LayerZero and Axelar enable omnichain NFT standards (e.g., Pudgy Penguins' Overpass), allowing a single on-chain policy to govern assets across Ethereum, Base, Blast. This prevents jurisdictional arbitrage.

• Unified Policy: One rulebook across all chains.
• Settlement Finality: Cross-chain proofs trigger enforcement.

The final form is self-enforcing creator economies. Smart contract frameworks like 0xSplits enable automatic, programmable revenue distribution. Combined with enforcement protocols, this allows creators to form micro-DAOs that autonomously collect, split, and reinvest royalties, turning IP into a self-sustaining financial primitive.

• Auto-Distribution: Splits to teams, collaborators, treasury.
• Composable Yield: Royalties directly fund community pools.

Marketplaces like Blur and Magic Eden have proven that optional royalties are a dominant strategy for attracting volume. If a critical mass of major NFT collections migrates to ERC-721C or similar configurable standards, the social contract is broken.

• Market Pressure: ~90% of Ethereum NFT volume now bypasses full royalties.
• Fragmentation: New collections must choose between principle and liquidity.
• Race to Zero: Royalties become a premium feature, not a default right.

Enforcement relies on centralized choke points: marketplaces, indexers, and bridge validators. A coalition of these entities could collude to strip royalties, rendering on-chain logic irrelevant.

• Validator Risk: Cross-chain bridges like LayerZero or Wormhole could censor royalty-enforcing messages.
• Indexer Sabotage: The Graph subgraphs could be forked to ignore royalty logic.
• Single Point of Failure: Reliance on a service like OpenSea's Operator Filter proved fragile and legally contentious.

Smart contract code is not law in most jurisdictions. Precedent from the OpenSea vs. Ozone Networks case shows courts are reluctant to enforce programmable royalties without explicit traditional contracts.

• Unenforceable Code: A "fee on transfer" function may not constitute a legally binding royalty agreement.
• Global Fragmentation: Compliance with varying international laws is impossible at the smart contract layer.
• Creator Liability: Aggressive enforcement mechanisms could expose creators to legal action for restricting property rights.

Traders will route around friction. If on-chain enforcement is robust, secondary markets will move to private OTC deals, batch settlements via CowSwap, or intent-based systems like UniswapX that abstract away the NFT transfer.

• Liquidity Migration: Volume shifts to dark pools and off-ledger settlements.
• Intent-Based Obfuscation: Solvers aggregate and settle trades, breaking the direct seller-to-buyer transfer link.
• Metrics Blindspot: Royalty revenue plummets while real economic activity is hidden.

As enforcement fails, top-tier creators abandon the model, reducing its prestige and network effects. This leaves only low-value collections enforcing royalties, cementing it as a niche feature for amateur artists.

• Network Effect Collapse: Loss of blue-chip projects like Yuga Labs would be catastrophic for the standard.
• Perception Shift: Royalties become associated with low-liquidity, speculative assets.
• Innovation Stagnation: No major protocol invests in solving a problem for a dying market segment.

The only technically guaranteed enforcement requires a centralized, upgradeable contract with admin keys—a magic multisig. This recreates the very custodial risks blockchain aimed to solve and becomes a high-value attack target.

• Security Risk: A $100M+ treasury of accrued royalties behind a 5-of-9 multisig.
• Censorship Power: The admin can blacklist addresses or change royalty rules arbitrarily.
• Contradiction: A decentralized creator economy reliant on a centralized fee collector.

Marketplace-level filters are trivial to bypass, and EIP-2981 is a suggestion, not a rule. The result is >90% royalty non-compliance on major chains. Building another marketplace with "good intentions" is not a defensible moat.

• Key Insight: Royalties must be enforced at the asset layer, not the application layer.
• Key Insight: The solution must be chain-agnostic and survive secondary sales on any platform.

New standards bake royalty logic and allow/deny lists directly into the smart contract. This shifts enforcement from trust to cryptographic truth.

• Key Benefit: Creator-controlled policy that travels with the NFT across all marketplaces.
• Key Benefit: Enables dynamic, on-chain business logic (e.g., tiered royalties, revocable licenses).
• Entity: Look at Manifold's ERC-721C and Limit Break's ERC-6956 as competing architectural philosophies.

The highest-value approach isn't fighting fee evasion, but creating new value streams that users willingly pay for. This moves beyond punitive enforcement.

• Key Insight: Integrate royalties with access, identity, or utility (e.g., token-gated experiences, updatable metadata, physical redemption).
• Key Insight: Layer-2s and appchains (Base, zkSync) enable micro-royalties for new high-frequency, low-value digital goods economies.

A neutral, cross-chain layer that defines and attests to royalty policies. This solves for fragmented standards and provides a single source of truth for wallets, marketplaces, and explorers.

• Key Benefit: Unlocks composable royalty streams across ecosystems (Ethereum, Solana, Bitcoin L2s).
• Key Benefit: Reduces integration complexity for builders from O(n) to O(1).
• Entity: Watch for projects like Rarible Protocol and Creator Core evolving into this role.

Two dominant models are emerging. The winner depends on the asset class.

• Vertical (PFP/Art): Full-stack control from minting to marketplace (e.g., Yuga Labs). High margin, but captive ecosystem risk.
• Horizontal (Utility/Gaming): Royalty protocol as neutral infrastructure (e.g., an ERC-721C-as-a-service). Lower margin, but defensible through network effects and standardization.

The final state is royalties as a silent, automatic feature of digital property rights. This requires solving identity (ERC-6551), attribution, and cross-chain settlement.

• Key Insight: Royalties become a programmable cash flow asset that can be financed, bundled, or traded.
• Key Insight: The largest opportunity isn't in collecting today's 5% fee, but in enabling the $100B+ market for perpetual digital ownership and commerce.