The Future of Royalties: Why On-Chain Enforcement Is Non-Negotiable

Royalty bypass is theft. Blur and OpenSea's optional royalty policies created a prisoner's dilemma where market share is won by enabling fee evasion, directly extracting value from creators like Yuga Labs and Art Blocks.

Code is the only contract. Social consensus and platform policy are unreliable; enforceable logic must exist at the protocol layer, as demonstrated by the success of ERC-721C and Manifold's Royalty Registry.

Evidence: Creator royalties on Ethereum plummeted over 90% from their 2022 peak, a direct transfer of hundreds of millions from artists to traders and marketplaces.

Royalties are the protocol. On-chain royalties are not a feature; they are the fundamental economic primitive for creator-owned networks like Art Blocks and Sound.xyz. Off-chain enforcement by OpenSea or Blur makes this primitive optional, turning it into a revocable platform policy.

Optionality destroys composability. A royalty is a smart contract-level directive. Making it optional breaks the ERC-721 and ERC-1155 standards, preventing predictable revenue streams for downstream protocols like NFTfi or Pudgy Penguins' physical redemption. Platform-controlled logic is a black box.

The trap is rent extraction. Platforms that 'protect' royalties today will extract value tomorrow. The historical playbook is fee increases and policy changes, as seen in Web2. The only defense is immutable code on a neutral ledger like Ethereum or Solana.

Evidence: After Blur made royalties optional, creator earnings on major collections fell over 50%. Platforms that enforced royalties, like Magic Eden on Solana via Metaplex's Token Metadata, retained sustainable creator economies.

Royalties are optional revenue. Platforms like Blur and OpenSea have made creator fees optional to compete on price, collapsing the effective royalty rate on major collections to near zero. This creates a prisoner's dilemma where no single marketplace can enforce fees alone.

On-chain enforcement is non-negotiable. The alternative is a race to the bottom where value accrues solely to traders and platforms, not creators. Technical solutions like EIP-2981 or custom transfer logic (e.g., Manifold's Royalty Registry) are the only viable path.

Evidence: After OpenSea made royalties optional in 2022, the average royalty payment for a Bored Ape Yacht Club sale fell from 2.5% to below 0.6% within months, according to Nansen data.

On-chain enforcement is non-negotiable. Marketplaces like Blur and Magic Eden prove that without protocol-level guarantees, royalties become optional fees. This creates a tragedy of the commons where creators subsidize platforms that bypass their revenue.

Programmable compliance replaces trust. Standards like ERC-721C and Seaport hooks enable creator-controlled logic that executes before a transfer. This moves enforcement from the marketplace's goodwill to the immutable smart contract.

The future is modular policy engines. Protocols like Manifold's Royalty Registry and 0xSplits act as on-chain policy layers. They allow creators to define and update complex rules—like dynamic fees or allowlists—without redeploying core NFT contracts.

Evidence: After implementing ERC-721C, projects like Forgotten Runes maintained 100% royalty collection on all marketplaces, while non-compliant collections on Blur saw rates drop below 0.5%.

Liquidity follows value, not the other way around. The core premise of the liquidity defense is backwards. Markets like Blur and OpenSea attract volume by subsidizing traders, creating a race to the bottom that destroys the creator economy that generates the assets in the first place.

Programmable property rights are the foundation. Without on-chain enforcement, an NFT is just a JPEG with a receipt. Protocols like EIP-2981 and creator-owned marketplaces like Zora enable fee-on-transfer logic, making royalties a non-negotiable property of the asset itself, not a marketplace policy.

The data proves sustainability. Look at Ethereum's dominance in high-value NFT trading versus zero-royalty chains. The market for authentic digital scarcity commands a premium that funds ongoing innovation. Liquidity that evaporates the asset's fundamental value proposition is parasitic, not sustainable.

Programmable royalties are inevitable. Marketplaces like Blur and OpenSea that circumvented creator fees exposed the fatal flaw of social enforcement. The next generation of NFT standards like ERC-721C and ERC-2981 will bake royalties directly into the token's transfer logic, making bypassing them a protocol-level impossibility.

The infrastructure is already here. Protocols like Manifold's Royalty Registry and 0xSplits provide the settlement layer, while smart contract wallets like Safe enable complex, automated revenue distribution. This creates a technical moat for projects that commit to creator-first economics.

Market forces will enforce adoption. As major collections like Yuga Labs mandate on-chain royalties, liquidity follows. Marketplaces that fail to integrate these standards will be excluded from the primary sales and secondary volume of top-tier assets, rendering them irrelevant.