Why Royalty Splits Are the Next Frontier for Contract Exploits

The AMM's design allowed NFT sellers to bypass creator royalties entirely, setting a dangerous precedent for protocol-level non-compliance.\n- Zero-fee pools enabled royalty-free trading, draining value from creators.\n- Exposed the moral hazard of protocol incentives vs. creator ecosystem health.

Aggregating trades across multiple marketplaces with different royalty policies creates a complex, opaque settlement layer.\n- Multi-hop transactions obscure the final recipient, enabling fee siphon attacks.\n- The oracle problem for real-time royalty rates becomes a critical vulnerability.

Contracts like 0xSplits and Royalty Registry introduce delegation and upgradeability, expanding the attack surface geometrically.\n- Proxy admin keys for split contracts are a single point of catastrophic failure.\n- Reentrancy in split distribution logic can lock or drain funds across hundreds of payees.

Bridging NFTs via protocols like LayerZero or Wormhole shatters royalty enforcement, as destination chains have no obligation to original terms.\n- Creates jurisdictional arbitrage for royalty evasion.\n- Lack of universal standard (e.g., ERC-721C) turns bridges into exploit vectors.

Sophisticated MEV bots can exploit the time delay between revenue recognition and distribution in split contracts.\n- Temporarily inflate revenue share calculations to claim a larger payout.\n- Targets protocols with epoch-based or manual trigger distributions.

The only robust fix is encoding royalty logic at mint into a non-upgradable, universally readable standard that marketplaces must query.\n- ERC-721C with commit-reveal schemes makes bypassing technically impossible.\n- First-principles design prioritizes creator rights over short-term liquidity incentives.

Most splits rely on off-chain oracles to calculate and distribute payments, creating a critical trust assumption. A compromised oracle can redirect 100% of funds.

• Vulnerability: Centralized API endpoint or a multi-sig with stale signers.
• Impact: Direct theft of all accrued royalties, often undetected until payout.

Custom splitter contracts often fail to follow Checks-Effects-Interactions patterns. An attacker's malicious token contract can re-enter the splitter during distribution.

• Attack Vector: Callback during transfer to recipient addresses.
• Result: Double-counting shares, draining the contract's entire balance.

Updatable split parameters (e.g., adding/removing payees) are frequently guarded by inadequate permissions. A leaked admin key or a flawed timelock implementation is catastrophic.

• Real-World Flaw: Owner can set their share to 100%.
• Consequence: Permanent diversion of future revenue streams.

On-chain distribution in a public mempool is vulnerable. Attackers can frontrun the distribution transaction to sandwich it or replace it with a malicious one.

• Mechanism: Bidding up gas to insert a malicious call to the splitter.
• Outcome: Skimming of funds or complete transaction failure, halting payouts.

Move from push-based distributions (which the contract initiates) to pull-based claims (where recipients withdraw). Use immutable split parameters set at deployment.

• Key Benefit: Eliminates reentrancy and frontrunning risks.
• Key Benefit: Transfers gas burden and execution risk to the payee, not the contract.

Replace off-chain oracles with a verifiable on-chain system. Use ZK proofs (like those from RISC Zero or zkSync) to attest to correct off-chain calculation.

• Key Benefit: Trustless verification of complex royalty logic.
• Key Benefit: Maintains privacy of underlying sales data while ensuring correctness.