The Future of Value Capture Is Dynamic NFT Royalties

A fixed 5% secondary sale fee ignores all other value generated by an NFT. This creates a massive misalignment between creators and holders, leaving ~$1B+ in potential annual creator revenue uncaptured from staking, lending, and commercial use.

• Zero incentive for utility: Holder activity that increases collection value yields nothing for the artist.
• Easy to circumvent: Marketplaces like Blur and OpenSea with optional royalties have broken the social contract.

Smart contracts that dynamically route fees based on on-chain activity, transforming NFTs into active financial instruments. Think Superfluid streams meets ERC-721.

• Multi-source royalties: Automatically split revenue from secondary sales, rental yields (like reNFT), and licensing fees.
• Holder rewards: Programmatically share a portion of protocol revenue (e.g., from a related game) with NFT stakers, creating a flywheel.

Dynamic models require trusted data feeds to assess value creation. This is not about price oracles, but activity oracles tracking usage, attribution, and influence.

• Protocols like Story: Provide on-chain attestations for derivative creation and remixing, enabling automatic royalty payments.
• Cross-chain state: LayerZero and CCIP allow dynamic contracts to aggregate value creation across ecosystems, not just one chain.

A new infrastructure primitive: modular smart contract frameworks that let any project deploy custom, upgradeable royalty logic without rebuilding the wheel.

• Composability: Plug into existing marketplaces (OpenSea, Blur), DeFi protocols (Aavegotchi, NFTfi), and social graphs (Lens, Farcaster).
• Creator toolkit: Dashboards to set rules like "10% of staking yield to creator for first 12 months," enforced autonomously.

Platforms like Sound.xyz and Audius show the blueprint: royalties are not a one-time sale tax, but a continuous stream based on consumption. This model will migrate to all media and IP.

• Pro-rata micropayments: Each play or view triggers a micro-royalty, aggregated and settled periodically.
• Transparent ledgers: Every stakeholder can audit their share of revenue in real-time, eliminating label accounting opacity.

The final evolution: the NFT itself becomes a tranche of cash-flow rights, tradeable separately from the underlying art. This creates a liquid market for future royalty streams.

• ERC-20 yield tokens: Fractionalize and trade the royalty income from a Bored Ape or a hit song NFT.
• Risk markets: Hedge or speculate on the future commercial performance of an IP via derivatives on platforms like Pendle.

The Problem: Artists are locked into platform-controlled, one-size-fits-all royalty contracts. The Solution: Manifold provides self-service, non-custodial smart contract tooling that puts creators in control. This enables dynamic, on-chain logic for royalties and minting.

• Creator Sovereignty: Deploy your own ERC-721/1155 contracts with embedded, unbreakable royalty rules.
• Dynamic Foundation: Serves as the base layer for projects like Sound.xyz and Highlight to build custom royalty schemes.

The Problem: Revenue sharing is static and manual, failing to adapt to contributor roles or performance. The Solution: 0xSplits is a composable primitive for real-time, on-chain value distribution. It turns a multi-sig into a dynamic, automated payment rail.

• Granular Logic: Split revenue based on time, NFT ownership, or off-chain data via oracles.
• Composability: Used by Zora, Sound.xyz, and Mirror to power dynamic creator funds and DAO treasuries.

The Problem: The market is fixated on the binary debate of "royalties on/off," which is a race to the bottom. The Solution: Dynamic royalties move beyond enforcement to create value-aligned ecosystems. Think tiered access, revenue-sharing pools, and collector rewards.

• Incentive Design: Higher royalties for flippers, lower for long-term holders.
• Protocol-Level Integration: Future Blur and OpenSea models will compete on programmable value capture, not just fee removal.

The Problem: NFT utility is often a static, one-time airdrop with no sustained engagement. The Solution: Highlight builds dynamic NFTs whose metadata and rewards evolve based on holder actions and real-world data.

• Behavior-Based Rewards: Royalty rates or token rewards adjust for provable engagement (e.g., event attendance).
• Data-Driven: Integrates oracles and cross-chain state (LayerZero) to trigger on-chain updates.

Fixed, on-chain royalties are a blunt instrument. They fail to reward loyal collectors or penalize flippers, creating a misalignment where creators capture value only on the first sale.

• Market Reality: >90% of major marketplaces (e.g., Blur, OpenSea) have made royalties optional, decimating creator revenue.
• Inflexibility: Cannot implement tiered rewards, time-based decays, or behavior-based incentives.
• Result: The current model pushes creators towards extractive, pump-and-dump launch strategies.

Smart contract-based logic that dynamically adjusts royalty rates and distribution based on verifiable on-chain behavior.

• Mechanisms: Sliding scales for holding period, reduced fees for trades within creator-curated pools (e.g., Sudoswap), bonuses for staking NFTs.
• Tech Stack: Requires robust oracle integration (e.g., Chainlink) for off-chain data and sophisticated modular smart account infrastructure (e.g., Safe, Biconomy) to execute complex logic.
• Precedent: Projects like Manifold's Royalty Registry and 0xSplits lay groundwork for programmable payout logic.

Major liquidity venues (Blur, OpenSea) have no incentive to support complex, non-standard royalty logic that could reduce trading volume.

• Liquidity Trap: NFTs with dynamic royalties may be ghettoized to niche marketplaces, killing their secondary market liquidity.
• Integration Burden: Each marketplace must individually integrate the royalty engine's logic, creating a classic coordination problem.
• Bear Case: Dynamic royalties remain a niche feature for small communities, failing to shift the ~$10B+ NFT market.

Dynamic royalties could be construed as creating an ongoing financial relationship, inviting securities classification.

• SEC Precedent: The Howey Test scrutiny increases with promises of future revenue share based on holding or staking.
• Platform Liability: Marketplaces like Coinbase NFT or Magic Eden may avoid the feature to de-risk their operations.
• Chilling Effect: The most innovative models (e.g., profit-sharing DAOs tied to NFT ownership) become legally untenable, capping design space.

Traders reject uncertainty. A system where the final fee is unknown until transaction settlement will face user backlash.

• Price Discovery: How does a trader value an NFT if the exit tax (royalty) is variable? This undermines efficient markets.
• Wallet Support: Most consumer wallets (MetaMask, Phantom) cannot simulate or display complex conditional fee structures.
• Outcome: Traders flock to simpler, predictable assets, leaving dynamic royalty NFTs illiquid.

The winning model may hybridize: lightweight on-chain rules with strong off-chain social and tooling enforcement.

• Model: A minimal on-chain royalty registry (e.g., EIP-2981) paired with aggregator-level enforcement (like UniswapX for NFTs) and allowlists.
• Tools: Platforms like Gallery or Context can prioritize artists who enforce royalties, creating social pressure.
• Reality Check: Value capture shifts from pure protocol fees to curation, discovery, and financing tools (e.g., paprMEME, arcade.xyz).

Fixed 5-10% fees ignore post-mint value creation. This creates misaligned incentives, stifles secondary market liquidity, and is trivial to bypass via marketplaces like Blur or Magic Eden. The result is a ~90% decline in creator royalty revenue on major chains.

• Key Benefit 1: Aligns creator incentives with long-term ecosystem health, not just initial sale.
• Key Benefit 2: Unlocks new revenue models beyond simple sales (e.g., staking, fractionalization).

Smart contract interfaces like EIP-2981 and Manifold's Royalty Registry enable dynamic logic. Royalties can be functions of time, sales volume, or holder status. This turns NFTs into programmable revenue streams, similar to Uniswap's fee switch but for digital assets.

• Key Benefit 1: Enables time-decaying fees, volume-tiered rates, and rewards for loyal holders.
• Key Benefit 2: Creates composable financial primitives for DeFi integration (e.g., royalty-backed lending).

Dynamic royalties require robust on-chain attribution to track provenance and usage. This moves beyond simple transfers to track derivatives, fractionalized ownership (ERC-404), and usage in games/virtual worlds. Protocols like LayerZero for cross-chain attribution become critical.

• Key Benefit 1: Ensures fair compensation across complex, multi-chain asset lifecycles.
• Key Benefit 2: Provides verifiable data for new underwriting models in NFTfi and insurance.

The end-state is infrastructure that abstracts away royalty complexity. Think Chainlink Functions fetching off-chain data to adjust rates, or Safe{Wallet} modules automating distributor splits. This creates a new middleware layer for value distribution.

• Key Benefit 1: Reduces integration friction for marketplaces and applications.
• Key Benefit 2: Enables novel collab models with automatic, real-time revenue sharing.