Why Smart Contract Royalties Are Fairer for Creators

Centralized enforcement is betrayal. Web2 marketplaces like OpenSea and Magic Eden initially promised royalties but controlled the enforcement logic off-chain. This allowed them to later disable fees to compete with zero-royalty rivals like Blur, breaking the social contract with creators.

On-chain logic is sovereign. Smart contract royalties, as implemented by standards like EIP-2981 or ERC-721C, encode payment splits directly into the NFT's transfer function. The creator's fee becomes a non-optional transaction tax, enforceable without platform permission.

The protocol is the policy. This shifts power from corporate boardrooms to deterministic code. Platforms like Manifold and Zora build tools for this, but the rule itself is immutable once deployed, preventing future rug-pulls on creator revenue.

Evidence: After OpenSea's optional royalty shift, creator earnings on major collections plummeted by over 50%. In contrast, fully on-chain ecosystems like Art Blocks maintained 100% royalty compliance, proving the model works.

Code is the final arbiter. A smart contract's logic executes precisely as written, removing human discretion and bias from royalty enforcement. This creates a trust-minimized system where creator terms are embedded in the asset's transfer function itself, unlike traditional IP law which relies on costly, slow legal action.

Platforms are unreliable partners. Centralized marketplaces like OpenSea and Blur have repeatedly downgraded royalty enforcement to compete on fees, proving their economic incentives are misaligned with creators. This platform risk demonstrates why off-chain promises are inferior to on-chain code.

The EIP-2981 standard provides the rails. This universal royalty standard allows any compliant marketplace or wallet to read and respect fee instructions directly from the NFT contract. Adoption by platforms like Foundation and Rarible proves the technical path exists; their optional enforcement is a business choice, not a technical limitation.

Evidence: Creator earnings on Ethereum mainnet, where royalty enforcement is strongest, are orders of magnitude higher than on chains with weak or optional standards. This data validates that code-based extraction is the only reliable revenue model.

EIP-2981 is insufficient alone. This standard provides a read-only function for royalty information but lacks enforcement, making it a suggestion that marketplaces like Blur or OpenSea can ignore.

On-chain enforcement requires transfer hooks. Protocols like Manifold's Royalty Registry or 0xSplits implement logic that reverts non-compliant trades, but this creates friction and is circumvented by aggregators.

Full-stack enforcement integrates market signals. Projects like Art Blocks tie access to future drops or community benefits to verified royalty payment, creating a social and economic layer of compliance.

The endpoint is programmable revenue. The final evolution is treating royalties as a native financial primitive, integrated into DeFi via platforms like Superfluid for streaming or into cross-chain settlements via LayerZero.

Mandatory royalties are inefficient price controls. Opponents argue that enforced creator fees distort free-market pricing and create friction. They champion zero-fee marketplaces like Blur and Sudoswap as the natural, efficient outcome.

This argument ignores creator capital costs. The zero-royalty model assumes creation is free. It externalizes the R&D and production cost of the asset onto the creator while letting traders capture all value. This is a classic free-rider problem.

Smart contracts enable direct value capture. Unlike Web2 platforms, on-chain royalties allow creators to bypass intermediaries. Protocols like Manifold's Royalty Registry and EIP-2981 standardize this, making fees a native property of the asset.

Evidence: Royalties fund sustainable ecosystems. Look at Art Blocks or Yuga Labs. Their ongoing revenue from secondary sales directly funds development, community events, and new collections, creating a virtuous cycle zero-fee markets cannot replicate.