Why NFT Licensing Needs Standardization, Not More Custom Code

Custom code is legal liability. Every bespoke NFT license is a unique legal document, forcing developers to audit each collection individually. This creates a compliance minefield for marketplaces like OpenSea and Blur, which must interpret thousands of divergent terms.

Fragmentation kills utility. Without a standard, on-chain licensing cannot be read by other smart contracts. This prevents automated royalty enforcement, prevents derivative platforms like Zora from programmatically verifying rights, and locks NFTs in silos.

ERC-721C is a band-aid. Standards like ERC-721C for royalty enforcement address a symptom but ignore the root cause: the license itself is not a machine-readable, on-chain primitive. This leaves the core legal agreement opaque and unenforceable by code.

Custom code is systemic risk. Each project's unique on-chain royalty enforcement logic, like Manifold's custom Registry, creates a fragmented attack surface. This increases audit complexity and the probability of exploits, as seen in past vulnerabilities within bespoke transfer logic.

Kill composability and liquidity. Non-standard implementations break the fundamental assumption of the ERC-721 interface, crippling tools from OpenSea to indexers. A collection with a custom mint function fails on platforms like Zora, fragmenting market liquidity.

Standardization enables new primitives. A universal standard, such as the proposed ERC-721C for on-chain enforcement, transforms royalties from a bespoke feature into a composable financial primitive. This allows for automated treasury management, derivative markets, and integration with intent-based systems like UniswapX.

Evidence: The ERC-20 standard's success is the precedent. Its uniformity enabled the entire DeFi ecosystem, from Uniswap to Aave. Without it, token swapping would require custom integration for every asset, exactly the problem NFT ecosystems now face.

Custom code creates systemic risk. Every project writing bespoke licensing logic introduces unique vulnerabilities and audit surfaces, mirroring the pre-ERC-20 token era of endless exploits.

Standards enable composable rights. A universal schema, like an ERC-721 extension, allows marketplaces like OpenSea, indexers, and tooling to programmatically understand and enforce terms without custom integrations.

On-chain is the only source of truth. Relying on off-chain legal documents (CC0, All Rights Reserved) creates a dangerous attestation gap between the NFT's utility and its enforceable legal status.

Evidence: The ERC-1155 standard's uri function demonstrates how a simple, universal hook can serve dynamic metadata; licensing requires an analogous, immutable on-chain record.

Tailored Commercial Logic is the primary draw. A project can encode specific revenue splits, transfer restrictions, or commercial rights directly into the token, creating a self-enforcing business model without external legal overhead.

Competitive Differentiation drives adoption. Projects like Yuga Labs and Art Blocks use bespoke terms to create unique utility and perceived value, treating their license as a proprietary feature rather than a commodity.

The Fragmentation Cost is the hidden tax. Each custom implementation requires new tooling, audits, and marketplaces, fracturing developer and user experience—a problem ERC-721 itself solved for NFT ownership.

Evidence: The CC0 vs. Commercial Rights debate shows market confusion. Projects must manually audit each NFT's terms, a process that standards like EIP-5218 or Canonical aim to automate.