Why Perpetual Royalties Are a Legal Fiction

Any NFT marketplace can fork the core trading logic of Blur or OpenSea and simply remove the royalty enforcement module. This creates a classic prisoner's dilemma where the first major platform to defect captures all volume.

• Zero-Cost Defection: Forking a smart contract is trivial; the code is public.
• Market Pressure: Traders naturally migrate to the platform with the lowest fees, creating a race to the bottom.
• Historical Precedent: LooksRare and SudoSwap demonstrated this by launching with optional or zero royalties.

Modern trading is routed through aggregators like Blur Aggregator and Reservoir, which treat royalties as just another fee to be optimized away. This abstracts the user from the marketplace contract entirely.

• Intent-Based Routing: Users submit a "sell this NFT" intent; the aggregator finds the best net price, often bypassing royalty-enforcing pools.
• MEV Extraction: Searchers bundle trades to capture value, including the royalty amount, for themselves or the trader.
• Architectural Bypass: The trade execution happens on a searcher's or aggregator's contract, not the original NFT's mandated marketplace.

A smart contract cannot subpoena a wallet. "Enforcement" via token blacklists or transfer hooks is a protocol-level arms race that destroys composability and user experience, as seen with ERC-721C.

• Sovereign Wallets: A user's wallet is their sovereign territory; you cannot force a transaction to fail post-transfer.
• Composability Break: Royalty hooks break NFT utility in DeFi pools, gaming vaults, and across bridges.
• Regulatory Void: There is no legal framework to treat a code-mandated fee as an irrevocable royalty; it's a voluntary protocol fee that can be circumvented.

Blur's royalty enforcement is a social contract, not a technical one. It uses trader loyalty points and airdrop eligibility as economic levers, proving that market dynamics and centralized curation are more effective than immutable smart contract logic.

• Key Mechanism: Penalize traders who bypass royalties by reducing future rewards.
• Market Result: Achieved ~80% royalty compliance at its peak, versus near-zero on purely permissionless exchanges.

Solana's Token Metadata Standard makes royalties a configurable feature for marketplaces, not a chain-level mandate. This shifts the enforcement burden to frontend logic and legal agreements, acknowledging that the base layer cannot coerce behavior.

• Key Mechanism: Royalty data is stored on-chain, but its application is a marketplace policy choice.
• Ecosystem Result: Created a fragmented landscape where Magic Eden enforces while others bypass, letting users vote with their fees.

Manifold's EIP-2981 royalty standard provides a universal lookup for royalty information, but it's merely a suggestion. It accepts that enforcement happens at the exchange or aggregator level (like OpenSea), which can choose to respect or ignore it based on commercial pressure.

• Key Mechanism: Creates a canonical source of truth for royalty percentages and recipients.
• Practical Result: Becomes a tool for pro-royalty platforms to streamline integration, but is useless against adversarial actors.

SudoSwap's NFT AMM pools explicitly removed royalty enforcement to maximize liquidity efficiency. It demonstrates that for certain financialized NFT use cases (like DeFi collateral), royalties are a friction cost that the market rationally eliminates.

• Key Mechanism: Pools are permissionless and execute trades directly, with no hook for creator fees.
• Market Signal: Proved demand for a zero-fee trading layer, attracting >$100M in liquidity from users prioritizing capital efficiency over creator support.