Why Royalty Standards Are the Next Battleground for Chains

Royalties are infrastructure. They are not a creator feature but a core protocol-level primitive that dictates value flow. Chains that treat them as an afterthought cede control to marketplaces like Blur and OpenSea, which have repeatedly demonstrated they will slash fees to zero to win volume.

The technical standard is the moat. ERC-2981 is the current baseline, but its optional on-chain enforcement is a fatal flaw. Chains must build superior, mandatory primitives like Solana's Token Extensions or Avalanche's unique approach to embed royalties directly into the asset's transfer logic.

This is a wedge for developer adoption. A chain with robust, unbreakable royalties attracts high-value NFT projects and their communities. It creates a sticky ecosystem where creators are economically aligned with the chain itself, not just the applications built on top of it.

Evidence: After Blur's zero-fee policy, creator royalties on Ethereum plummeted over 90%. In contrast, Solana's enforced Token Extensions guarantee fees, making it the default choice for professional creators seeking predictable income.

Royalties are a revenue stream. Blockchains compete for developers and users, but the most defensible moat is a sustainable economic flywheel. Creator revenue is the fuel. Chains that standardize and enforce royalties attract high-value NFT projects, whose secondary market fees generate predictable, on-chain revenue for the protocol via transaction fees.

The market has spoken. The failure of optional royalties on marketplaces like Blur and OpenSea proved creators demand enforceable standards. Chains like Solana and Ethereum with EIP-2981 are now competing on whose standard provides stronger guarantees and simpler integration, turning a social consensus problem into a technical feature.

Evidence: After implementing its Token Metadata Program, Solana saw a 40% quarter-over-quarter increase in creator royalties collected, demonstrating that enforceable standards directly impact chain economics and developer migration.

Royalties are the new TPS. The primary battleground for L1s and L2s is no longer transaction speed, but the ability to enforce on-chain creator economics. Chains that guarantee programmable revenue streams attract the NFT and socialFi applications that drive sustainable fees and user engagement.

The EIP-2981 standard is insufficient. While it defines a royalty interface, it lacks enforcement. This created a market-driven collapse where marketplaces like Blur and OpenSea competed by bypassing payments to creators, directly harming the application ecosystems chains depend on.

Chains are now picking sides. Solana enforces royalties at the protocol level via Token Extensions. Ethereum L2s like Arbitrum and Optimism implement custom fee mechanisms to support creators. This strategic divergence forces every new chain to choose between maximalist fee extraction and curated economic security.

Evidence: After implementing Token Extensions, Solana saw a 10x increase in on-chain royalty volume in Q1 2024, demonstrating that enforceable standards directly translate to captured value.

Standards are winner-take-most. The ERC-20 and ERC-721 standards succeeded because they created a single, predictable interface for developers and users, reducing fragmentation. A chain that hosts the dominant NFT royalty standard becomes the default settlement layer for all compliant collections, locking in liquidity and developer mindshare. This is a direct replay of the EVM's victory over alternative VMs.

The battle is for the default. Chains like Solana (with Metaplex) and Ethereum (with EIP-2981) are not just implementing features; they are competing to be the reference implementation. The standard that achieves critical mass dictates fee economics and developer tooling for the entire ecosystem, similar to how Uniswap V3 concentrated liquidity became the default AMM design.

Technical elegance is secondary. A standard's adoption is driven by first-mover integration with major marketplaces and wallets, not its cleverness. Blur's enforcement mechanism, while controversial, proved that marketplace policy drives on-chain reality more than any protocol-level spec. A chain must court these centralizing forces to win.

Evidence: After Solana's Metaplex became the de facto standard, over 95% of its NFT volume flowed through compliant marketplaces, creating a powerful economic moat. Chains without a clear standard, like some EVM L2s, see rampant royalty avoidance and fragmented developer experiences.

Developer adoption is the bottleneck. A standard like ERC-721C is useless without integration from major marketplaces like Blur or OpenSea. These platforms prioritize liquidity and fees over creator monetization, creating a classic prisoner's dilemma.

Royalties are a tax on liquidity. Chains like Solana and Avalanche that historically minimized fees will resist any protocol-layer overhead. Their value proposition is cheap execution, not complex royalty enforcement that burdens every NFT transfer.

The market has already voted. The collapse of creator royalties on major EVM chains post-Blur proves economic incentives trump idealism. Users flock to the cheapest venue, making a chain-level standard a nice-to-have feature, not a necessity for growth.

Evidence: Look at Polygon's push for royalties via ERC-721C. Despite the technical implementation, its NFT volume remains a fraction of Ethereum's, proving that a standard alone cannot create a market.

Royalty enforcement is a feature. Chains that natively support creator royalties, like Solana with its Token Extensions or Avalanche via its custom VM, will capture the next wave of digital asset platforms. This is a direct attack on the fee-minimization ethos of chains like Base and Blast.

The battle is infrastructural. The conflict moves from marketplace policy to protocol design. Expect new primitives for royalty routing and on-chain attribution to emerge, creating a technical moat. This mirrors the early battles over DeFi primitives like Uniswap's constant product formula.

Evidence: After Blur's optional royalties eroded Ethereum NFT fees, platforms like Magic Eden migrated to Solana specifically for its enforceable standards, demonstrating clear economic signaling. The chain that standardizes programmable royalties wins the creators.