On-Chain Royalty Enforcement vs Off-Chain Royalty Enforcement

Protocol-level immutability: Royalty logic is embedded in the NFT smart contract (e.g., ERC-2981 standard). This ensures 100% compliance on all marketplaces that interact with the contract, as fees are non-optional. This matters for high-value art collections and brand IP where creator revenue is non-negotiable.

Reduced marketplace optionality: Enforcing royalties on-chain can alienate marketplaces that resist fees, potentially limiting liquidity. It adds gas overhead to every transfer. This matters for mass-market PFP projects prioritizing broad distribution and low transaction costs over guaranteed fees.

Adapter-based integration: Royalties are enforced via marketplace policy (e.g., OpenSea's Operator Filter, Blur's marketplace contracts). This allows selective compliance and avoids alienating key liquidity pools. This matters for projects launching on multiple chains who need to adapt to varying ecosystem norms.

Policy-based vulnerability: Enforcement relies on the continued goodwill and central policies of major marketplaces. A marketplace like Blur can change its policy, instantly breaking the model (see 2023 royalty wars). This matters for long-term sustainable creator economies that cannot depend on third-party benevolence.

Guaranteed Execution: Royalty logic is embedded in the NFT's smart contract (e.g., ERC-2981, Manifold's Royalty Registry). Fees are enforced at the protocol level on every secondary sale, regardless of marketplace. This matters for creator revenue assurance in a fragmented market landscape.

Inflexibility & Upgrade Complexity: Changing royalty terms requires a new contract or complex proxy upgrades, creating friction. It also increases gas costs for minting and transfers. This matters for iterative projects or those needing to adapt business models post-launch.

Flexibility & Lower Cost: Royalties are enforced via marketplace policy (e.g., OpenSea's Operator Filter, Blur's marketplace logic) or legal agreement. Allows for dynamic rate adjustments and tiered structures without touching the contract. This matters for high-volume, gas-sensitive collections and experimental models.

Marketplace Fragmentation Risk: Enforcement depends on individual marketplace compliance. Royalties can be bypassed on non-compliant or emerging marketplaces (e.g., Sudoswap, Blur during its initial phase). This matters for long-term, trust-minimized revenue streams where creator control is paramount.

Guaranteed Immutability: Royalty logic is embedded directly in the NFT's smart contract (e.g., ERC-2981 standard). This creates cryptographically enforced compliance, making it impossible for marketplaces like Blur or OpenSea to bypass payments without forking the chain. This matters for creators who require absolute, trust-minimized revenue assurance.

Inflexible & High-Friction: Rules are hardcoded and cannot be easily updated post-deployment. This leads to poor user experience (e.g., failed transactions if a wallet lacks royalty funds) and limits dynamic business models (e.g., time-based rates, promotional waivers). It matters for protocols needing agile monetization strategies.

Maximum Flexibility & UX: Enforcement is managed via allowlists, API checks, or marketplace policies (e.g., OpenSea's Operator Filter). This enables dynamic rule sets, gasless transactions, and easy updates. This matters for platforms prioritizing seamless user onboarding and adaptive creator tools.

Centralized Trust & Fragility: Relies on the continued cooperation of centralized entities (marketplaces, indexers). Enforcement can be unilaterally removed, as seen with marketplaces dropping royalty support. This matters for long-term asset valuation and protocols building for a credibly neutral, decentralized future.