Enforced Royalty

The NFT contract maintains a list of approved marketplaces. Sales can only occur on platforms in this allowlist. If a marketplace is not on the list, the contract will reject the transaction. This method:

• Centralizes control with the creator/DAO.
• Requires ongoing maintenance of the list.
• Can fragment liquidity by restricting where assets can be traded. It's a common approach for collections that want to guarantee royalties but rely on a curated set of partner exchanges.

Separate, modular smart contracts that handle fee logic. The main NFT contract delegates royalty enforcement to this external module. Benefits include:

• Upgradability: The enforcement logic can be changed without migrating the NFT collection.
• Specialization: Different modules can be designed for specific use cases (e.g., gaming vs. art).
• Gas efficiency: Complex logic is offloaded from the core transfer function. This is a more advanced architectural pattern seen in sophisticated NFT ecosystems seeking future-proof enforcement.

Non-technical methods that rely on community norms and legal frameworks.

• Creator blacklists: Publicly denouncing or delisting collections on marketplaces that circumvent fees.
• Terms & Conditions: Legal agreements that bind sellers and marketplaces to pay royalties, with breach-of-contract as a remedy.
• Community pressure: Collectors boycotting platforms that do not honor creator fees. While not programmatic, these methods can be effective in shaping marketplace behavior and are often used in conjunction with technical solutions.

The sale transaction is structured so the payment is automatically split between the seller and the royalty recipient. This is often implemented via:

• Marketplace-level logic: The exchange's smart contract handles the split at the point of sale.
• Proxy contracts/Wallets: Using a intermediary contract that holds funds and distributes them according to predefined rules. This method ensures the creator is paid directly from the sale proceeds, making bypass difficult without fundamentally altering the transaction flow. It's a core feature of many royalty-enforcing marketplaces.

Enforcement is delegated to a curated list of compliant marketplaces. The NFT contract's transfer logic checks if the transaction originates from an allowlisted marketplace contract. Sales on non-listed platforms (like decentralized exchanges) are blocked. This creates a walled garden where only platforms that agree to enforce the fee structure can facilitate trades, as seen in early implementations by CryptoPunks and other Larva Labs projects.

The most extreme form of enforcement: removing the ability to trade the asset entirely. By implementing soulbinding (making the NFT non-transferable except under specific conditions), creators eliminate the secondary market. Royalty enforcement becomes moot because sales cannot occur. This is used for membership passes, achievements, and identity credentials where utility, not speculation, is the primary goal.

Enforcement occurs off-chain through traditional legal frameworks. The NFT's license agreement explicitly states that commercial rights are only granted if secondary sales comply with royalty payments. Violations constitute a breach of contract and copyright infringement. Projects like Yuga Labs' Otherside and Art Blocks have employed this strategy, using the threat of legal action to compel marketplace compliance, especially where on-chain methods are circumvented.

The most robust method, where royalty logic is hardcoded directly into the NFT's smart contract or a marketplace's transfer function. This uses functions like _beforeTokenTransfer to intercept sales and divert a percentage of the sale price to the creator's wallet before the transaction completes. It is resistant to circumvention but requires upfront design and can increase gas costs.

• Example: An NFT contract that calls a payRoyalties function on every transfer.
• Limitation: Cannot be retrofitted to existing, non-compliant collections.

A allowlist/blocklist system for marketplaces, popularized by projects like OpenSea. The NFT contract references a central registry that designates which marketplaces are authorized to facilitate trades. Transactions on non-compliant marketplaces are blocked by the smart contract.

• Pro: Allows creators to blacklist marketplaces that don't honor fees.
• Con: Centralizes trust in the registry maintainer and can fragment liquidity.

Enforcement mechanisms introduce specific security and design trade-offs.

• Centralization Risk: Systems like operator registries create a single point of control or failure.
• Gas Inefficiency: Additional logic checks increase transaction costs for users.
• Market Fragmentation: Blocking certain exchanges reduces liquidity and can harm collector experience.
• Upgradeability Concerns: Adding enforcement post-mint often requires proxy contracts or mutable logic, which can be a security vulnerability.

Enforcement changes the economic incentives for all market participants.

• Creator-Aligned Incentives: Guaranteed fees encourage continued project development and support.
• Arbitrage Opportunities: Price discrepancies may emerge between enforcing and non-enforcing marketplaces.
• Collector Consideration: Buyers must factor in the royalty as an additional, non-recoverable cost of acquisition, potentially affecting secondary market prices and liquidity.

Some blockchains or token standards bake royalty logic into the protocol layer. For example, Ethereum's EIP-2981 defines a standard royaltyInfo function that any marketplace can query. This is a soft-enforcement approach; it provides the royalty data but relies on marketplace goodwill to pay it.

• Advantage: Universal standard, easy for new marketplaces to integrate.
• Disadvantage: No direct enforcement; payment is optional for the marketplace.

The Manifold royalty enforcement system uses a combination of techniques:

• ERC-2981 Standard: For reporting royalty information.
• Transfer Hooks: Custom logic in their ERC721Creator extension to intercept transfers.
• Flexible Overrides: Allows creators to set different royalty addresses and percentages per-token. This design highlights the balance between standardization, powerful enforcement, and creator control.