Royalty Sniping

This is the core mechanism where a sniper bot detects a pending NFT sale on a marketplace that enforces royalties (like OpenSea). The bot executes a flash transaction to buy the NFT before the original sale, then immediately resells it to the intended buyer on a marketplace with zero or minimal royalty enforcement. The profit is the difference between the sale price and the royalty amount that was avoided.

• Key Tools: Bots monitor public mempools for pending transactions.
• Target: Listings on platforms with strict royalty policies.

Snipers rely on arbitrage between marketplaces with different royalty policies. They purchase an NFT on a platform that honors full creator fees and instantly sell it on a zero-royalty marketplace like Blur or Sudoswap. The strategy capitalizes on the price discrepancy created by the avoided fee, which is typically 5-10% of the sale price.

• Example: Buying a 1 ETH NFT on OpenSea (with a 5% royalty) and selling it for 1 ETH on Blur nets the sniper ~0.95 ETH, bypassing the 0.05 ETH royalty.

Royalty sniping is enabled by the transparency of public blockchain mempools. Bots scan for specific transaction patterns, such as approve and safeTransferFrom calls to marketplace contracts. By offering a higher gas fee, the sniper's transaction is prioritized by miners/validators, allowing it to be processed before the victim's sale. This is a form of Maximal Extractable Value (MEV).

• Vulnerability: Relies on transactions being broadcast publicly before execution.

The primary consequence is the erosion of on-chain creator royalties, a key revenue model for artists and projects. Widespread sniping forces marketplaces to adopt optional royalties to remain competitive, creating a tragedy of the commons where individual rational actions (avoiding fees) collectively undermine the ecosystem's sustainability. This reduces predictable income for creators who rely on secondary sales.

Projects have developed technical defenses against sniping. Transfer hooks (like OpenZeppelin's ERC721Royalty) can enforce royalty payments on any transfer, regardless of marketplace. Blocklist functions deny transfers to known sniper contracts or zero-royalty marketplaces. The EIP-2981 royalty standard provides a universal interface for fee information but does not, by itself, enforce payment.

• Limitation: These measures can conflict with user ownership rights and composability.

The sniping phenomenon has directly shaped marketplace design. Responses include:

• Optional Royalties: Platforms like Blur make fees payer's choice, reducing snipeable transactions.
• Private Transactions: Services like OpenSea Pro use private transaction relays to hide sales from the public mempool.
• Enforcement Tools: Some marketplaces blacklist NFTs that bypass royalties on other platforms.

The ecosystem has shifted from universal enforcement to a fragmented, competitive model.

Platforms have adopted divergent strategies to handle royalties, creating a fragmented landscape.

• Full Enforcement: Marketplaces like OpenSea (with Operator Filter) and Blur (for select collections) enforce royalties on-chain or via policy.
• Optional Royalties: Platforms like LooksRare and X2Y2 allow buyers to pay royalties voluntarily.
• Zero-Fee Marketplaces: Aggregators and marketplaces like Sudoswap and Blur (for non-filtered collections) bypass royalties entirely to offer lower trading fees.

Creators and developers have built technical solutions to enforce royalties at the smart contract level.

• EIP-2981: A royalty standard that allows NFTs to declare recipient addresses and fee percentages directly in their smart contracts.
• Operator Filter Registries: Systems like OpenSea's, which allow collections to block sales on non-compliant marketplaces by restricting approved operator contracts.
• Transfer Hooks: Custom contract logic that executes on NFT transfers, enabling fee enforcement or blocking unauthorized sales.

Widespread sniping has significantly disrupted the projected revenue models for many NFT projects.

• Revenue Erosion: Collections without robust enforcement can see >80% of secondary sales volume occur royalty-free, drastically reducing sustainable funding.
• Shift to Alternative Models: Creators increasingly rely on primary sales, mint fees, and utility-driven models rather than perpetual royalties.
• Collection Valuation: Perceived enforceability of royalties can become a factor in the long-term valuation and desirability of an NFT collection.

Sniping is a form of on-chain arbitrage that exploits pricing inefficiencies between marketplaces with different royalty policies.

• The Process: A bot or trader buys an NFT on a zero-royalty marketplace (e.g., a liquidity pool) and instantly lists it on an enforcing marketplace (e.g., OpenSea) at a slightly higher price.
• Profit Calculation: The profit is the difference between the sale price and the purchase price, minus gas fees. The sniped royalty becomes the arbitrageur's profit.
• Automation: This activity is typically executed by MEV (Maximal Extractable Value) bots scanning for profitable opportunities across decentralized exchanges and marketplaces.

The royalty debate has created a fundamental schism between key stakeholder groups with opposing incentives.

• Pro-Enforcement (Creators & Collectors): Argue royalties are essential for sustainable project development and long-term ecosystem health.
• Anti-Enforcement (Traders & Aggregators): View royalties as an inefficient tax that reduces market liquidity and trader profitability.
• Marketplace Dilemma: Platforms face a trade-off between supporting creators and attracting trading volume with lower fees, leading to strategic fragmentation.

The enforceability of royalties touches on evolving areas of digital property law and contract design.

• Contractual vs. Social Expectation: Royalties specified in a project's website are a social contract, while those encoded via EIP-2981 or transfer hooks are more legally defensible on-chain obligations.
• Terms of Service: Marketplaces' legal agreements define their role in enforcing or bypassing creator-set fees.
• Future Regulation: Some jurisdictions may explore whether creator royalties constitute a form of resale right (droit de suite) for digital assets, potentially mandating enforcement.

Royalty sniping is a specific form of transaction front-running on blockchains. An attacker uses a bot to monitor the mempool (the pool of pending transactions). When they detect a buy transaction for an NFT that includes a royalty payment, they submit their own purchase transaction with a higher gas fee, ensuring the network prioritizes and confirms their transaction first. They then immediately resell the NFT to the original, now-failed buyer, pocketing the difference that would have been the creator royalty.

This exploit relies on specific technical conditions:

• On-chain enforcement: Royalties must be enforced by the marketplace's smart contract logic at the time of sale.
• Mempool visibility: The blockchain (e.g., Ethereum) must have a transparent mempool where pending transactions are visible.
• Gas-based ordering: The network must use a transaction ordering mechanism (like a gas auction) that allows a higher-fee transaction to jump the queue. Platforms using private transaction relays or alternative consensus mechanisms are less susceptible.

The primary victim is the creator or rights holder who loses their designated revenue. This undermines the fundamental economic model of many NFT projects. Secondary impacts include:

• Erosion of trust in platforms that promise royalty enforcement.
• Increased volatility and manipulation in NFT markets.
• Skewed incentives that favor flippers and arbitrage bots over long-term collectors and community members.

Marketplaces and protocols have developed several countermeasures:

• Private Transaction Relays: Using off-chain systems (like Flashbots Protect) to submit transactions directly to validators, bypassing the public mempool.
• Royalty Enforcement at Contract Level: Designing NFT smart contracts (e.g., ERC-721C) that mandate royalty payments on all transfers, regardless of the marketplace used.
• Time-Delay Mechanisms: Introducing a cooldown period between listing and sale for high-value assets.

For participants in the NFT market:

• Buyers may inadvertently purchase sniped assets at inflated prices, as the sniper's profit is baked into the final sale price.
• Sellers listing on platforms vulnerable to sniping may experience failed transactions and gas waste.
• Due diligence is required: understand a platform's royalty policy and transaction privacy features before conducting large trades. Using marketplaces with robust anti-sniping infrastructure is critical.

Royalty sniping is part of an ongoing protocol-level arms race between exploiters and defenders. As platforms implement private mempools, snipers develop techniques to infiltrate or mimic these systems. This has accelerated the development of more sophisticated MEV (Maximal Extractable Value) protection tools and has forced a re-evaluation of whether royalties should be enforced on-chain by the smart contract, off-chain by the marketplace, or made optional.

A fee, typically a percentage of the sale price, paid to the original creator or rights holder on secondary market sales. This is a key revenue model for artists and projects, enforced at the smart contract or marketplace level. Key mechanisms include:

• On-chain enforcement: Fees are hardcoded into the NFT's transfer logic.
• Off-chain enforcement: Marketplaces voluntarily honor and collect fees.
• Royalty standards: EIP-2981 is a common standard for on-chain royalty information.

Platforms like Blur and Gem that source liquidity from multiple NFT marketplaces into a single interface. They are central to sniping because:

• They enable sweeping (buying multiple NFTs in one transaction).
• They often implement complex transaction bundling to optimize for gas and speed.
• Their reward structures (like Blur's points system) incentivize high-volume, low-royalty trading, creating the economic conditions for sniping.

The profit a validator or searcher can extract by reordering, including, or censoring transactions within a block. Royalty sniping is a form of application-layer MEV. The process involves:

• Searchers run bots to detect profitable opportunities (e.g., a listed NFT priced below its true market value).
• They use flashbots bundles or high gas fees to ensure their buy transaction is executed before others.
• The profit is the difference between the purchase price and the instant resale value, minus gas and any unavoidable fees.

A design paradigm where royalty payment is not enforced by the NFT smart contract itself, making it optional for marketplaces. This shift, led by marketplaces like Sudoswap and Blur, is the root cause of widespread sniping. Consequences include:

• Race to the bottom: Marketplaces compete by offering lower or zero fees to attract traders.
• Creator pushback: Projects implement royalty enforcement tools like blocklists or on-chain enforcement (e.g., Operator Filter Registry) to punish non-compliant marketplaces.
• Fragmented liquidity: NFTs may trade at different prices on royalty-enforcing vs. non-enforcing platforms.

The lowest listed price for an NFT within a specific collection. Sniping bots primarily target assets at or near the floor. Key dynamics:

• Floor sweeping: A sniper buys multiple floor NFTs in one transaction to resell instantly at a profit, often bypassing royalties.
• Price manipulation: Sniping activity can cause rapid, artificial fluctuations in the recorded floor price.
• Liquidity impact: Creates a volatile and risky environment for legitimate buyers trying to purchase at the listed floor.

Technical solutions implemented by NFT projects to compel royalty payment. These are direct responses to sniping and optional enforcement. Common approaches:

• Blocklists: Smart contracts that revert transactions from non-compliant marketplace addresses (e.g., early OpenSea approach).
• On-chain enforcement: Upgraded contracts that deduct royalties on any transfer (e.g., Manifold's Royalty Registry).
• Allowlists: Only pre-approved, royalty-honoring marketplaces can facilitate trades. These tools create an ongoing technical arms race between creators and snipers.