Secondary Royalty

Royalty logic is embedded directly in the smart contract, making it programmatically enforceable. The contract automatically diverts a percentage of the sale price to the creator's wallet. This is the most robust method but requires upfront design and is often tied to specific marketplaces that respect the contract's logic.

• Example: An NFT's transfer function includes a fee calculation sent to a predefined address.
• Limitation: Not all marketplaces or lazy minting solutions honor on-chain enforcement.

Royalties are applied based on the marketplace's internal policy and off-chain metadata, not contract logic. The platform acts as a trusted intermediary, collecting and distributing fees. This is the most common method but is opt-in and revocable by the marketplace.

• How it works: The platform reads the seller_fee_basis_points field in the NFT's metadata and applies it at sale.
• Key Risk: Creator revenue depends entirely on the marketplace's policy, which can change (e.g., OpenSea's optional creator fees).

A control mechanism, like OpenSea's Operator Filter, that allows creators to restrict NFT sales to marketplaces that enforce royalties. The NFT's contract checks a registry to see if a given marketplace (operator) is allowed.

• Purpose: To make royalty enforcement a prerequisite for liquidity.
• Controversy: Seen as restrictive by some, leading to debates about decentralization and owner property rights. Upgradable registries also introduce centralization risk.

Royalties can be programmatically split among multiple parties, enabling complex revenue-sharing models directly on-chain.

• Common Splits: Payments can be divided between the original creator, co-creators, DAO treasuries, or charity wallets.
• Implementation: Managed within the smart contract's payment logic or via external payment splitter contracts that receive the royalty and distribute it according to predefined shares.

The fundamental tension between creator monetization and owner sovereignty. Perfect on-chain enforcement is difficult without restricting an owner's ability to freely transfer their asset, a core property of true ownership.

• Zero-Royalty Marketplaces: Platforms like Blur emerged by prioritizing trader value, making royalties optional.
• Result: A fragmented ecosystem where royalty yields depend heavily on the marketplace of sale and the underlying contract's design, leading to unreliable income for creators.

This refers to technical mechanisms that enforce royalty payments, going beyond merely providing royalty data. Protocols implement logic to make payment to the creator a mandatory part of the trade settlement.

• Marketplace-Level: Platforms like Blur and OpenSea have implemented optional fee enforcement for listed collections.
• Protocol-Level: Standards like EIP-721C (Creator Fee Standard) and ERC-7496 (NFTCreatorFee) enable enforceable fees directly in the NFT's smart contract logic, reducing reliance on marketplace goodwill.

On Solana, the Metaplex Protocol is the foundational standard for NFTs and their associated royalties.

• Core Standard: The Token Metadata program includes a creators array where royalty shares and addresses are defined.
• Enforcement Model: Historically enforced at the protocol level via the Token Auth Rules program, which could block non-compliant transfers. This has shifted towards a more flexible, marketplace-coordinated model post the "State of Royalties" update.

An operator filter is a contract-level allowlist/blocklist system that restricts which marketplaces can trade an NFT, conditional on honoring creator fees.

• Mechanism: The NFT's transfer function checks if the marketplace (operator) is on an approved list.
• Example: OpenSea's Operator Filter Registry (EIP-721C implementation) was a prominent, though controversial, example that allowed creators to block sales on non-fee-paying marketplaces. It has since been sunset.

Standards and tools exist to manage royalty splitting, where sale proceeds are automatically distributed among multiple parties.

• On-Chain Splits: Protocols like 0xSplits and EIP-2981-compatible contracts can define multiple recipients with precise percentage allocations within the royaltyInfo response.
• Use Cases: Essential for collaborative projects, funding DAO treasuries, or ensuring ongoing revenue shares for co-creators and platforms without manual intervention.

The most secure method, where royalty logic is hardcoded into the NFT's smart contract. The contract itself enforces payment to a designated address before a transfer is finalized. This is often implemented via the EIP-2981 standard for NFT Royalties. Key characteristics:

• Immutable: Rules cannot be changed post-deployment.
• Protocol-Level: Enforcement is native to the asset.
• Limitation: Cannot be applied retroactively to existing, non-compliant collections.

The most common method, where centralized marketplaces (like OpenSea or Blur) voluntarily honor and enforce royalty payments as a policy. This is a social contract, not a protocol guarantee.

• Central Point of Failure: Royalties depend on the marketplace's continued goodwill and policy.
• Optional Royalties: Some marketplaces make them optional for buyers, leading to significant slippage.
• Blacklisting: Creators may blacklist marketplaces that don't enforce royalties, but this fragments liquidity.

An advanced on-chain method using smart contract hooks that intercept transfer functions. When an NFT is sold, the transaction is routed through an enforcing contract (like Manifold's Royalty Registry) which validates the payment. This approach:

• Adds a Layer: Sits between the seller and buyer.
• Can Be Upgradable: Allows for logic updates without modifying the original NFT contract.
• Introduces Complexity: Adds gas costs and potential new attack vectors for the hook contract itself.

A reactive enforcement strategy where creators programmatically restrict where their NFTs can be traded. The smart contract checks if a marketplace or protocol is on an allowlist before permitting a transfer.

• Proactive Defense: Can block known non-compliant venues.
• User Experience Friction: Can confuse users and lock liquidity.
• Arms Race: Marketplaces may find technical workarounds, leading to ongoing evasion tactics.

Non-technical methods to incentivize royalty payment. This includes community pressure, creator prestige, and access-gated utility.

• Token-Gated Content: Royalty payments could be required to access future airdrops, IRL events, or digital content.
• Reputation Systems: Marketplaces that reliably pay royalties may be favored by top creators.
• Inherently Weak: Relies on extrinsic incentives rather than cryptographic guarantees.