Swapping done right — Part II
NFT resale royalties grant the artist (some might say the wallet) the right to receive a fee on the resale of their works of art. And in that matter NFTs are revolutionary as it enables artist on a global scale to receive royalties and therefore participate in secondary sales. As some would have it, where the real money is made with their art.
Brief knowledge detour of resale royalties (or droit de suit — the right to follow — how it is called in French): resale royalties were proposed in Europe in the 19th century to support artists during challenging times throughout their lifetimes and to counterbalance the imbalance between first and secondary sales. Until today there are only two places in the world where there are existing operating schemes in place which permit resale right protections — Europe and Australia. In California, the one place in the U.S. which had a resale royalty scheme, it was struck down as unconstitutional in 2012.
Back to the future and NFTs.
In terms of resale royalties, the NFT universe took matters in its own hands. Artists, creators and builders are implementing royalty fees in their smart contracts, which usually revolves around 5–10%. So whenever a secondary sale is happening, best case scenario is that the creator gets a certain percentage of the trade. Additionally a standard was created, the NFT Royalty Standard, or ERC-2981, which — and here I am quoting one of the creators of the standard:
allows for a digital asset to present a simple, standardized and GAS efficient solution to any 3rd party about what are the expected, contractual royalties to be paid out. In essence, a focus on simplicity with an aim to help wider adoption from marketplaces.
For more on ERC-2981 read this and this.
While not all marketplaces are set up to grant royalties to the artists, it is important for the collectors (buyers and sellers alike) to know that artists count on that passive income. And it does not matter if it is a Beeple, a Tyler Hobbs or some never heard of artist. They deserve their fair share of participation on a sale. On a side note, when buying an NFT you have agreed to all the terms written in the smart contract, including royalty fees.
Since OpenSea announced that private sales use the same structure as public sales, I see more and more people using swap.kiwi to “sell” their NFTs. That’s because of the implication the OpenSea announcement came with. You now have to pay a 2.5% fee to OpenSea for a private sale.
https://twitter.com/natechastain/status/1433579040867237892
How do these sales look like. Well here is a great example:
https://twitter.com/swapkiwi/status/1436447120672841729
A Fidenza was basically sold for 173 ETH. The additional NFT is only there to complete the swap. The example I chose is also worth mentioning because the seller chose to send a 5% royalty fee, privately, to the artist — which equals 8.65 ETH or roughly 30.000 USD.
NFTs are a movement everyone is benefitting from, not only resellers but also and finally artists. If you make money from selling NFTs, reach out to the artist, ask for their wallet address, and send them their fair share of royalties. Let’s make this a better place than the existing art market.
