Illustration: Brendan Lynch/Axios
Just as Instagram, the biggest social network for looking at pictures, opens up to non-fungible token sales, it looks like the potential for NFT's to provide artists with recurring income is fading.
The big picture: Fewer and fewer marketplaces are honoring artist royalties — a payment that rewards creators during secondary sales — built into NFTs.
Why it matters: If the coolest creators stop making cool stuff, interest in the NFT scene could dry up. That extreme scenario is unlikely, but some creators — such as those for whom making digital collectibles had been just barely worth it — might stop.
Driving the news: If the old news adage that three makes a trend is right, then this is a trend.
Of note: OpenSea declined to comment to Axios on this trend. Everyone is waiting to see when and if the dominant marketplace drops royalties.
What we're watching: The layer-2 scaling system for NFTs, ImmutableX, has a solution in its ecosystem to enforce royalties through whitelisted and blacklisted marketplaces. It announced today that it would deploy the solution to Ethereum.
Our thought bubble: It doesn't feel great, but the writing is on the wall. Royalties are going to go.
Zoom out: There's a parallel happening right now in the broader cryptocurrency market, as exchanges are in a race-to-the bottom in trading fees.
Context: For collectors — the ones that buy an NFT every now and then, sit on them and hold a long time, and maybe use them as keys to get into some parties — paying a 3 to 8 percent royalty one day isn't that discouraging.
Be smart: A part of the popular narrative around NFTs was that royalties were built into the operation of the blockchain. This was never true.
The other side: There could be a bright side for everyone. Making fees optional could foster new ways for creators to get creative about how to foster stronger communities.
Meanwhile, people voluntarily paying royalties now appear to be dropping fast.
The bottom line: $1.8 billion in royalties have been paid out to creators on the Ethereum blockchain alone, according to Galaxy Digital. That number is, undoubtedly, growing much more slowly now.
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