NFT, or Non-Fungible token, is a blockchain-based digital asset with its own unique identifiers that can be used to validate its legitimacy and ownership. Each NFT has a unique token ID and metadata, which simplifies the verification and validation procedure. In one of our earlier medium blog posts titled — “Beginners Guide to NFT”, we explained the basic information regarding NFT such as what is an NFT, how it works, what’s the difference between traditional blockchain and cryptocurrency digital assets and NFTs and various use-cases of NFTs. NFT Royalties is one of the popular use cases mentioned briefly in the blog post.
Let us now take a closer look at NFT Royalties and how they are assisting in the advancement and expansion of the NFT sector. NFT Royalties are essentially royalty payments made in cryptocurrency rather than conventional currencies. These royalties are paid to creators on each and every sale of their finished product. This is a great source of income for creators while helping them defend their interests, which is often difficult to achieve in the Web2 space and traditional financial arena. Furthermore, the adoption of NFT allows creators to benefit not only from the initial sale of their products but also royalties from later sales of those creations, facilitating a steady passive income source.
NFTs can range from artwork, music, or photographs to in-game products like gaming characters/skins/weapons or plots of land, as well as other metaverse-based virtual digital entities. In traditional Web2 and non-blockchain-based markets, the sale of a creator’s work is facilitated by middlemen and third-party corporate entities such as auction houses, music production houses and studios, and so on, whose legal contracts favour the profits of third-party entities over the best interests of creators. Furthermore, once the asset (music/artwork/picture/statue) has gone through its initial primary sale, it becomes very difficult to track the subsequent sale of these assets, and the existence of finely forged items also makes validating the authenticity of the original asset nearly impossible.
As NFT assigns a unique token ID and metadata to each digital asset/NFT token, it becomes very difficult to fake or replicate a creator’s work and also makes it easy to monitor the sold NFTs even after several secondary sales/transactions. Furthermore, NFT royalties allow artists to earn a fee on every transaction of their workpiece, whether primary or secondary (being sold/exchanged many times). This serves as a passive and endless source of income thereby fostering and developing a creative economy. And in contrast to traditional industry practises and business models, creators/artists can approach the NFT marketplace directly and sell their creations, eliminating middlemen and allowing creators to completely control how, where and to whom they sell their creations while also gaining full profits from the sale of their creations.
NFT marketplace plays an important part in fostering the creative economy by allowing creators to mint their creations into NFTs and selling them to their chosen audience. The concept of Marketplace has already fully integrated into the NFT ecosystem and is present in every single blockchain network that handles NFTs, establishing itself as a cornerstone of the NFT universe. Some popular marketplaces are even available across various blockchain networks and have cross-chain transaction features allowing creators to sell their creations to a larger audience. Presence in well-known and popular marketplaces provides creators with a better reputation, making their creations more appealing and in higher demand among the target audience (NFT/artwork/music collectors).
Overall, as the NFT industry grows and gains popularity in the creators’ world, more and more artists and content creators from many areas throughout the world are opting to promote their creations as NFTs. NFT Royalties provide a more beneficial environment for creators than previous practices, allowing them to perceive a consistent and durable stream of income from their creations. As a result, the creative economy-focused business powered by NFT royalties has significant potential and is predicted to grow as a large market both now and in the future.
Check out some of our other NFT-related blog posts — NFT Rentals and NFTs in Web3 Gaming
