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X2Y2 Tweet about Custom Royalty
tweetstweetsAnnounced the "Custom Royalty" feature, which will allow buyers to choose the royalty they want to pay for their contribution to the NFT project (100%, 50%, or 0%), when choosing to pay 50% and 0% will return some of the royalties to the buyer (these royalties were originally paid to the project party or creator).
As soon as the news came out, heated discussions arose: Some people criticized and opposed the cancellation of royalties by X2Y2 and sudoswap, thinking that this was infringing on the copyrights and copyrights of creators and artists, and at the same time would seriously affect the capital flow of NFT project parties, and subsequent development may not be possible. Supporters believe that the royalties "steal away" the profits that should belong to NFT traders, which are additional and unnecessary expenses. At the same time, royalties should not be paid to those "soft rug" project parties, "do nothing" You should not continue to enjoy royalties.
All of a sudden, the "creator economy" that originally created a win-win situation turned into a zero-sum game of life and death. Looking back carefully, you will find that the NFT trading market has long since changed from a blue ocean gold rush to a red ocean fight.
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Christie's auction house has clear regulations on resale rights
RegulationRegulationIt clearly stated that the seller and its agent (auction house) must jointly and separately bear the royalties, and Christie's will collect a sum equivalent to the resale royalties from the buyer and hand it over to the relevant collection agency.
It can be seen that for the resale of works of art, the payment of royalties has always been due. However, due to the characteristics of traditional artworks in reality, such as the difficulty of distinguishing the authenticity of the works, the different laws of different countries, the difficulty of tracing the source, and the low transparency of information, it has always been difficult to implement the collection of royalties.
When art enters the blockchain and encrypted art is presented in the form of NFT, these problems are well solved:
The immutability of the blockchain and the transparency on the chain ensure that the assets of the encrypted art carried by the NFT are confirmed, traceable, and authentic.
"Code is Law", the smart contract ensures that the royalties can be distributed to the original creator/artist/project party in a simpler and more convenient way.
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As a third party, the trading platform is responsible for transferring royalties to creators/project parties
For a long time, buying and selling an NFT on mainstream NFT trading platforms usually has two "additional" fees, namely transaction fees and royalties, which are all paid by the seller. The transaction fee is collected by the NFT trading platform, and the royalties are collected by the NFT project party/creator.
This section takes the transaction process of an NFT as an example to describe the transaction process on the three NFT trading platforms, OpenSea, sudoswap, and X2Y2, which are mainly involved in the “Cancellation of Royalty” incident.
(For ease of calculation, assume that the selling price of this NFT is 100E, the royalty is 5%, and the transaction fees of the three NFT trading platforms are 2.5%, 0.5%, and 0.5% respectively)
OpenSea (transaction fee 2.5%, royalties set by NFT project party/creator)
1. The price of the seller’s pending order is 100E, and the buyer pays 100E
2. The OpenSea transaction fee is 100*2.5%=2.5E, and the NFT project party charges a royalty of 100*5%=5E
3. The seller finally receives 92.5E, and the buyer finally pays 100E
sudoswap (transaction fee 0.5%, bypassing the setting of NFT project party/creator charging royalties)
1. The price of the seller’s pending order is 100E, and the buyer pays 100E
2. sudoswap transaction fee charged 100*0.5%=0.5E, no royalties
3. The seller finally receives 99.5E, and the buyer finally pays 100E
X2Y2 (transaction fee 0.5%, royalties changed from NFT project side/creator settings to buyers deciding whether to pay)
1. The price of the seller’s pending order is 100E, and the buyer pays 100E
2. The transaction fee of X2Y2 is 100*0.5%=0.5E, assuming that the buyer chooses not to pay the royalties, the royalties will be returned 100*5%=5E
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sudoswap: With OTC market genes, reducing slippage as much as possible is a necessary condition for the smooth operation of the sudoAMM mechanism
Previously in "NFT's AMM made sudoswap"In the article, the former OTC predecessor of sudoswap and the current sudoAMM mechanism are introduced in detail.
sudoswap was originally created by0xmonsPublished in April 2021Over the Counter (OTC), it supports transactions of any combination of ERC20, ERC721, ERC1155 and other tokens. Users can customize the order expiration time and designate any or specific buyers for transactions. In addition, transactions through sudoswap do not charge transaction fees and royalties at all.
As an NFT over-the-counter trading market, it is a niche market. Most traders choose sudoswap after negotiating prices off-site, in order to avoid one of the buyers and sellers going back and forth to ensure that the transaction is safe. Before the official launch of sudoAMM, its trading volume and daily active people were almost negligible compared to trading platforms such as OpenSea.
The emergence of sudoAMM has changed the situation of the NFT market. sudoAMM is a centralized liquidity AMM similar to uniswap v3. Liquidity providers can freely choose a price range to provide liquidity, which improves capital efficiency. At the same time, the bonding curve (linear and exponential) is used to facilitate the transaction of NFT, and the automatic adjustment of the quotations of buyers and sellers improves the flexibility of traders and liquidity providers.
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sudoswap improves trade matching efficiency by reducing slippage
Take the above picture as an example, assuming that the fair value of an NFT series is 100E, the acceptable slippage fluctuation for both buyers and sellers is 1%, and the royalty is 5%. At this time, the buyer wants to buy at a price of around 100E, and the seller also hopes to receive the full payment of 100E after the sale. Therefore, the buyer will set the Offer at 99E~101E, while the seller will set the selling price at 104E~106E, and the matching efficiency is very low.
Summarize:
Summarize:
Sudoswap was formerly an over-the-counter trading market and later became an NFT trading platform. Because its market size is small compared to the entire NFT trading platform, the issue of canceling royalties has not been taken seriously. Now, as a potential strong competitor of the new NFT trading platform, this issue has to be brought to the table.
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X2Y2: There were NFT aggregators in the past, but now they have lost all their advantages and have no choice but to go to the wrong side
NFT trading aggregators such as Genie and Gem emerged as solutions for NFT liquidity. They can aggregate data from multiple NFT trading markets and are committed to solving the problem of incompatibility of pending order data between platforms, which optimizes the user’s trading experience .
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Sources of current X2Y2 trading users (Source: nansen)
The emergence of the variable NFT trading aggregator allowed X2Y2 to "borrow the wind". The aggregator smoothed out the information gap between the pending orders of various trading platforms, and X2Y2 gained a certain market share by virtue of low transaction fees. according tonansen dataIt shows that most of X2Y2's current user transactions come from the NFT aggregator Gem, which shows the close connection between the two.
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Sudoswap trading volume continues to rise
However, in July, sudoswap came out with the original sudoAMM, featuring low transaction fees (0.5%, the same as X2Y2) + zero royalties, and a unique automatic market maker system for NFT.
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Most of the low price pending orders on Gem come from sudoswap
to reportto report, In the early hours of August 26, someone discovered that sudoswap had been integrated into the NFT aggregator platform Gem.
Although the integrated Gem of this function has been "vaccinated" in advance, the reality of the pending order chart is far greater than the impact imagined: the floor prices of many NFT collections are all on sudoswap, and blue-chip projects such as Azuki and Penguin are also No exception.
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according toDune dataIt shows that the market transaction volume of sudoswap is rapidly catching up with X2Y2
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"Win-win co-creation" has become a "zero-sum game", has the creator economy lost?
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Supporting the "Royalty Cancellation" Viewpoint
The term "soft rug" is often used to describe those NFT project parties who give up building projects and communities after the sale. "Doing nothing" and still enjoying the royalties dividends has caused dissatisfaction in the community. The community and project parties do not trust each other. In addition to the opposite, many voices supporting the "cancellation of royalties" come from here.
However, it is now a bear market in the NFT market, and the overall macro environment is not optimistic. "Falling floor prices" and "not pulling orders" are also regarded as "doing nothing". At the same time, many projects are committed to developing projects with a long period of time. The pace of the encrypted world is fast. Once the progress of the project is slower than the holder's expectation, it will be defined as "doing nothing". When the holder makes a profit, he is more tolerant of the royalties, and regards the royalties as part of the cost; when the holders lose money, the psychology of seeking benefits and avoiding disadvantages will want to minimize the losses, and then the royalties are assimilated into a part of the losses.
Yuga Labs founder Wiley Aronow once said bluntly in the Full Send podcast: "We never look at the floor price, I don't care, the only thing I care about is the number of wallet holders, which is why each founder only owns one cause of the apes".
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Many artists oppose the "elimination of royalties"
"Abolition of royalties" violates the legal rights of creators and artists, and paying royalties has always been due. A number of artists have spoken out about this, and encrypted KOL Pranksy bluntly said in response to X2Y2’s official announcement of “custom royalties”: “You don’t take into account the creators and projects that you should be grateful for and live on.”
In the NFT world built on the basis of encrypted art, creators are the source of life. In order to survive the fight in the Red Sea, the NFT trading platform chose the path of infringing the creator’s copyright, “hold up the bowl to eat, put down the chopsticks and scold the mother”, regardless of the general trend of the “creator economy”, it will hit artists’ creation and development in the long run. The enthusiasm for project operation and the win-win and co-creation efforts of the community and creators may be ruined.
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What are the solutions for creators/NFT project parties to deal with the crisis of “cancellation of royalties”?
The royalty payment of NFT on the Ethereum network is not executed in its supporting smart contract, but is executed at the trading market level, that is, the interface of the NFT trading platform is called, and the trading platform is responsible for forwarding the royalties collected from buyers and sellers, and then distributing them For creators/project parties, this is why changing royalties can be "one word" on the NFT trading platform.
There are some options for the "elimination of royalties" crisis:
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Create a whitelist of tradable NFT markets
tweetstweetsMeans: It is possible to change the NFT smart contract, establish a whitelist of tradable NFT markets, or directly prohibit its NFT collection from placing orders on those NFT trading markets that support zero royalties.
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Truth Labs will launch its own NFT trading market
AnnounceAnnounceAn NFT trading market will be launched in a few weeks. Its ecological projects goblintown.wtf, The 187, SecretSocietyJHB, grumpls, burgers, etc. will be listed on the market for trading. The royalty for all NFT collections in this marketplace is set at 5%, with no platform fees.
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EIP-2981: NFT Royalty Standard
EIP-2981is an NFT royalty smart contract standard, which was jointly proposed by Zach Burks, James Morgan, Blaine Malone, and James Seibel in September 2020. EIP-2981 allows asset contracts (such as NFTs that support ERC-721 and ERC-1155 interfaces) to send NFT creators or rights holders a certain percentage of royalty amounts to be paid each time an NFT is sold or resold.
EIP-2981 implements standardized royalty information retrieval, and its characteristics can be summarized as "global", "cross-market", "on-chain royalty", and "backward compatibility". EIP-2981 enables accurate royalty payments regardless of which marketplace the NFT is sold or resold on. But it also has some problems: For example, only some mainstream NFT trading markets (such as LooksRare, Coinbase NFT) currently support this contract standard, while OpenSea, X2Y2, etc. do not support it for the time being.
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Coniun Announces Fight Back Against "Royalty Cancellation"
tweetstweetsAnnounced its sanctions against those NFT trading markets that support zero-royalty: delete links to zero-royalty-related trading platforms within the Coniun platform, cancel project offerings on X2Y2, withdrawjustaped.inepilogue
epilogue
The farce of "cancellation of royalties" is an unexpected result of the NFT trading platform fighting in the Red Sea in the bear market environment. There was sudoswap, the initiator, when low prices and subsidies could not become a moat. When facing a crisis of survival, X2Y2 chose to sacrifice the creation as the source of living water Those who use the name of "punishing soft rug" to harm the reality of the NFT ecology, the logic of which is not self-consistent.
X2Y2 can be called "preparing for danger in times of peace", but I believe that unrighteous teachers who are against the spirit of Web3, do not respect creators and artists, and are full of interests will eventually fail.
In the historical torrent of the "creator economy", some people joined the introversion and added fuel to the fire of "bad money drives out good money", while some chose to work quietly to make the cake bigger, focusing on long-term utility and the future of the brand. This is a consensus hard fork of speculators and idealists, and the road to Web3 utopia is long and difficult.
