Original author:William M. Peaster
Compilation of the original text: The Way of DeFi
Original author:
Compilation of the original text: The Way of DeFi
As the NFT ecosystem continues to grow, with no-fee or low-fee marketplaces emerging, many creators face reduced royalty income from secondary sales.
The good news is that there are several strategies NFT creators can use to compensate for declining royalty income.
Image Credit: Generated by Maze AI
In this article, I will share four paths creators can take to better position themselves in this ever-changing NFT royalty environment.
Image Credit: Generated by Maze AI
As DCinvestor previously explained, NFTs are best understood as “permissionless, censorship-resistant bearer assets.” In other words, NFTs are decentralized digital things that can be moved directly between individuals without interference from centralized intermediaries.
As the NFT space has recently been grappling with the downward trend in royalty payments fueled by the NFT marketplace war between Blur and OpenSea, methods -- such as blocking transfers, burning tokens of non-royalty payers, and market blocklists -- have been brought to the fore. out as a potential way to stem the decline in revenue.
The problem with the above approaches is that they are all centralized strategies that erode the fundamental value proposition of NFTs as decentralized bearer assets.
Still, NFT creators have a range of options to consider when it comes to compensating for falling royalties.
1) curb supply
The first and most basic approach a creator or collection team can consider is to keep some supply of NFT items for themselves.
These reserved supplies can be used later for major sales as the project develops, whether it be a drip for further financing over a period of time, or as Larva Labs sells its CryptoPunk supply to Yuga in 2022 Labs as part of a broader IP deal.
There are two general variations on this strategy, either keeping the unminted supply (think minted-on-demand series like Chromie Squiggles, where +250 NFTs can still be minted for special occasions out of the series' max supply) or Keep minted supply (e.g. Larva Labs minted the first batch of 1000 NFTs from the CryptoPunks smart contract and sold from that batch over time).
Of course, just because a project keeps some supply for itself doesn't mean it can't try to earn royalties, although they may be on the decline lately.
For example, the creators of Terraforms took a zero-royalty approach and just chose to keep the unminted supply for a primary sale later and align themselves with the community long-term, but by contrast, when the goblintown.wtf team in 2022 When they did free minting in May 2019, they kept 1000 NFTs and started charging 7.5% royalties on secondary sales (later moved to their own custom marketplace, which implemented a 5% royalty).
2) Become an LP with supply
In the NFTfi space, there is a growing wave of NFT automated market maker (AMM) agreements, where creators or projects can offer NFTs to earn transaction fees for swaps.
For example, the Sappy Seals team obtained 50 of their own NFTs, and then started using these NFTs for LPs on sudoswap in August 2022. Since then, the team has earned thousands of dollars worth of revenue through transaction fees. Other projects that have used this LPing strategy with similar success include Based Ghouls, Finiliar and Allstarz.hereAnother more advanced variation of this approach would be to do LPing in an Abacus spot pool, but there are no examples of this yet. Abacus is a new NFT valuation protocol focused on the pricing of NFTs. The team proposes a new way of NFT LPing, where projects link some of their treasury funds to their own liquidity pools on Abacus to generate revenue and accurately price all NFTs in the pool. exist
here
Learn more about this concept.
3) DIY market
Sometimes, when you need to do something, you have to do it yourself. In the contemporary NFT market space, projects looking to enforce royalties are increasingly launching their own local marketplaces and centralizing activity there in order to attract transactions from currently unreliable places like Blur, OpenSea, etc.
Fortunately, NFT infrastructure projects like Reservoir are making it increasingly easy for creators and collectibles to deploy their own custom, royalty-friendly marketplaces and provide aggregated NFT listings.
For example, Finiliar uses Reservoir to power its local marketplace system at finiliar.com. They set up the front end the way they like it, and then Reservoir takes care of all the actual market action.
4) Incentive royalties
There are many different ways that this incentive can be achieved. For example, NFT teams can use an indexing system to identify all of their collectors who have cashed out royalties in the past year, and then roll out unique benefits for these royalty-supporting collectors, such as whitelists, NFT airdrops, chats with token thresholds , leaderboard competitions, and more.
