Second Realm

Eric P. Rhodes, Artist

Artist Royalties, Capital Redistribution, and the NFT Revolution


The digital renaissance, powered by NFTs and Web3, has ushered in a new era for artists. While the opportunities are vast, so are the challenges, especially when it comes to the contentious topic of artist royalties.

A Brief Overview of Artist Royalties

The concept of artist royalties has its roots in the European Renaissance when artists began to be recognized for their individual talents and unique contributions to culture.

However, it wasn’t until the 20th century, particularly with the rise of the music and film industries, that royalties became a standardized practice. These payments ensured that creators earned a share from the resale or reuse of their work, acknowledging their continuous contribution to its value.

Over time, as industries evolved and digital media emerged, the debate around royalties intensified, leading to the complex landscape we navigate today. This history underscores the ongoing struggle for artists to gain fair compensation for their enduring creative impact.

With this backdrop, let’s dive into the intricacies of this debate in the context of the Web3.

The Heart of the Debate

In traditional art markets, artists rarely benefit from secondary sales of their work. NFTs promised a departure from this norm for many. They offered the potential for artists to embed royalties, ensuring they get to participate in the future success of their work, as Matt Kane points out so eloquently. But how is this promise holding up today?

Smart Contracts

Smart contracts, the bedrock of NFT transactions, can be programmed to automatically allocate a percentage of secondary sales to the original artist. However, they’re not foolproof. Clever maneuvers, like off-chain agreements and wrapping NFTs, can bypass automated royalties. And not all platforms enforce these contracts uniformly. Platforms like Blur and LooksRare disregard artist-set royalties and OpenSea recently shifted in strategy to compete. It seems like support for artist royalties has waned significantly as NFTstats.eth points out..

Social Contracts

Beyond the code lies an age-old concept: the social contract. In the NFT space, it translates to collectors consciously honoring royalty agreements out of respect for the artist, even if not bound by a smart contract. Ultimately prioritizing mutual respect, transparency, and the unwritten social contract over mere profit. This ensures artists are fairly compensated for their work’s ongoing value. We can call this Ethical Collecting for short.

Projects vs. Artists

The NFT landscape is diverse, with brand-backed projects and individual artists. And both have their place, but they operate on different paradigms. Projects tied to larger brands or startups promise future utility and community benefits. In contrast, individual artists offer their art as the primary value, dedicating their lives to their craft. Understanding this distinction is crucial when discussing royalties and capital redistribution.

The Power of Capital Redistribution

Capital redistribution, especially through mechanisms like royalties for creators, can foster a more equitable and sustainable economic ecosystem. By reallocating resources, we can reduce economic disparities and support emerging talent. In the NFT space, this could mean using royalties to fund an artists ongoing presence in the space.

The Power of the Public Ledger

Blockchain’s inherent transparency can be a boon for artists. Every NFT transaction is publicly recorded, allowing artists to track their work’s journey. This transparency can be also leveraged to hold collectors accountable and ensure artists receive their due.

Tips for Artists

For artists looking to grasp the nuances better, consider the following:

  • Educate Yourself: Dive deep into how different NFT platforms handle royalties. Some enforce them by default, while others might offer more flexibility for traders and collectors.
  • Engage with Your Community: Open a dialogue with fellow artists and collectors. Share experiences, discuss challenges, and brainstorm solutions.
  • Promote Ethical Collecting: Use your platform to advocate for the importance of honoring artist royalties. Highlight the value of the social contract and the mutual respect it fosters.

Proactive Steps

Artists aren’t powerless in this debate. Here are some proactive measures to consider:

  • Choose Platforms Wisely: Align yourself with NFT platforms that prioritize artist rights and transparency. Platforms that make royalty structures clear can help ensure you’re compensated fairly.
  • Direct Engagement: Consider reaching out directly to your collectors, emphasizing the importance of royalties and the mutual benefits they offer.
  • Collaborate with Fellow Artists: There’s strength in numbers. Collaborative efforts, like joint exhibitions or collective statements, can amplify the message.

The Path Forward

The world of NFTs and Web3 is dynamic, with the landscape evolving rapidly. While challenges exist, so do opportunities for artists to shape the future. By understanding the nuances, advocating for our rights, and making informed choices, artists can ensure they not only thrive in this new era but also redefine its contours.