Creators of Ethereum-based NFT have earned a whopping US $1.8 billion in NFT so far, according to the latest research report published by crypto firm Galaxy Digital. The report also said the average royalties on popular NFT marketplaces like OpenSea have also doubled in the past year.
Meanwhile, the top 10 NFT issuers have collectively garnered 27 per cent of all creator royalties and took home royalties worth nearly half a billion dollars. Yuga Labs, the creator of the blue-chip Bored Ape Yacht Club NFT collection, has earned the most in royalties, with more than US $147 million in payouts so far.
The US $4 billion start-up has expanded its focus to developing blockchain games. Yuga Labs’ feat in royalty income is not surprising, considering that its massive Otherside Metaverse Land mint earlier this year has garnered US $561 million in total sales in just 24 hours.
This concentration of wealth in the NFT space also raises important questions about centralization and potential opportunity for newbies in the space.It also suggests that the NFT market may be more centralized that what some might have thought.
Around 482 NFT collections have collectively earned nearly 80 per cent of all NFT market royalties. Sportswear brand Nike, which acquired digital collectibles start-up RTFKT, made US $91.6 million in consolidated NFT royalties. The figure includes various non-Nike-branded NFT offerings from RTFKT.
Other real-world brands such as Gucci, Adidas, Nickelodeon, McLaren, to name a few, have successfully integrated NFT into their business models and made some money from NFT royalties. The amount of royalties earned is, however, much lower when compared to the creator royalties of top Web 3.0-native entities like Art Blocks, The Sandbox, Doodles, World of Women and more.
The report also highlighted that average royalties on popular NFT marketplace OpenSea have doubled to 6 per cent within the past year from the earlier rate of 3 per cent. This is significant, considering the fact that OpenSea remains the largest NFT marketplace in terms of trading volume.
While new NFT marketplaces are still popping up on a regular basis, OpenSea still makes up the lion’s share of all NFT resales. Data from Dune Analytics and from the Galaxy Digital report suggest that OpenSea makes up more than 80 per cent of all Ethereum-based NFT marketplace volume.
OpenSea allows creators to choose the percentage of royalties they would like to receive from secondary sales. They can make this choice at the time of minting NFT projects through OpenSea. Those creators have collectively earned US $76.7 million so far in royalties from such sales.
Royalties have historically been praised as an important part of the NFT ecosystem that provide a steady stream of income for creators to continue developing various plans on their project Roadmaps. The said plans may include, but not limited to, creating a video game, throwing token-gated parties or even hiring more community moderators.
However, while royalties are considered a core value proposition of NFT, some industry experts also admit that royalties are not currently enforceable on-chain without sacrificing some principles of decentralization and self-custody – values that are held dear by many crypto proponents.
Notwithstanding the raging debate surrounding royalties on NFT, abandoning royalties means that creators would be parting with a substantial source of passive income. The royalty figures mentioned above proves that abandoning royalties could also mean potentially leaving millions on the table.