NFT Royalties May Be ‘Dwindling,’ Galaxy Digital Researcher Says

Salmaan Qadir said NFT creators have earned upwards of $1.8 billion in royalties from secondary sales. But that number may be skewed.

AccessTimeIconOct 24, 2022 at 7:15 p.m. UTC
Updated Oct 24, 2022 at 7:54 p.m. UTC
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Fran is a writer at CoinDesk. He owns no crypto holdings.

Nearly $2 billion in royalties have been made on non-fungible token (NFT) marketplaces, but most creators have shared only a fraction of that amount, according to Galaxy Digital Research Associate Salmaan Qadir.

What’s more, Qadir told CoinDesk TV’s “First Mover,” the market for royalties may be dwindling.

“Because they’re driven by market volume and velocity of the NFT space in general, not many people are making tons of money from royalties,” Qadir said. Royalties, which are considered to be “social norms enforced by marketplaces,” Qadir said, are used as a way for creators to earn money on their work.

According to Galaxy Digital’s most recent report, NFT creators have earned upwards of $1.8 billion in royalties from secondary sales. That number however may be skewed; 80% of that amount was made by 482 creators. As well, the value is calculated at the time of transaction and does not gauge whether creators cashed out or held on to their earnings.

The marketplace itself is also changing.

The challenge for royalty-based platforms may be the emergence of zero royalty marketplaces, such as Yawww and Hadeswap. Magic Eden, which has 90% of the NFT market share on Solana, made the royalty-based requirement optional after feeling some heat from zero-royalty competitors, suggesting a significant shift.

What platform is used by creators can dictate the kinds of marketplaces that can thrive. OpenSea, which does have royalties, still has about 80% of NFT marketplace volume on Ethereum.

“On Solana, NFTs tend to be worth less money and tend to attract a mercenary type of trader that wants to flip,” Qadir said. “Ethereum, on the other hand, is home to most of the valuable NFTs in [the] space.”

Qadir said that whether royalties will be around in the next five to 10 years is a “heated debate” that will depend on whether they are seen as a “key value proposition” for online marketplaces.

CoinDesk reached out for comment from OpenSea and Magic Eden but did not hear back by the time of publication.

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Fran is a writer at CoinDesk. He owns no crypto holdings.

CoinDesk - Unknown

Fran is a writer at CoinDesk. He owns no crypto holdings.