NFT Marketplace X2Y2 Changes Course On Royalties
Inspired by OpenSea’s stance on creator royalties for NFT collections, X2Y2 will now support royalty charges set by artists on its platform. The Ethereum-based NFT marketplace popularized the idea of an optional royalties model which raised a lot of controversy in the digital art industry.
Ethereum-based non-fungible token (NFT) marketplace X2Y2 has reversed course on its decision to phase-out creator royalties. Over the past few months marketplaces were discussing the possibility of rejecting incentives paid out to NFT creators by buyers, a move made popular by platforms like X2Y2 which allows buyers to opt how much they want to pay in fees to creators.
Earlier this month, the world’s largest digital collectibles marketplace OpenSea launched a tool for creators to implement royalties for their latest projects. The ‘Open Filter Registry’ also allows artists to blacklist marketplaces that do not enforce royalty fees.
“It is clear that many creators want the ability to enforce fees on-chain and we believe that choice should be theirs – not a marketplace’s – to make. So we’re building tools we hope will balance the scales by putting more power in creators’ hands to control their business model,” stated OpenSea in a twitter thread.
OpenSea is yet to clarify its stance regarding creator charges for existing projects and is inviting community feedback for its optional royalties model. The company has set a December 8th deadline after which the marketplace will make royalty fee payments optional for all projects on the platform. Currently creators can charge 5% to 10% as royalty from the final asking price of an NFT listed on OpenSea. This is paid by the trader when they sell the item over any secondary marketplace. However, this fee is not completely enforceable on-chain but NFT marketplaces like OpenSea have always honored them.
Recently, Solana-based marketplace ‘Magic Eden’ and Ethereum-based ‘LooksRare’ announced their decision to move to an optional royalties structure. While Magic Eden opted for a model that scrapped the 2% platform fees it charged from buyers and sellers, LooksRare said it would not charge royalties by default but instead share 25% of its platform fee with creators and owners of the NFT.
The debate on royalties has one side arguing that it is a way to help creators continually generate revenue from further sale of their NFTs, while the other side argues that the incentive model is a burden on buyers who are forced to pay extra charges when purchasing already expensive digital artworks. Optional or zero royalty models were first introduced by newly launched marketplaces like X2Y2, SudoSwapAMM, and YAWWW. In September, Solana-based NFT project DeGods, creators of the y00ts and t00bs collection, moved to a zero-royalty model meaning the project won’t charge any royalties from sales. However, DeGods will support artists who want to add royalties to their works.
X2Y2’s Flexible Royalty program allows buyers to choose how much they want to pay as creator fees. The optional incentive model implemented for new and existing projects on the marketplace is only enforceable on artwork and access pass NFTs while profile picture projects (PFP) like CryptoPunks and Bored Apes are not eligible for the option. However, when given the option of not requiring to pay creator charges, most buyers opt not to pay them at all. Trading data on X2Y2 showed that compared to the month of September when 75% of traders opted to pay royalties, In October that number fell to just 18%.
On Friday, X2Y2 announced its decision to scrape the Flexible Royalty model and enforce creator-set royalties for all collections on its marketplace – both existing and newly-launched ones. The platform that grew in popularity during the summer praised OpenSea’s decision to stand with creator-set royalties, while admitting that many newly launched NFT projects implemented the OpenSea blacklist code which bans marketplaces that don’t fully enforce royalties from listing the items for sale.
“We used to believe the best way to handle royalties is to give both parties, creators and traders the right to choose. It is the rationale behind our Flexible Royalty feature, And we still believe so. Putting beliefs aside, if there was anything self-evident in crypto, it’s the “code”. Since OpenSea released the OperatorFilter, most of the new projects have sided with it,” wrote X2Y2 in a Twitter thread.
OpenSea has since responded saying that the platform has removed X2Y2 from its marketplace blacklist. This means NFTs that use OpenSea’s OperatorFilter code can now be traded on X2Y2. The move will be much welcomed by the NFT creator community who were outraged by optional and zero royalties models.