Programmable NFT Royalties: A Radical Change for NFTs

Introduction

NFTs are about to experience the most significant upgrade ever. A new open-source library of smart contracts for NFTs has been publicly announced, and it could be applied to any NFT collection, old or new. This news comes after Limit Break, one of the leading companies in the NFT sector, announced its open-source library of smart contracts for NFTs. They are the company behind DigiDaigaku, and their recent development will push the industry forward. In this article, we'll tell you everything you need to know about it!

NFT Royalties Explained

Royalties are a small percentage of every NFT sale. Usually, that percentage is between 2.5% to 10% of the total sale price, which the seller pays. That percentage of the sale is then shared between the original creator of the NFT collection and the marketplace (online platform) where the sale occurred. Royalties represent a revenue stream and incentivize NFT creators because it generates passive income on each sale in perpetuity. In 2022, a big issue arose when some NFT marketplaces offered the 'zero-royalty' feature. It incentivized sellers to list their NFTs on those marketplaces. But this was a setback for the NFT industry. Zero-royalties eliminated the incentive for creators to keep releasing collections. No collections result in less trading volume, which is terrible for all parties involved.

I get it, not! So… What's New?

Programmable Royalty Sharing Smart Contracts. While these five words might initially sound confusing, they could represent the most significant progress in the NFT space.

Limit Break introduced an on-chain royalty-sharing system that benefits creators, collectors, marketplaces, and affiliates. This upgraded version of NFTs is a game-changer for the industry and is one of the factors that will push the space closer to mass adoption.

This new royalty-sharing model is an open-source library of smart contracts that can be applied to any NFT through staking. Soon, NFTs can have programmable on-chain royalties, offering several new features that will benefit the NFT industry. Limit Break recently announced this development through an in-depth Medium publication. It is an opt-in system where creators and collectors can decide on which NFTs to apply it to. It could be applied to existing NFT collections or future ones. Furthermore, it can also be applied to individual tokens or an entire collection.

In this context, staking represents converting (or upgrading) the NFTs through these smart contracts. It is optional, meaning that collectors and creators can decide whether to stake their NFTs. It can also be undone if a collector wants to return the token to its original version.

The NFTs can now be staked and set a specific percentage of the royalties directed to the creator, marketplaces, affiliate, and, drum roll… collectors. Yes. Owning an NFT could generate passive income through royalties simply by holding that token in your wallet.

Upcoming Features of NFTs:

Enforced Minimum Floor Operator

NFTs will now have the option to implement specific minimum floor prices in which to be traded. Floor price refers to the lowest price of an NFT within a collection. This is to protect the value of the NFT. A minimum floor operator contract is beneficial when the collection creator wants to keep the price at a specific range and avoid going to zero.

What's the practical use of this? Let's use a few examples. In the first one, we will use the example of a successful artist. Say, Joseph is a very successful and reputable artist. He decides to launch the NFT collection of his art pieces. However, launching an NFT collection comes with some risks. What if the collection doesn't get enough attention for a lack of good marketing? Resulting in a low number of sales, and the price might drop close to zero. This could drastically affect his career and reputation as an artist, and it may inaccurately 'show' that his art has no value. However, by setting a minimum floor price, he can have better control over the value of his art pieces. This means sellers can only re-sell that specific art piece at a minimum value, which Joseph, the creator, specifies. This way, the collection still holds its value. This benefits all parties involved: the creator, the seller, the buyer, and the marketplace.

Are you an artist looking to start your NFT journey? Read this guide on how to become an NFT artist

Another practical application of minimum floor prices is in gaming. By setting a specific minimum price for a high-value in-game item like a weapon for 100 ETH, the weapon might not have much trading activity, but it will retain its value thanks to the minimum price protection. The possibilities are numerous with this new feature!

Future Royalties for Collectors

The old owner of an NFT can claim future royalties, even if a new owner holds the NFT. This incentivizes people to keep promoting NFT projects, even after they have sold or exited a project. For example, you decide to mint an NFT and become the first owner. Later, you decide to sell it. Thanks to these, you could receive a percentage of the next ten trades of that specific NFT. This opens the door for additional revenue streams for collectors. The collection creator also benefits from this feature because it incentivizes a higher number of trades, which means more revenue from royalties.

Rewards

By staking, or in other words, by upgrading the NFT. The owner could be eligible for premium airdrops, claims, or community rewards. These are features that the creator of the collection could specify.

Reveals

When buying during the first public sale of an NFT, the art (or image) usually remains unrevealed. This means the buyer must wait for a while (days or months) until the reveal date. A potential feature of this upgrade is to give people the option to pay to get an NFT revealed earlier OR wait for a specific time-lock to be fulfilled. Of course, this all depends on the rules set by the creator of the NFT collection.

Long-Term Incentives

Some new features include time-based rewards. For example, long-term holders of a specific NFT could receive a percentage of royalties on the NFT they held based on the length of time they owned the NFT. For instance, If you keep an NFT staked for longer than a year, you could receive monetary rewards, or airdrops, after a specific time frame is fulfilled.

Affiliate Program for NFTs

NFT Royalties will be subdivided using 'payment splitters' set to specific beneficiaries. This could mean people would receive a percentage of the royalties for promoting NFT projects. More information will come out soon on how these features will work.

WEN?

Version one is out today, and it's available through GitHub. Version 2 will be released on February 2023. The features mentioned in this article are very brief. This new system of smart contracts opens the world to hundreds of potential uses. Read the full article here.

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