Royalties

Royalties let NFT creators earn from secondary sales, not just the initial mint. A collection might specify a 5 percent royalty, so when a piece resells for 2 ETH, 0.1 ETH goes to the creator and the rest to the seller, minus marketplace fees. The royalty rate is typically recorded in the token's metadata using a standard such as EIP-2981.

For a while royalties were a major income source for artists and projects, with some collections earning millions of dollars from resales. However, royalties are not enforced by the blockchain itself. A marketplace can choose to honor them or not, and in 2022 and 2023 several marketplaces made royalties optional to compete on price, which cut creator income sharply.

Some creators responded with contracts that block transfers through marketplaces that do not pay royalties, and others moved to upfront pricing models. Whether and how royalties are paid now varies by marketplace and collection, so buyers and creators should check the terms rather than assume.