NFT royalties are a way for creators to earn a percentage of the sale value each time their NFT is sold on the secondary market.
The creator defines the terms in the smart contract, which then enforces the royalties automatically whenever the NFT is sold in a secondary market. Thus, creators can continue to earn income from their creation even after it has been sold once.
For example, if an artist creates an NFT and sets a royalty percentage of 10%, and then sells the NFT for 1 ETH, they would receive 0.1 ETH (10% of the sale price) every time the NFT is subsequently sold. If the NFT is sold for 10 ETH in a secondary market, the artist would receive 1 ETH as a royalty.
NFT royalties are a key feature of many NFT marketplaces. However, not all NFTs have royalty features and not all marketplaces enforce NFT royalties.
NFT royalties benefit creators and artists, who get a recurring income from their creations. They no longer have to worry about losing out on subsequent sales of their work and can even receive increasing returns as their popularity grows. Buyers also benefit, as they can verify the authenticity of what they are buying and resell the assets at an assured price.
NFT royalties are typically calculated as a percentage of the NFT's sales price. The percentage varies between 3% to 10% and remains the same for all subsequent sales, but the amount earned by the creator may differ depending on the sales price.
Some NFT marketplaces have eliminated or limited NFT royalties. This shift in trend began in the Summer of 2022 when some marketplaces made royalties optional and introduced a "tipping" system. However, this change has created financial turmoil for many artists who rely on passive income from their work. While not all NFT marketplaces have eliminated royalties, some artists have boycotted exchanges that no longer support NFT royalties for their digital assets.
Copyright laws depend on the country where the creator of the NFT is located. In general, most countries have copyright laws protecting digital works such as music, images and videos. Additionally, some countries have enacted specific legislation to address digital copyright issues. However, the legal framework surrounding NFTs is still evolving, and it is important for creators to consult with legal professionals to ensure that their rights are protected.
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