The new marketplace, due to arrive by the end of the year, aims to ensure artists keep earning from their work. Its success could influence the policies of competing NFT platforms.
Magic Eden and Yuga Labs are teaming up to introduce the first ETH marketplace that honors creator royalties across all ETH NFT collections. According to the announcement, the exchange is expected to go live by the end of this year, the further details will be released soon.
Creator royalties are a significant source of income for NFT artists. Whenever a digital artist creates an NFT and it sells, they receive a share of the sale price each time it changes hands. This setup ensures that artists continue to earn from their work with each resale, motivating more creators to produce and market digital art.
The NFT community has seen heated debates over the enforcement of creator royalties. Some marketplaces that once mandated these payments have shifted to making them optional.
In August, OpenSea, a leading NFT marketplace, chose to discontinue a feature supporting royalty enforcement, leading to significant pushback from the community. In response, Yuga Labs considered removing their collections from the platform.
The absence of royalties notably impacts artists’ earnings, and this is particularly true for large collections like Yuga Labs’ Bored Ape Yacht Club. However, OpenSea’s decision is also comprehensible. Since royalties are not enforced at the protocol level, maintaining them leads to a loss of traders and trading volume to competitors that do not enforce royalties.
OpenSea itself has not been doing too well lately. Since August 2022, it has been losing ground to Blur, another prominent NFT marketplace, so it is keen to do whatever it takes to attract traders and volume back. Furthermore, recent reports indicate that OpenSea has laid off another 50% of its staff, which suggests that it may be facing difficulties.
Meanwhile, the market is in a downturn, with weekly trading volumes now at $50-80 million, a steep fall from the March 2022 peak of over $1 billion. Presently, about 100,000 traders are active in the NFT market each week, down from a high of 600,000 weekly traders in 2022.
Source: dune.com
On the upside, the NFT market tends to move in tandem with overall crypto market cycles, indicating that we may see a significant uptick in volumes during the next bull run. Indeed, with the recent increase in Bitcoin’s price, November’s NFT volumes have already shown a notable improvement over September’s figures.
It remains to be seen how Magic Eden and Yuga Labs will address the enforcement of creator royalties. If successful, their approach could significantly benefit artists. We will continue to Observe.