Yuga Labs Leaves OpenSea Due to Removal of Royalties Enforcement

A great divide is forming in the NFT ecosystem over creator royalties.

On August 19, one day after OpenSea made public its decision to turn off the “Operation Filter” tool, Yuga Labs announced it would be taking its collections from the marketplace.

“Yuga Labs will begin the process of sunsetting support for OpenSea’s SeaPort for all upgradable contracts and any new collections, with the aim of this being complete in February 2024 in tandem with OpenSea’s approach.”

“Operation Filter” is a code snippet that allows digital creators to block NFT marketplaces that don’t enforce royalties from selling their work.

Operational since November 2022, the tool was one of OpenSea’s first strategies to maintain its market dominance over the recently launched competitor - Blur, the pro-trader NFT marketplace that turned the market upside down with its zero fees and optional creator royalties.

For the tool to work, it required the whole ecosystem to opt in, which according to Devin Finzer, Chief Executive Officer of OpenSea, didn’t happen: “Unfortunately, the ecosystem did not adopt the Operator Filter.”

Not surprisingly, when it’s optional to pay a fee, people usually opt out of paying it. Since digital collectibles marketplaces began to implement optional royalties fees last Fall, their volume started to decline until reaching a two-year low in June.

The unwillingness to pay creators for secondary sales went a step forward when rival marketplaces found ways to sidetrack Operation Filter, making the tool irrelevant, contributing to the decision to turn it off by the end of the month.

“Starting on Thursday, August 31, 2023 we’re moving to optional creator fees on OpenSea to better reflect the principles of choice and ownership that drive this decentralized ecosystem.”

The non-fungible tokens ecosystem is undergoing a challenging period where changing dynamics of supply and demand, increased competition, and low sales volumes are all happening at the same time. After having lost its position as the market leader, OpenSea seems to be desperately trying to make it out alive. But its strategy to do so isn’t sitting well with creators.

More than a “simple code snippet”, Operation Filter is turning out to be a deal breaker for creators who stuck with OpenSea for its apparent commitment to the ethos of art valorization.

Despite the drop in sales volume and market relevance of the studio behind Bored Ape Yacht Club (BAYC) in the last couple of months, their voice remains one of the loudest in the space.

While OpenSea is solely focusing on satisfying users’ need for lower fees, Yuga Labs’ CEO Daniel Alegre stressed the need to also consider creators’ financial well-being.

“For as much as NFTs have been about users truly owning their digital assets, they’ve also been about empowering creators. Yuga believes in protecting creator royalties so creators are properly compensated for their work.”

As the digital collectibles marketplace chooses to turn its back on the ones who it pledged to protect, a supportive community of Web3 creators warmly embraced Yuga Labs’s stance for supporting creator royalties, further rocking OpenSea’s boat.