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Cryptogambling / ‘Protecting creator royalties’: Yuga Labs cuts back support on OpenSea

‘Protecting creator royalties’: Yuga Labs cuts back support on OpenSea

Publish Date: 22/08/2023
Stock Photo, tags: creator yuga - images.unsplash.com

Stock Photo – images.unsplash.com

The creator of Bored Ape Yacht Club and CryptoPunks, Yuga Labs, is pulling away support for OpenSea following its decision to stop enforcing creator royalty fees through Operator Filter.

The company said via X (formerly Twitter) that it would gradually suspend the ability to trade its newer NFT collections on the marketplace by February 2024. Yuga CEO Daniel Alegre said the company “believes in protecting creator royalties so creators are properly compensated for their work.”

OpenSea launched the Operator Filter, a tool that allows creators to restrict secondary NFT sales to marketplaces that enforce creator royalties, in November last year. However, the marketplace announced last week that it would “sunset” the tool at the end of August, citing a lack of adoption by the entire ecosystem, platforms bypassing the tool and pushback from creators.

The NFT marketplace also announced that creator royalty fees would be optional on the secondary sales, which means creators may not always receive royalties if NFT owners were to sell their pieces. This will be highly disadvantageous to creators like Yuga, which has seen explosive prices on its collections.

A blog post revealed that royalty fees could be added up to around $35 million for Bored Apes alone in November 2022. All of these transactions were conducted on OpenSea.

Responses from other creators

Yuga’s announcement was met with positive reactions from members of the BAYC community. NFT project founders like EllioTrades and Alex Becker also supported the move.

Forgotten Runes Wizards Cult CEO and co-founder dotta said he “loved to see how Yuga Labs responded to OpenSea.” He asserted that NFT creators “have enough power in aggregate to move to royalty-paying marketplaces” instead of staying on OpenSea.

Luca Netz, the CEO of the Pudgy Penguins, described Yuga Labs’ decision as a “great move.” Netz hinted that his project might follow Yuga Labs’ lead by moving to another marketplace that enforces creator royalty fees. Based on Netz’s recent correspondence with Coinbase, the NFT project may consider moving to Coinbase NFT.

Royalties pillar to creator ecosystem

One of the key selling points of digital art, especially NFTs, is that it allows artists to be compensated each time their work is resold. However, some marketplaces began to slash or eliminate these royalties.

For example, X2Y2, a token-based platform, experimented with zero percent creator royalty fees last year. Blur, another NFT platform, slashed its creator royalty fee to as low as 0.5 percent. As of July 5, NFT royalties have reached their lowest levels in the past two years.

OpenSea was initially a strong supporter of enforcing creator royalties. However, the market conditions forced the marketplace to follow other NFT marketplaces and scale back its royalty fee protections to remain competitive. Now, royalty fees have become optional.

Analysts say OpenSea’s decision is “ironic,” as the platform initially promised to create new revenue streams for digital artists.

Although creator royalty fees are not the only way for creators and businesses to make money, they are a major source of revenue. Many businesses tend to produce a limited number of NFTs and sell them at a low price. The value of these NFTs can grow over time, and creators and businesses can earn commissions on subsequent sales.

The Bored Ape NFTs, for example, were sold for around $220 each at launch. Since then, the value of these collections has increased significantly. Some pieces have been resold for hundreds of thousands of dollars.

The Bored Ape collection previously had a 2.5 percent resale fee. After acquiring the Meebits NFT collection, Yuga Labs increased the resale fee to five percent.

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