What Are NFT Royalties?
NFT royalties are automatic payments sent to the original creator every time their NFT is sold on the secondary market. Unlike traditional art (where an artist earns once at the initial sale), NFT royalties allow creators to earn a percentage of every future resale — forever — as long as the royalty is enforced.
For example: An artist creates an NFT collection and sets a 5% royalty. They sell NFT #100 for 0.5 ETH. Months later, the buyer resells it for 3 ETH. The artist automatically receives 0.15 ETH (5% of 3 ETH) — with no paperwork, no chasing payment, no middlemen.
This was one of the most celebrated innovations of the NFT revolution: programmable, automatic income for creators in perpetuity.
How Royalties Are Set
When a creator deploys an NFT smart contract, they specify:
- Royalty percentage: Typically 2.5% to 10% (5% is most common)
- Royalty recipient address: The wallet that receives the payments
This data is encoded in the smart contract. The standard used on Ethereum is ERC-2981 (the NFT Royalty Standard), which allows any marketplace to read the royalty info from the contract.
Example Royalty Settings
| Collection | Royalty % | Use of Funds |
|---|---|---|
| Bored Ape Yacht Club | 2.5% | Yuga Labs operations |
| Art Blocks | 5% | Artist (primary) + platform |
| Nouns DAO | 0% | No royalties by design |
| Typical PFP project | 5–7.5% | Team/development fund |
How Royalties Are Paid (Technically)
When you buy an NFT on a marketplace like OpenSea:
- You send ETH to the marketplace smart contract
- The contract splits the payment:
- Royalty amount → creator’s wallet (e.g., 5%)
- Marketplace fee → marketplace (e.g., 2.5%)
- Remainder → seller’s wallet
- The NFT token transfers to your wallet
This all happens atomically in one transaction — no human involvement needed.
The Royalty Enforcement Crisis
Here’s where it gets complicated. NFT royalties are not enforced at the blockchain protocol level — they’re enforced at the marketplace level. This distinction matters enormously.
What Happened in 2022–2023
In late 2022, the marketplace Blur launched with a strategy that made royalties optional for traders. Sellers could choose to pay royalties or skip them to maximize their take-home. To compete, other platforms followed:
- LooksRare (earlier): made royalties optional
- X2Y2: made royalties optional
- OpenSea: initially resisted, eventually moved to optional royalties for most collections
The result: creator royalty income collapsed by 80–90% on many collections almost overnight. Artists who had built business models around royalty income were devastated.
Why Marketplaces Can Bypass Royalties
Because royalties are enforced by marketplace code (not blockchain code), any marketplace can simply choose not to send the royalty payment. The NFT transfer still works — the royalty just never gets paid.
The ERC-2981 standard says "here’s where to send royalties and how much" — it doesn’t force anyone to actually send them.
Attempted Solutions
The NFT community has explored several approaches to enforce royalties at the contract level:
Operator Filter (OpenSea’s Approach)
OpenSea introduced a tool that lets creators block transfers from marketplaces that don’t enforce royalties. Collections that adopted this would only be tradeable on royalty-compliant marketplaces.
Outcome: Limited success. Blur eventually moved to partial royalty enforcement as a compromise. OpenSea later abandoned the Operator Filter.
On-Chain Royalty Enforcement
Some newer smart contract designs reject NFT transfers unless a royalty payment is included in the same transaction. This enforces royalties at the code level — no marketplace can bypass it.
Downside: Reduces NFT liquidity and composability. DeFi platforms, lending protocols, and other smart contracts struggle to integrate with these stricter standards.
EIP-2981 + Protocol-Level Enforcement
Ongoing proposals in the Ethereum developer community aim to bake royalty enforcement into the EVM (Ethereum Virtual Machine) itself. Not yet implemented as of 2026.
Solana’s Programmable NFTs (pNFTs)
Metaplex (Solana’s NFT standard creator) launched Programmable NFTs (pNFTs) which allow creators to set rules that are enforced at the token level — including required royalty payments.
Outcome: Partially successful on Solana, though adoption has been mixed.
What Royalties Mean for Collectors
Buying Considerations
- A higher royalty rate means you’ll pay more to sell on royalty-enforcing marketplaces
- On royalty-optional platforms, the full royalty goes to you instead of the creator
- Some collectors ethically choose to pay royalties even when optional
Floor Price Impact
Collections with high royalties (7.5%–10%) can see reduced secondary trading activity because the cost to buy-and-flip is higher. Lower royalties sometimes correlate with more liquid markets.
Supporting Creators
Paying royalties (when optional) supports the artists and teams building the collections you own. A project with a well-funded team can build more utility, fund marketing, and maintain community — which can support floor price long-term.
The Future of NFT Royalties
The royalty enforcement debate is far from settled. Several trends to watch:
- Hybrid models: Some marketplaces enforce partial royalties (e.g., 0.5–1% minimum) as a compromise
- Protocol-level enforcement: Technical solutions that remove marketplace discretion entirely
- Community norms: Social pressure to pay royalties even when optional
- Revenue diversification: Creators building revenue streams beyond royalties (tokens, events, merchandise)
The idealistic promise — "creators earn forever from their work" — was real, but the implementation has been messier than anticipated. The space is actively working toward better solutions.
Browse upcoming NFT collections on the NFTRadius Calendar or learn more in our NFT Wiki.