by August Wang & Heather Ritchie
July 17, 2023
ERC721-C: A Game-Changing Upgrade for NFT Royalties
A potential solution to the challenge of NFT royalties has emerged, offering programmable royalties that empower creators and foster a fair ecosystem.
In recent months, the world of non-fungible tokens (NFTs) has faced a significant challenge with regards to royalties. Some exchanges were not honoring the royalties owed to creators, which sparked an outcry among artists and project founders. However, a potential solution has emerged in the form of ERC721-C, an evolution of Ethereum’s ERC721 token standard. Introduced by Limit Break, the free-to-play gaming studio behind DigiDaigaku. ERC721-C offers programmable royalties that provide creators with greater control over their intellectual property.
Key Features of ERC721-C
ERC721-C allows projects to opt-in to the new token standard, granting individual NFT holders the opportunity to gain the full benefits of this upgrade. The introduction of ERC721-C brings forth a range of intriguing possibilities for project founders. For instance, projects can now set royalties to zero for any NFT that sells below the mint price. This addresses a common concern raised by collectors who argue that if a project fails to gain traction and minters incur losses, should they be compelled to pay additional royalties? With ERC721-C, projects now have the option to waive royalties in such cases.
Another notable feature is the ability to program royalties to kick in only after a specific number of resales, such as the third time an NFT is sold. This can be positioned as a selling point to attract minters, particularly during periods of market downturn. Additionally, projects can choose to reward their most loyal holders by disabling royalties for those who have held an NFT for less than a year. This gesture expresses gratitude towards long-term supporters.
Sharing royalties between projects and holders is another compelling use case of ERC721-C. By offering revenue based on the project’s success, NFT collections can foster a mutually beneficial relationship between teams and founders. This approach encourages collaboration and aligns the interests of all stakeholders.
Most importantly, ERC721-C empowers projects to hard code royalties into the NFTs themselves, ensuring that marketplaces cannot set royalties to zero. This represents a critical development for the future of Web3, establishing a safeguard against the erosion of royalties that has plagued the NFT market.
Reviving the NFT Ecosystem
The significance of royalties cannot be understated. With platforms disrupting the market by implementing zero royalty structures, NFTs have suffered. The absence of royalties not only disadvantages small traders but also undermines the incentive for creators to participate in the NFT ecosystem. Projects rely on royalties to cover operational costs and maintain their businesses. When these royalties are disregarded, founders have significantly less motivation to build and improve upon their projects.
Fortunately, with the introduction of ERC721-C, the return to normalcy for NFTs seems promising. Projects will once again possess the necessary resources to sustain their operations, and founders can avoid harboring animosity towards their communities for evading royalties. Moreover, the implementation of ERC721-C will unlock a new range of utilities that teams can offer to their NFT holders, strengthening the alignment between projects and their communities.
A Fair and Sustainable Ecosystem
ERC721-C is a significant step forward in addressing the royalties problem in NFTs. By introducing programmable royalties, this token standard empowers creators, grants them greater control over their intellectual property, and ensures a fair and sustainable ecosystem. With ERC721-C, the NFT game is poised to change for the better, enabling a more harmonious relationship between projects, communities, and the broader NFT market.
Contributors statement
This work was a collaboration between the nameless editorial team.
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