This wealth concentration raises concerns over centralization and opportunity since just 10 NFT issuers to own 27% of all creative royalties. According to a new report by Mike Novogratz’s Galaxy Digital today, Ethereum NFT manufacturers have collected $1.8 billion in royalties from secondary sales on markets like OpenSea.

Galaxy Digital researchers Sal Qadir and Gabe Parker revealed that the average royalty fee for NFT developers on OpenSea, the most significant overall marketplace by transaction volume, grew from 3% to 6% over the last year. The researchers also identified a concentration of royalties among only ten companies, suggesting that the NFT economy may be more concentrated than previously thought.

The top ten got around half-billion dollars in royalties or 27% of the total Ethereum NFT royalties. According to the report based on Flipside Crypto data, 482 NFT collections together garnered 80% of market royalties. NFTs, unique blockchain tokens that reflect ownership are often “minted” or sold on a third-party website developed by the NFT manufacturers or through a launchpad made available to specific markets. After the minting process, NFTs may be resold on marketplaces such as OpenSea, Magic Eden, LooksRare, and others.

I think what is obvious to me on NFT royalties
1. they are a really cool mechanism for creators to earn additional revenue
2. if it’s not enforced directly in the tech the market will move around them
3. they must be unambiguous to users🧵

— toly 🇺🇸 (@aeyakovenko) October 14, 2022

The Bored Ape Yacht Club creator, Yuga Labs, gets the most excellent NFT royalties. The $4 billion startup has shifted its focus to blockchain game production and generated significantly more than $147 million in royalties alone. That is hardly surprising given that Yuga’s massive Otherside metaverse land mint made $561 million in 24 hours earlier this year.

Wylie Aronow (“Gordon Goner”) and Greg Solano (“Garga”) joined Dan Roberts and Kate Irwin on the gm podcast to discuss Bored Ape Yacht Club parent company Yuga Labs and its size and influence in the space, Ape haters, NFT haters, the SEC investigating Yuga, Buzzfeed “doxxing” Aronow and Solano earlier this year, and more. According to numbers compiled by Dune Analytics and the Galaxy study, OpenSea accounts for over 80% of all Ethereum NFT marketplace traffic. That is, even though new NFT marketplaces are constantly emerging. Watch Episode 21 of the gm podcast on Apple or Spotify to subscribe.

When minting NFT projects using OpenSea, creators may choose the percentage of secondary sale royalties they want to receive. These artists have so far collected royalties totaling $76.7 million from these sales. That qualifies for the third position on Galaxy’s list. Other notable NFT developers on the list include Chiru Labs (Azuki), Proof (Moonbirds and Proof Collective), and the teams behind The Sandbox, Doodles, and Gary Vaynerchuk’s VeeFriends.

Citing a second data set concentrating just on legacy brands, Galaxy listed Nike as the highest earner with $91.6 million in revenues. On the list are also Dolce & Gabbana, Gucci, and Adidas. This page features non-Nike NFT items created by RTFKT, a digital studio Nike acquired in 2021.

Also, read; Solana Blockchain: A Guide to the NFT Platform

There are rumblings of royalty.

Historically, royalties have been hailed as an essential component of the NFT ecosystem, providing a consistent cash flow for artists to continue developing various goals on their project “roadmaps,” such as the production of a video game, the organization of token-gated events, and the hiring of additional community moderators. According to Qadir and Parker, royalties constitute an “essential value proposition of NFTs.” Royalties still need to be enforced on-chain without jeopardizing the values of decentralization and self-ownership, which many crypto advocates cherish.

On-chain royalty enforcement may cause a blockchain trilemma similar to that Ethereum co-founder Vitalik Buterin has extensively addressed and that rival platform Algorand pledges to solve. Instead of being enforced on-chain, creator-imposed royalties are often implemented via centralized NFT marketplaces. This month, NFT royalties have been the subject of much discourse. The creator of the pseudonymous Solana NFTs, Frank, decided on October 9 to “experiment” by erasing all earnings from his DeGods and y00ts profile picture NFT collections.

Our next experiment. pic.twitter.com/VmoDfXvcyu

— DeGods (@DeGodsNFT) October 9, 2022

He took action following a rise in Solana marketplaces refusing creative royalties or letting sellers select whether to pay them. After losing significant market share to rival platforms, Magic Eden, the dominant Solana marketplace, said last week that it would make royalty payments optional. “We acknowledge that this judgment will have substantial effects on the ecosystem,” the marketplace stated on Twitter, adding that it hopes “new royalty-protecting regulations will be adopted.” By not paying royalties to inventors, NFT sellers avoid a 5 to 10 percent reduction of the secondary selling price.

Some Twitter users have criticized Magic Eden’s action, labeling it “by far the worst decision” and “a desperate effort to grab market share.” Thursday, Metaplex, the creator of Solana’s existing NFT standard, said it is developing a new standard capable of imposing on-chain royalties. As the debate about NFT royalties rages on, one thing is sure: eliminating royalties would result in writers forgoing a substantial passive income stream and potentially leaving millions of dollars on the table.