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digital
daily

digital daily: Collision Course

NFTs have been a blessing to artists. Not only has the technology provided an avenue to display artwork globally, but creators have been empowered with passive income on secondary sales through royalties. There was a whopping $1.8 billion in royalty revenue in 2022 alone. However, a controversial trend among leading NFT marketplaces has persisted. Magic Eden, X2Y2, and LooksRare have made royalties optional. Why? While royalties are a blessing to the artist, they are not for NFT traders. Royalty trades include a 2.5% average fee in the cost of an NFT trade, driving traders to seek cost efficiency where they can. Web 3.0 NFT marketplaces are pressured to offer optional or zero royalties to retain buyers and stay ahead of the competition. The clash between content creators and publishers does not end with web 3.0 NFT marketplaces. Apple continues to insist on its burdensome NFT policy in its Appstore. This policy includes imposing a 30% commission on NFT purchases, restricted access to external NFT marketplaces, and limited NFT interoperability outside the Apple ecosystem. The objective is to centralize NFTs into a familiar walled garden. To compete against this, a web 3.0-centric phone becomes more appealing to bypass web 2.0 huge commissions. In web 3.0 marketplaces, possible solutions are in the content creator selecting where the NFT can be sold to control royalty payments. Marketplaces like LooksRare have also opted to pay content creators a portion of their own fees collected. Maintaining the right cost-benefit balance for all parties involved is key to the sustainability of the NFT space. An inevitable collision course is now strongly surfacing. Competition is good.

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