35
Today's article is a look at NFTs and Royalties and I think that's quite an interesting topic, because who doesn't like a system whereby you make what is known as residual earnings (although a lot of people use the term passive income instead).
So one of the things that NFTs offered up as a hope to content creators, artists, writers and other creative kinds of people is a new way to monetize their work. Artists have typically suffered for their art - it's hard to make money off doing something that most people see as an enjoyable activity and the platforms that allow artists and writers and such like to make money off their craft do take a hefty chunk - they're in control. So I can see why NFTs have this appeal to this particular sector of the community, because they've felt that our traditional systems have not served them well on the whole over time, except for a few lucky people at the top of the pile who do make vast sums of money. So when you have an NFT you have the opportunity to automate royalties, and this of course is fascinating to software engineers, because we love the automation of tasks that previously involved armies of clerks and filing cabinets and things like that.
Now, one of the issues with selling an NFT is that the original creator of the artwork associated with the NFT and the NFT itself would probably like to make a royalty off each trade: profit from the onward selling of the NFT and its hopeful rise in value over time as it becomes more popular and desirable. Now one of the problems you have is that, although you can stick a bit of code in your NFT contract that siphons off cryptocurrency to the originator's address, you have an issue there because sometimes an NFT is sold from one person to another, and that should trigger a royalty payment. In other cases the owner may be simply transferring their NFT from one wallet to another. So if I bought a painting and I hung it on my wall and then later I decided to sell it on to another art collector and the contract agreement for the ownership of the painting said that the original painter was supposed to get a percentage of the transfer fee, then that's fine and well, but I would not be happy if every time I moved the painting from my living room to my dining room and then back again I had to pay some kind of fee to the painter. That would seem ridiculous, and that's the problem with putting automated royalties into NFT contracts, because different transfers occur for different reasons. And the second thing is that when it comes to tokens - the paying for tokens is usually done through a separate channel from the transfer, so normally you have a marketplace where the token may be held in escrow by the marketplace, and then somebody pays and the token is transferred to them and the payment minus the platform fee goes to the previous token holder. If you had a token where the payment was baked into it, i.e to get the token you transfer cryptocurrency to the token contract, well then you have an issue about “how can I ensure that the transaction goes ahead correctly” - you could write, I suppose, a whole load of complicated code that says that this token is now for sale, this is the asking price for the token, and this is the only address that I am going to sell it to - all these addresses are the only ones that I will consider a bid from, so then you're building an auctioning system into the token but that seems like an awful lot of work for a simple NFT token. I mean you're bolting on a whole bunch of other smart contracts in order to not just have a token that's a non-fungible indivisible unit owned by somebody but now you're building a whole auctioning site or a whole financial transaction system onto it as well, and really you want to try and keep things as simple as possible in smart contracts, because that would open up a hell of a lot of security vulnerabilities or attack vectors for malicious people.
So I think it's a fascinating area, and a lot of different solutions are being come up with to deal with it, but as is always the case in blockchain - it's early days things, are going to go wrong and some things are going to seem impossible at this stage, but then someone will have an insight and come up with a better way of doing it so I look forward to seeing where this space goes over time because I think it is absolutely fascinating.
Interested in learning more about Bitcoin, Blockchain, and Cryptocurrencies?
Subscribe to my Publish0x blog
The links throughout this article are provided for informational purposes only. I am not an affiliate of these companies, I make no recommendation regarding the companies or their services, and I have not received any compensation for linking to their content.
Follow me on instagram
Follow me on twitter
Thank you for reading!
