Yuga Labs—the brain behind the famous NFT collection Bored Ape Yacht Club—has come down heavily on OpenSea’s stance against creator royalties on secondary sales. The founders of Yuga Labs has proposed a DAO-based model, allowing creators more control over the handling of sales.
The discussion was set into motion when OpenSea — a reputed NFT marketplace — mentioned in a Twitter thread that it might stop enforcing royalties on the secondary sales of NFTs. OpenSea mentioned that only on-chain enforcement for creator royalties makes sense as it is a more transparent approach toward creator monetization.
Here is the Twitter thread for your reference:
There’s been a lot of discussion over the past few months about business models for NFT creators & whether creator fees (“royalties”) are viable.
Given our role in the ecosystem, we want to take a thoughtful, principled approach to this topic & to lead w/ solutions. 🧵
— OpenSea (@opensea) November 6, 2022
OpenSea also announced the launch of a new on-chain royalty enforcement resource, which would only be valid for new collections.
Why did the move trigger NFT creators?
With its calculated move to enforce NFT royalties on-chain, OpenSea takes a veiled jibe at royalties from secondary sales. This might be the NFT marketplace’s way of saying that they aren’t going to track secondary NFT sales and stay away from concerned royalty enforcements. The move triggered several NFT creators, and the founders of Yuga Labs amplified the voice of creators.
In a blog, Yuga Labs founder Gordon Goner condemned the move and even came up with a technical solution for making life easier for creators and even marketplaces like OpenSea. He, along with the co-founders and digital fashion hub 10KTF, has proposed the deployment of an allowlist model for the same. This model will be community governed, like a DAO, and would allow creators to approve secondary NFT sales and trades via marketplaces.
The allowlist model will come with a smart contract, where the trade would pass only if the list has the name of the facilitating marketplace. This way, creator royalties, even for secondary sales, will not be affected adversely.
Yuga Labs founders said that when BAYC was launched in 2021, the Yuga community had agreed on a 2.5% royalty commission on every secondary sale. The commission ensured that OpenSea made close to $35 million from the Ape sales.
Royalties from secondary sales raised $147 million for Yuga Labs. However, secondary NFT sales commissions added to these figures aren’t limited to BAYC NFTs. These include MAYC and Otherside’s metaverse NFTs as well.