Magic Eden, the leading marketplace for NFTs built on the Solana blockchain, has just announced that they are making royalties optional for NFTs bought on their marketplace. Optional royalties mean that if you are buying an NFT on Magic Eden, you can decide whatever percentage of that sale you want to go back to the original NFT creator. Prior to this announcement, royalties were usually set by the creator themselves. On top of this, Magic Eden is also temporarily waiving their platform fees.
The Magic Eden team described this decision in a tweet on October 15. The company described data indicating that NFT buyers are increasingly moving towards marketplaces that implement optional creator royalties. They said, “royalties are not enforceable on a protocol level, so we have had to adapt to shifting market dynamics.” Simultaneously, Magic Eden is launching a hackathon to develop pro-royalty & creator monetization tools, with $1 Million in prize money at stake. This series of announcements was met with passionate feedback on Twitter, with many people responding either in favor or against this decision.
We recently wrote about NFT project DeGods announcing that they are doing away with royalties, something that has created debate in the industry. Now, with Magic Eden being such a popular marketplace, their decision has wide reaching consequences. Since it is not easy to enforce royalties technologically, Magic Eden is essentially saying that providing buyers with options on what royalties to provide is a potential solution for ensuring that creators get compensated. And since NFT buyers are already moving towards marketplaces that implement zero or optional royalties, it seems that the current creator-defined royalty model has some challenges. This still leaves an open question on how to fairly compensate NFT creators, whether it’s through defined royalties or another method.
Regardless of the positive or negative reaction from different people within the NFT space, other companies and marketplaces are likely now more inclined to have zero or optional royalties. The landscape of NFT marketplaces grows bigger every day, and each subsequent marketplace needs some kind of competitive advantage. Magic Eden has made the structure of royalties and platform fees their own weapon to compete. Let’s see how their competitors respond.