NFT exchanges slash artist royalties to the tune of $1.5 billion as market slump deepens

economictimes.indiatimes.com:

The friction stems from moves by top NFT exchanges Blur and OpenSea to slash royalty rates payable to artists when a token’s ownership changes, in the hope that lower costs will lift depressed levels of buying and selling. But diminished artist income could stanch new work, ossifying a market where trading volumes have already crashed 95% from $17 billion in January 2022, according to figures from Token Terminal. Royalties peaked that month at $269 million but were just $4.3 million in July this year as the rates paid fell to 0.6% per transaction from as much as 5%, researcher Nansen said.

“It’s a shortsighted strategy, neglecting the fact that sustainable success in this space is built on a delicate balance of empowering both traders and creators,” said Phillip Kassab, the growth lead for NFT and gaming at blockchain technology specialist Sei Labs. Cumulative monthly royalties hit $1.5 billion during a purple patch from August 2021 to May 2022, Nansen data show, aided by the popularity of collections such as Yuga Labs Inc.’s Bored Ape Yacht Club. Creator payouts subsequently tumbled as the NFT market rolled over amid ebbing pandemic-era stimulus.

The sector was then shaken up by the October launch of Blur, a platform that incentivised trading in part by chopping royalty rates and which now commands over 70% of daily volume on the Ethereum blockchain, according to a Dune Analytics dashboard. Blur’s strategy put pressure on the marketplace it usurped, OpenSea, to follow suit. “With the launch of Blur, NFTs became progressively more financialized,” said Ally Zach, a research analyst at Messari.