While the hype of Non-Fungible Tokens (NFTs) may have centered around skyrocketing sales and celebrity purchases, a less-publicized metric has been quietly mounting: royalties. Fresh insights into this critical element of the NFT ecosystem reveal that royalties paid to NFT projects on Ethereum have reached roughly 699,816 ETH.
An in-depth analysis by on-chain data analytics firm Nansen has found that these royalties, at current prices are worth $1.3 billion, and at the time of the NFT sale the royalties amount to approximately $1.8 billion.
At current prices, that translates to approximately $1.3 billion USD. But it’s important to note that when we price ETH at the time of NFT sale, lifetime royalties are much higher at $1.8 billion USD
— Nansen 🧭 (@nansen_ai) July 24, 2023
A Downtrend In Royalties Despite Stable NFT Volumes
Despite the gargantuan sum, a more granular look at the figures offers a different perspective. The annual breakdown shows a significant dip in royalty payouts this year, raising questions about the underlying causes and potential implications.
The lion’s share of Ethereum-based NFT royalties was disbursed in 2022, with the year accounting for more than 64% of the total ETH paid out. Interestingly, royalties received by NFT projects in 2023, though the year isn’t yet over, have been significantly less despite comparable NFT volumes.
Nansen’s research indicates that 2023’s royalties only constitute 9.4% of the total payout. As of mid-year, the volume of NFT sales for 2023 already amounted to 50.6% of the 2022 figure. However, the royalties earned from these transactions amounted to just 14.7% of 2022’s total. This disparity signifies a potential trend in declining royalty rates.
The Declining Trend In Effective Royalty Rates
Further insights by Nansen’s analyst Deranzxc, reveal a downward trend in the effective fee rate for royalties. The average royalty rate, which stood at 2.5% in 2022, dropped to a meager 0.6% by July 2023. So it appears that despite the growth in NFT transactions, artists and projects might not be reaping the rewards at the same pace.
In the spotlight among NFT projects that have benefited from royalty payouts is Yuga Labs, the creative powerhouse behind top-tier NFT initiatives like Bored Ape Yacht Club (BAYC) and Mutant Ape Yacht Club (MAYC). The firm collectively received 9.4% of all royalties disbursed to NFT projects.
With the NFT market growing at an astonishing pace, the downtrend in royalty rates needs careful analysis. Notably, the promise of the NFT era is not just in the creation of unique digital assets, but also in the potential for artists to earn fair remuneration for their work.
While the NFT market has continued to thrive, Ethereum has shown bearish trends in the past week down by 2.3%. Following a meager 0.4% increase in the past 24 hours, Ethereum’s price currently trades at a price of $1,857 at the time of writing.
Featured image from Shutterstock, Chart from TradingView