Today, October 15, leading Solana NFT marketplace, Magic Eden announced it is enabling optional creator royalties on its platform. In addition, the firm said it will waive its 2% platform fee, effective immediately. Furthermore, it has launched a $1M Creator Monetization Hackathon to support its creators.
Here’s all you need to know about Magic Eden’s optional royalty model and what this means for the industry.
About Magic Eden’s optional royalty model
With the optional royalty model, Magic Eden’s buyers can now decide how much royalty to pay. They can set their royalties in multiple ways, including an option to pay the royalties in full, half, or none. However, by default, all NFTs will have full royalties.
“This is a decision that we make with a heavy heart, knowing that it will make a significant impact to our creator base,” Magic Eden wrote in a now unavailable statement.
Magic Eden’s announcement was met with heavy backlash from the NFT community. Artist and brand consultant, Jason Keath called the move “terrible”. Meanwhile, some others are seeing this as the “downfall” of the top Solana marketplace.
In the meantime, the platform has announced a $1M Creator Monetization Hackathon. For this, Magic Eden will work with creators and ecosystem partners to develop solutions for royalty enforcement. They will also explore developing alternative creator monetization tools as well as business models.
Why is the optional royalty model controversial?
Creator royalty payments have been an integral part of the NFT ecosystem. In essence, it allows creators to earn a percentage of each subsequent sale of their works. Most NFT marketplaces allow creators to set their own royalty percentages. This is usually between 3%-10% of the NFT’s price.
However, it is important to note that royalty payments are not enforceable on-chain: only NFT marketplaces can enforce them. So, things took a controversial turn when a new marketplace, X2Y2 announced its plans to make certain purchases royalty-free. At the time, X2Y2 tweeted, “Buyers on X2Y2 can now choose the amount of royalties they would like to contribute to projects.”
Naturally, the NFT community heavily criticised the decision. Many also commented on how this would affect the artists who turned to NFTs for more lucrative and fair payments.
More recently, DeGods founder, Frank announced that the project is updating all its NFTs to 0% royalties. Originally, the NFTs had 9.99% royalties. While Frank didn’t give much of an explanation, he said that was the “best decision” for their business. “It’s about time we take a new approach.”
Magic Eden hopes the decision is not permanent
It is amid this growing controversy that Magic Eden announced its optional royalty model. However, the platform reiterated that while the decision was necessary, it hopes it’s not “permanent.”
“The movement away from creator royalties has been an unfortunate trend, but one that seems inevitable given that royalties are not enforceable at the protocol level,” said its CEO and Co-Founder Jack Lu. “It is a trend that we are hoping can be reversed long-term.”