In the early pitch for NFTs, the promise sounded simple: a creator sells once, and then keeps earning as the work changes hands. NFT Royalties are the mechanism behind that promise, a fee attached to secondary sales that routes a slice of each resale back to the original creator or a designated wallet. In practice, it is a blend of code, marketplace policy, and community norms, and those three pieces do not always line up.
Royalties matter because they try to fix an old internet problem in a new format. Digital work is easy to copy, easy to circulate, and historically difficult to monetize beyond the first sale. With NFTs, the asset can be resold like a collectible, and royalties attempt to make that resale economy less extractive for artists, studios, and builders who keep the culture moving.
NFT Royalties: How Creators Earn Passive Income
At the most basic level, NFT Royalties are a preset percentage, often 2.5% to 10%, that is intended to be paid to the creator when an NFT is sold on the secondary market. The creator sets the percentage and the recipient address either at the collection level or token level, depending on the contract and marketplace tooling.
In a perfect world, every marketplace reads the royalty settings, collects the fee during settlement, and pays it out automatically. That is why NFT Royalties became such a big part of the creator economy narrative: the revenue model is meant to follow the asset, not the platform.
The reality is more specific. A marketplace sale is not only an exchange of an NFT for payment; it is a coordinated set of smart contract calls that decide who gets paid, when they get paid, and whether the fee is mandatory or optional. That detail is exactly where NFT Royalties can succeed, fail, or become a voluntary tip.
How secondary sales actually move money
A typical secondary sale has three economic parties: the seller, the buyer, and the marketplace. The marketplace usually collects its own fee, and then, if the rules allow it, it also collects creator earnings and routes them to the creator wallet. Many marketplaces display royalty information in the listing UI, but the presence of a displayed percentage does not always mean the fee is enforced at settlement.
That difference explains why two sales at the same price can produce two very different outcomes for a creator. When NFT Royalties are honored, the creator sees a predictable cut. When they are not honored, the creator may see nothing from a resale, even though the metadata still advertises a royalty rate.
The on-chain standards that describe royalties
On Ethereum and compatible networks, the most cited standard is EIP-2981 (often referred to as ERC-2981), which defines a simple interface that lets marketplaces query an NFT contract for royalty payment information. The key point is what the standard actually does: it provides a way to retrieve royalty details, not a way to force payment.
That design choice is not an accident as the standard was built for interoperability, so a marketplace can ask, “If this token sells for X, who should receive royalties and how much?” In other words, the standard helps marketplaces discover NFT Royalties, but it does not compel a marketplace to include them in the transaction.
This is where many newcomers get tripped up; An NFT contract can declare royalties clearly, and still see those royalties bypassed on venues that choose not to enforce creator fees.
Why royalties are not guaranteed across marketplaces
Royalties became controversial as marketplaces started competing on trading costs. If one venue enforced creator fees and another did not, traders chasing tighter spreads often moved to the cheaper route, and creators felt the drop almost immediately.
Public shifts by major platforms made this dynamic impossible to ignore. OpenSea, for example, moved creator fees toward optional settings for new collections in 2023 and indicated broader optionality later, which triggered loud pushback from artists and some major NFT brands.
This is the uncomfortable truth creators have had to internalize: NFT Royalties are partly an ecosystem agreement, not only a line of code. A marketplace can decide not to collect them, and unless enforcement is built into transfer rules or settlement logic, the creator has limited recourse.
The enforcement arms race and what changed in 2024
The industry response has been a mix of social pressure, technical countermeasures, and new token standards designed to make enforcement harder to ignore.
One of the more concrete updates arrived in April 2024, when OpenSea announced support for ERC721-C, a token standard associated with Limit Break, allowing creators to set and enforce creator earnings on OpenSea through compatible contracts and Seaport upgrades. In OpenSea’s own help documentation, enforceable earnings are tied to ERC721-C or ERC1155-C compatible contracts and specific creation paths in OpenSea Studio.
These changes matter because they signal the current direction of the market: if NFT Royalties are going to be dependable, they may need stronger contract-level guardrails, not just marketplace goodwill.
Other ecosystems explored their own approaches earlier. Magic Eden introduced the Open Creator Protocol on Solana to enable royalty enforcement for collections that adopted the standard, while leaving royalties optional for collections that did not.
Meanwhile, some marketplaces adopted models that removed mandatory creator fees but shared protocol revenue with creators or offered opt-in royalties at checkout. LooksRare, for instance, shifted to optional royalties while directing a portion of protocol fees to creators, framing it as an alternative to strict enforcement in a zero-royalty competitive environment.
Why creators still care, even after the marketplace shifts
Even in a world of optional fees, creators keep pushing for royalties because they align incentives. A healthy resale market benefits collectors, but it also signals that a collection has cultural momentum, and creators often remain the ones investing time and money into that momentum through updates, community work, and partnerships.
The problem is not only philosophical, it is operational. When NFT Royalties become unreliable, creators tend to compensate by raising mint prices, locking more value into primary sales, or paywalling utility, which can reduce accessibility for new collectors. In that sense, weak secondary royalties can make the broader market less liquid and more transactional over time.
Some platforms and communities have also tried to solve this through curation and aggregation choices. Rarible, for example, has documented efforts to keep royalties respected on its native listings and has previously said it would stop aggregating orders from venues that allowed royalty bypassing, framing it as a pro-creator marketplace stance.
How creators can design a more reliable royalty strategy
A modern royalty strategy is less about picking a percentage and more about designing for resilience.
Creators that want steadier earnings often do three things. First, they choose contracts and standards that make enforcement easier where possible, especially on marketplaces that support creator-fee enforcement mechanisms.
Second, they treat NFT Royalties as one line in a broader revenue stack that can include primary drops, membership utility, licensing, brand partnerships, and in some cases physical product tie-ins.
Third, they pay attention to marketplace routing, because many traders will naturally choose the path of least friction unless the value proposition gives them a reason not to.
The risks and red flags that buyers and creators should watch
Royalties can be exploited in the same way any crypto mechanic can be exploited: through fake marketplaces, manipulated volume, or misleading listings that make fees unclear. If a collection promises aggressive earnings tied to resales, the underlying question is whether those earnings are technically enforceable, socially enforced, or simply marketing language.
Tax treatment can also be a surprise. Creator earnings from secondary sales are typically treated as income in many jurisdictions, and the on-chain record can create a clean audit trail even when the creator did not plan for it. A creator that relies heavily on NFT Royalties tends to need basic bookkeeping discipline early, because wallet activity that looks casual can become a serious accounting project fast.
Conclusion
The simplest way to describe the current landscape is that royalties are still real, but enforcement is fragmented. NFT Royalties work best when a marketplace honors them by default or when the token standard and settlement layer make creator fees difficult to bypass. That is why the conversation has shifted from idealism to implementation, and why creators increasingly care about contract choices, distribution strategy, and long-term utility instead of assuming every resale will automatically pay out.
A creator economy built on resales is not guaranteed, but it is also not dead. The models are evolving, and the winners are likely to be the creators and platforms that treat royalties as part of a durable product strategy rather than a hope pinned to a single marketplace norm.
Frequently Asked Questions
Are NFT Royalties legally enforceable?
In many cases, NFT Royalties are enforced by platform rules or smart contract design rather than traditional legal contracts, which means enforceability depends on where the sale happens and how the transaction is settled. Standards like EIP-2981 describe royalty information, but they do not force a marketplace to pay it.
Can a buyer avoid paying royalties?
Yes, if a marketplace or sale route does not enforce creator fees, the buyer or seller may complete a transaction without paying creator earnings. That reality is one reason marketplaces debated optional fees so publicly in 2023 and 2024.
How are royalties set in practice?
A creator typically sets a percentage and a recipient wallet either in the NFT contract or through marketplace tooling that writes royalty settings. OpenSea, for example, describes creator earnings setup and notes enforceable earnings paths for ERC721-C or ERC1155-C compatible contracts.
Do all blockchains handle royalties the same way?
No. Ethereum commonly uses interfaces like EIP-2981 for royalty discovery. Solana has used different approaches such as protocol-level tooling for collections that opt in, as seen with Magic Eden’s Open Creator Protocol.
Glossary of Key Terms
Creator earnings: The amount a creator receives from secondary sales when a marketplace collects and routes fees to the creator wallet.
Secondary sale: A resale of an NFT after the initial mint or first purchase, typically occurring on a marketplace.
EIP-2981 (ERC-2981): An Ethereum standard interface that allows marketplaces to retrieve royalty payment information from an NFT contract.
Seaport: A marketplace protocol used for NFT trading on Ethereum, with documented mechanisms related to creator fee enforcement for certain token standards.
ERC721-C / ERC1155-C: Token standards associated with creator-fee enforcement approaches supported by some marketplace implementations, including OpenSea’s creator earnings enforcement path.
Royalty enforcement: The practical ability to ensure creator fees are included in a sale, either via marketplace policy, contract-level transfer restrictions, or settlement-layer validation.
Disclaimer
This article is for educational and informational purposes only and does not constitute financial, legal, or tax advice. Digital assets are volatile, marketplace rules can change quickly, and readers should consult qualified professionals before making decisions involving NFTs, trading, or taxes.
Sources
Ethereum Improvement Proposals
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