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NFT Makers Are Boycotting Low-Fee Exchanges Over Tumbling Royalties

NFT creators are taking a stand against dominant exchanges due to a decline in royalties. Yuga Labs Inc., known for producing Bored Ape Yacht Club and CryptoPunks NFTs, and LSLTTT Holdings Inc, the maker of Pudgy Penguins, are among those either withholding collections or threatening to do so on popular platforms like Blur and OpenSea. The two exchanges reduced royalty rates this year in an effort to revive NFT trading. This move came after a surge in NFT prices and trading activity during the pandemic ultimately led to a significant downturn. September royalties were just $2.4 million compared to a peak of $269 million in January 2022, as reported by Nansen data. Monthly trading volumes plummeted from a record $17 billion during that time, according to Token Terminal figures.

Yuga Labs has blocked trading of its latest project, Mara, on Blur and OpenSea, stating that only exchanges that “respect” royalties will be allowed to list their NFTs. The company recently announced layoffs due to challenging conditions. Luca Netz, CEO of Pudgy Penguins, described the situation as a “coup” in the marketplace business. He revealed that his firm is considering starting its own exchange or partnering with platforms that offer fair royalties. The dispute between NFT developers and dominant trading platforms has raised questions about whether the market’s peak, exemplified by the $69.3 million sale of Beeple’s Everydays NFT in 2021, is now a thing of the past.

 

Blur, which launched a year ago with a low-fee model, quickly overtook OpenSea, leading the latter to follow suit. Blur’s minimum royalty rate is 0.5%, while OpenSea has introduced optional creator fees. Together, these platforms account for approximately 70% of NFT volumes, according to Token Terminal data. Luca Netz emphasized the need for a visionary approach in the NFT marketplace business, following Yuga Labs’ lead. Pudgy Penguins has expanded into merchandising, with product sales reaching $7 million this year compared to NFT royalties of just $300,000. Yuga Labs and Pudgy Penguins’ main collections represent 71% of NFT trading volumes this year, as per DappRadar data.

 

In-Depth NFT Market Analysis 2023 | Coinmonks

 

Blur did not respond to requests for comment regarding the fee criticisms. An OpenSea spokesperson noted that royalties can still be a valuable income source and that the platform is focused on building scaling solutions and revenue streams for creators. The effectiveness of boycotts and the creation of alternative marketplaces as strategies for NFT projects remain uncertain, given the dominance of Blur and OpenSea in trading and liquidity.

According to Ally Zach, a research analyst at Messari, users are increasingly resistant to paying royalties and fees, making the long-term viability of the boycott strategy uncertain. For now, Blur and OpenSea will likely continue to face pressure to keep trading costs low, which conflicts with the decentralized ethos that blockchain applications were originally meant to embody, as pointed out by Jake Brukhman, CEO of Coinfund LLC, a web3 venture capital firm.

Resistance to Royalties

“Users are increasingly resistant to paying royalties, and fees in general,” said Ally Zach, a research analyst at Messari. “While some collections may try to replicate this boycott strategy, its long-term viability remains uncertain.” For the foreseeable future, Blur and OpenSea will continue to face pressure to keep trading costs down. Their critical role jars with the ethos of decentralization that is supposed to characterize applications of digital ledgers. “We’re kind of failing in a core area of blockchain, because blockchains were meant to democratize these things,” said Jake Brukhman, chief executive officer of web3 venture capital firm Coinfund LLC.

This article is for information purposes only and should not be considered trading or investment advice. Nothing herein shall be construed as financial, legal, or tax advice. Bullish Times is a marketing agency committed to providing corporate-grade press coverage and shall not be liable for any loss or damage arising from reliance on this information. Readers should perform their own research and due diligence before engaging in any financial activities.

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bennysteele

NFT and Cryptocurrency Journalist. Founder of NFTRadar, much copied never equalled. Community manager for multiple Telegram and Discord groups. I have been working in the Crypto space since 2018 in various capacities promoting ICOs and NFT startups.
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