Non-fungible tokens (NFTs) play a major role in the blockchain space. They can provide an additional stream of revenue for creators that want to monetize their works, sounds, videos, or anything else that can be minted as an NFT.
Not everyone entering the world of NFTs truly understands what royalties are and how they work in the context of Web3.
As such, today, we will be exploring how royalties work and how SmartMint by Pastel Network can help any creator mint and publish their NFTs to begin earning immediately.
NFT Royalties and Their Role
Royalties surrounding non-fungible tokens (NFTs) are essentially payments that can compensate the original creators of the NFT for the usage of their NFts.
The royalties are a percentage of the secondary sale of an artist’s NFT. In the blockchain space, the royalties associated with each individual NFT are set by the creator in the minting process.
Royalties from NFTs can give the original owner a percentage of the sale price every time the NFT gets sold within the marketplace.
The average NFT royalties percentage can range from 5% to 15%. Most marketplaces enable users to individually pick the royalty percentage, and the overall payments are automatic on each subsequent sale on the secondary markets.
How Do NFT Royalties Actually Work (in detail)?
NFT royalties are automatic payments distributed to the original owner of the NFT. The original creator chooses the NFT royalty, and the data gets stored on a blockchain platform throughout the minting process.
The NFT royalties typically come from the secondary sale of an NFT. Whenever an artist ends up selling the primary NFT, they get the full amount, aside from the marketplace fee. To track the royalties, the public ledger maintained by the miners or validators is used.
When the new owner of the NFT, now the secondary owner, decides to sell it, a specific percentage will go back to the wallet of the original creator that minted the NFT. This procedure will occur when the secondary owner sells it to the third, and so on, indefinitely.
Content creators will typically choose the royalty rate during the minting process, which is the procedure of making an NFT a part of the blockchain.
The creator must create a smart contract, typically completed through a no-code solution such as Smartmint by Pastel Network.
This programming exists within the blockchain, and once the blockchain’s smart contract terms are created, the royalties occur through automatic means afterward.
Can Creators Earn Through NFT Royalties?
NFT smart contracts can vary by the marketplace or platform chosen to create them and are not standardized. However, NFT royalties can be calculated as a percentage of the sales price specified by the original artist or creator. If the royalty fee calculation results in a remainder, the royalty fee can be rounded up, or rounded down, depending on the unique situation.
This means that the content creator, an artist who creates music, photos, or even videos, who has created the original NFT, can earn royalties through each subsequent sale in the secondary market. For example, let’s assume they set an NFT’s royalty at 10%.
- The original NFT creator sells the NFT. Aside from the marketplace fee, they get the full profit from the NFT sale.
- The secondary owner now sells it to the third owner, and the original NFT creator gets a 10% royalty.
- The third owner now sells it to the fourth owner, and the original NFT creator still gets a 10% royalty of the total value the NFT has been sold for.
Creators essentially earn royalties this way. When a creator sells, for example, a 10,000 NFT collection and every single NFT in that collection gives them royalties, then they get 10% on each NFT sold, and if at least half of those get re-sold down the line, they also get 10% on those.
Getting Started with NFTs Through SmartMint
SmartMint makes minting NFT drops and collections simple and more powerful than ever by introducing a no-code solution.
Additionally, SmartMint features Sense, a near-duplicate NFT detection protocol, that determines the rarity of an NFT. It also features Cascade, a distributed, permanent storage system for NFT data that requires only a single payment.
Users can create and own smart contracts and add custom properties to them. Then, creators can manage their royalties for custom smart contracts created on SmartMint, whenever they connect their wallet, such as Metamask, to the custom collection it is minted under.
Through using SmartMint and supporting marketplaces like OpenSea or Rarible, creators can monetize their ideas. Additionally, SmartMint also features multi-chain support, and minting is available for Ethereum (ETH), Polygon (MATIC), and Solana (SOL).