NFTs, Effective Royalty Rate and the Future

Why
"Zero Royalties" pose a
threat to Web3 and
Creators?
And some ideas on possible solutions!

An analysis by Thanos of Web3 7/12/2022

 Zero creator royalty marketplaces
create a systemic issue for creators.

It is important to understand what the

“effective royalty” is for top projects in
the space.
 But first let's
speak about the
implications of
zero royalties.
4 crucial points below
 1. “Zero royalties” policies have
been destructive.

More money is being diverted away

from creators to avoid paying them
royalties.
 2. The increase in market share
on “Zero royalties” marketplaces
has resulted in the significant
loss of royalty payments to
creators.
 3. “Zero royalties”
marketplaces are paying
creators virtually nothing.
Or close to $0.
4. OpenSea is the last hope for stopping
the race to the bottom.

OpenSea is fighting for an uneven battle,

collecting 91% of all creator royalties in
the entire market while having less than
50% of the market of NFT sales.
Here you see the Average Royalty % from
Major Marketplaces (November)
ETH dominates at OpenSea the last quarter
But the declining trend is real...
(October-November 2022 data)
These are millions
of $$$
that are not being
distributed to
creators!
 So, what's next?
The time has come:

Let's now talk about

Effective Royalty Rate
 “Effective Royalty Rate” is
calculated as the total royalties
earned across all marketplaces,
divided by the total volume
across all marketplaces.

It is shown in percentage (%)

 Below you'll some graphs
that show the
Effective Royalty Rate
from major NFT collections
The downfall is apparent...📉

Data shown are from 1st of July till today (6 months)

The next slides will be fun... be ready

1.Bored Ape Yacht Club
2.Mutant Ape Yacht Club
3.Moonbirds
4.Azuki
5.Clone-X(RTFKT)
6.Renga
7.DeadFellaz
Effective Royalty Rate in % - 6 month period fluctuation
Start of July 2022 Now in Decemeber 2022

BAYC

MAYC

Moonbirds

Azuki

Clone-X(RTFTK)

Renga

DeadFellaz

0% 1% 2% 3% 4% 5%
The numbers from above for your reference

July 2022 ERR% December 2022 ERR%

BAYC 2.23% 0.88%

MAYC 2.41% 0.89%

Moonbirds 4.98% 2.33%

Azuki 4.37% 1.26%

Clone-X (RTFTK) 1.17% 1.84%

Renga 4.87% 1.56%

DeadFellaz 5% 4.16%

ETH and WETH volumes have been used in the calculations across major NFT marketplaces
 And that's a wrap
Key points and takeaways:

The declining trend of royalties is real

OpenSea dominates the space, but that doesn't help either
Major NFT collections have been facing issues with their
revenue
Much smaller and unknown creators are taking a greater hit
Wash trading has to be mitigated or punished into smart-
contracts if collections and large projects are "caught"
conducting it
 Possible solutions?
Here's what I found and suggest:

Lower the % of royalties or completely removed after

community voting takes place
How the voting scheme will be is another topic for another
time
Algorithmically create dynamic royalties(revenue-dependent)
Offer royalties to collectors
Create a Regressive Royalty System (check next slide*)
Apply Harberger Taxes ( EIP-5320 - check on Github )
*Regressive Royalty System and Dynamic Royalties
can go hand in hand...
Some projects have manually followed a
Regressive Royalty System.

As their Floor Price increased largely, they

wanted to avoid loss on revenue income.

Here are some examples:

Just Worms 9.99%>2.5% (SOL)
Chimpions 12%>7% (SOL)
 for reading till the end!

Important: I spent quite some time to this analysis. If you have find it useful, I kindly ask you to
reshare/repost it, download it or send it to friends or people that might find it interesting!