In this post I would like to discuss giving well-deserved credit in the form of royalties for NFTs back to the creators and participants. It is an idea and I would like feedback on what you think.
Previously, I wrote about the Royalty pallet:
It locks the NFT to prevent bypassing of royalties. This is a solution. This post discusses a more elegant permissionless solution - allowing royalty recipients to whitelist marketplaces where their NFTs can be sold and off-boarding bypassing logic to the on-chain marketplaces. Some marketplaces will have better anti-bypassing logic than others. If one of them can have a good system to prevent bypassing of royalties then I’d imagine the next wave of NFT creators would migrate to this marketplace.
I see two paths:
A marketplace pallet that would be deployed in different parachains, this would be an instantiable marketplace pallet with an account. The royalty pallet references this marketplace pallet account. Specifically, the royalty recipients can reference the pallet’s account. Essentially whitelisting where they allow their NFT to be sold.
As a Marketplace Hub, the marketplace pallet would have the ability to create new marketplaces. The Royalty pallet would reference the marketplaces. Thus placing the power in the hands of the creator (royalty recipient(s)).
The marketplace would either have marketplace logic in the marketplace pallet (method 1) or place their marketplace logic elsewhere, perhaps in a smart contract or another parachain and only having their marketplace address/account in the Marketplace Hub (method 2).
The marketplace would be held responsible for having a strong algorithm/logic to ensure that royalties are extremely difficult to be bypassed. Some marketplaces may have better logic than others and therefore more royalty recipients would whitelist that marketplace versus others. This is different than what already exists in the Web3 space because we are doing this in a permissionless way → the marketplace address is on-chain and control is handed to the creators.
Ensuring that royalties cannot be bypassed or at least making it difficulty to bypass them can be done via several ways. Some examples:
Marketplace pallet could have logic around
- identity and reputation
- the onchain trading history of the NFT
- non-transferable NFTs
- oracle-based marketplaces
- social flagging**
- “social sells” where community decides the price of the NFT
- many more innovative/creative ideas that would come as a result of a (healthy) competitive marketplace space
** The marketplace could have some social mechanism where if buyers/sellers are flagged as most likely bypassing, their reputation goes down… rather easy to do this… if we see a high value NFT selling for $1 that is a red flag, however, it is more difficult to catch bypassing in a scenario where the high value NFT is valued at $60,000 and sells for $55,000 to “swallow” the royalty but perhaps that is now part of the pricing/valuing of the NFT.
Recap: Royalty anti-bypassing logic, with this solution, is permissionessly abstracted to the marketplace, and most of all, the creators (royalty recipients) have the power to choose where their creation can be sold/traded.