NFT royalty

An NFT royalty is a cut of every secondary sale that is meant to flow back to the original creator — say 5 to 10 percent each time the piece is resold. It is one of the most-celebrated promises of NFTs: an artist could be paid not just on the first sale but forever after, as their work changes hands. The trouble is that this promise turned out to be a social and marketplace convention, not something the blockchain enforces.

The reason is fundamental. An ERC-721 transfer is just an ownership update; the standard transfer functions have no notion of a price and no hook that says 'a sale just happened, divert a percentage'. A peer-to-peer transfer, or a sale arranged off the marketplace, moves the token with no payment visible to any contract. So royalties can only be collected by a marketplace that voluntarily looks up the creator's fee and pays it out of the sale proceeds at settlement time.

When marketplaces compete on price, royalties erode. Around 2022–2023 newer venues (notably Blur) made royalties optional or near-zero to attract traders, and volume shifted toward them, so creator income collapsed even where royalties were 'set'. Enforcement attempts — operator allowlists/blocklists that refuse trades on non-paying marketplaces, or transfer restrictions — can be bypassed by routing trades elsewhere or wrapping the token. ERC-2981 standardized how a contract advertises its royalty, but advertising is not enforcing: honoring it remains the marketplace's choice.