Great article, and it is timely.

There is actually something that can be done in code here. Both the ERC1155 and ERC721 standard use the approveForAll function to allow marketplaces to trade the tokens on behalf of the owner. It is possible for the NFT creator to upgrade the implementation of this function so that only certain addresses are whitelisted (i.e. the marketplaces which honour the artist commissions), which would stick the first hurdle in the way of bypassing royalty payments.

Secondly, the actual NFT transfer function can be modified such that if the transfer is not happening via an approved marketplace, that the transfer function itself can demand a minimum transfer tax be paid to the owner in order for the transfer to happen at all.

So in effect the user is forced to either a use an honourable marketplace, or pay the creator a fixed tax.

With this simple combination, you can begin to control your own royalties.

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Whitelisting and blacklisting marketplace contracts would work, but defeats the open nature of NFTs. It would essentially enshrine marketplaces as permanent monopolies. Alternative new marketplaces wouldn't stand a chance if they were not whitelisted for existing projects.

This could work if there was a shared 0% fee base contract which other marketplaces adopted

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Great post. Been thinking abut this a lot recently. I believe it's possible to force royalties in the contract if you do these 2 things:

1) The transfer of funds needs to be baked into the NFT contract (so royalties can always be taken)

2) Attempts to trade tokens below the market price need to be punished

You can achieve this quite simply using a method similar to the hamburger tax.

The owner must set a listing price in order to transfer the NFT. Anyone is able to buy at that price. If the price is too low it will be sniped.

This creates some limitations, like making it costly to transfer between your own wallets, or sending the NFT to other smart contracts for example. But I think these can be solved by separating the "owner" and "controller". Just like ENS

Another benefit of this approach is that marketplaces lose their network effect, making NFTs more open as the actual selling mechanism is on the NFT itself.

DM me @osakatonithomas, I want to test this on a collection

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Great job putting this together, Zeneca! A few thoughts

Sudoswap, no royalties for creators, fees to liquidity providers, etc. are all features designed for traders. It makes sense for a platform to come up and give this sort of features, as of today, probaby 70%+ of NFTs volume is from traders. I wonder, is this really what we need?

What stops a new platform to come with 0.1% fees? nothing.

I can see how this is an exciting thing for traders, but it isn't for artists or founders.

I'm just worried that this kind of platforms and features will not attract new users (those that aren't interested in trading/investing) and where the real growth and space potential lies.

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Perhaps services or utilities segment the buyers/collectors. It seems NFT market is much more fragmented

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Thanks for another interesting post @zeneca_33!

I wasn't aware that the royalties weren't baked into the smart contracts until this thread emerged. It's actually also wrong to call them royalties: royalties are derived from an income-producing asset typically (e.g. you own 1% of the brand rights to Listerine) and you get a cut of the global revenue. This is also very common in the commodities industry where you may get a cut off of the oil produced from a certain well.

The NFTs aren't securities and certainly aren't producing income so it would probably be more accurate to call this a flip tax that you occur when selling - until sudoswap came around.

Now that that's out of the bag, the creators probably need to bifurcate the two goals of 1) creating a loyal follower base and 2) selling lots of PFPs/ 1x1s/ other NFTs.

One way to accomplish this would be to issue two types of NFTs at a time: the artwork and a membership token, both of which can be traded. The membership token could come with a monthly fee that owners can either decide on or that the issuers decides on. More akin to Patreon than to the current model. The art NFT could simply be flipped all day long.

Other ways to skin the cat of course but it's an interesting thought experiment.

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...and Zeneca will zeneca – excellent treatment as always. Thank you ser!

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