Time to weigh into this royalties conversation.
Yes, I have a different take than most.
I think the whole conversation is based on false premises.
Apologies to all the deep and well reasoned philosophical arguments that have been presented, but I think they're all bunk.
Why are they all bunk? I'm not gonna bury this 50 tweets in:
They are all based on the premise that "royalties" is a real tangible, good thing with some kind of heft and durability and realness and which "should continue". That it's a good status quo and a default.
It ain't so.
Royalties in NFTs are an anomaly.
Repeat after me:
Royalties in NFTs are an anomaly.
Let's try it a third time:
Royalties in NFTs are an anomaly.
This transient anomaly is now passing on and will soon be forgotten.
This is true for all the different types of NFTs. Art, 10k PFPs, Axies, gaming items, whatever.
Let's try art. Art exchanged for money has existed for thousands of years. Royalty rate for those thousands of years of art trading?
That's right, a big fat zero.
And yet somehow art has been made, artists have made money, art trading and also speculation has happened, etc.
The art market is doing alright. Yeah, it could be better, for sure. Maybe royalties would improve it. Maybe not. Hard to tell.
10k PFP collections, as I've asserted for nearly a year now, are startups. In this, their NFTs are most analogous to (though not the same as) shares.
Should shares have royalties? Heck no. Why should they? What's the benefit of rewarding a company because they're heavily traded?
It's a mismatched incentive, as others have pointed out.
In the crypto world, this type of drain, when present in a contract, is usually rightly presented as a liquidity drain on traders that is likely to ultimately kill the project.
It never made any sense.
Most things in life can be bought and sold. Royalties are an invention of the intangible IP world designed, originally, to force publishers to reward creators when they mass produce and sell the creators' work.
They don't have much to do with trading or collectors.
If a publisher makes a pile of $$$ from reselling a creator's work and doesn't pay royalties - sure, I'll buy that this is a Bad Thing. And, if they have a contract, illegal. And if they agreed to pay royalties, at the very least they are liars and that's considered unethical.
The NFT space has a bad habit of extrapolating from the current minimal experience, assuming that just because it's been so for little over a year, it's going to be so forever.
We assume that those things we've become used to make sense and won't be disrupted abruptly.
Like, for example, the certainty of some ppl that there will be another bull market.
I wonder how many people kept buying tulip bulbs after Feb 1637, convinced that there would be another bull run eventually.
If this thought makes you uncomfortable... it should.
Maybe there will be. Maybe there won't be. I sure as heck don't know, nor do I know what specific part of the NFT market might have another bull. I have guesses, but I'm wrong about a lot of things, like most ppl - and I'm aware I might be wrong. Nothing is certain.
Similarly, everyone seems to be approaching this conversation with the sure assertion that royalties are the way the NFT world ought to be. That artists should be getting royalties, even though that's a really new and, it turns out, rather fragile construct.
The assertion that people who will choose to trade without paying royalties are somehow immoral naturally arises then. I also think that's bollocks.
It's like the new and improved version of sell-shaming.
Let's nip this one in the bud.
There is no moral right to royalties, especially not if you embrace decentralisation. It's an invention of the NFT space that's only had traction for a very brief period. It looks like that period is about to end.
I say again: good.
When we assume NFT royalties are a good thing without examination, we ignore the important question: why should a creator earn revenue in perpetuity for future sales of their art?
Again, that's not true at all in the real world. Only publishers pay royalties, not collectors.
Collectors and traders are not publishers. They are not making thousands of copies of the NFT and selling those for profit. They are just buying an item and, some day, maybe selling it on.
Just like buying an Aeron chair (recommended!) and, some day, selling it on.
As they are now, royalties enable artists to benefit from speculative bubbles (of which there have been many lately) affecting their art.
Is that a good thing? Maybe.
Is it a Divinely Good Moral Thing That Is Obviously Good So How Dare You Question It? Fuck no.
In the "real world", artists begin selling their art cheap. Then when they get traction, they raise their prices. They make money from, drumroll, making art and selling it. Not collecting taxes from collectors.
Oh hey, there's a good alternative name for royalties:
Hey everyone, let's rebrand taxes and call them royalties.
How dare you legally minimise your government royalties in compliance with the law? They are owed those royalties on moral grounds!
Hire an accountant to pay less govt royalties? SHAME ON YOU!
You moved to Dubai to pay no government royalties at all?
You're the worst scumbag. Immoral. Barely worthy of any respect.
Or maybe taxes are not quite so inevitable as death is, and "royalties" are no different.
Tangent over. There is no Moral reason why artists are Owed taxes on future sales of their work.
That's just made up.
It's been true in the NFT space for a year or two.
As many are realising, since it's not encodable at the smart contract level, it soon won't be true anymore.
Most people will naturally seek to minimise taxes.
Some who have enough money may choose to donate money (in the form of taxes or otherwise) to artists they like. That has been true for thousands of years, it's still true now.
But most won't. And that's ok.
Successful artists will still find ways to make a living by making more art and selling it. If they're doing well, they'll sell their art for more. Good.
I'm all for artists making money, to be clear: I just also see that royalties were a blip and we're back to normal.
NFT-backed companies will, to their horror, have to actually develop real revenue sources.
Some will opt for an infinite stream of airdrops. Thus they'll reveal their true ponzi colours, via their inability to actually make sth ppl want to pay for.
The smarter ones will switch to revenue models that involve selling things that people want for amounts of money that they are willing to pay.
It's a bummer, I know, but trust me, it's better than having companies that basically make money from drama.
Like, the fact that Azuki's founder made a big pile of money from revealing that he was a serial scammer is... not right.
I'm happy to leave that world behind. Very happy.
I've been an entrepreneur for 15+y. I assure you there are other ways to make revenues.
So that's it for this Big Royalties Debate, as far as my take on it is concerned.
TL;DR: Royalties/taxes are on the way out. Ppl will sell where taxes are lower. That's ok. Get used to it. Artists will still make money and so will legit companies.
gm & gl
PS: If you loved this thread, you can find many more like it at https://swombat.io.
Also, I would appreciate a ReTweet. Here's the first tweet for your convenience :-)