Animoca Brands Chairman Speaks out
Digital art, new dimension
NFTs have brought a new dimension to the concept of digital art, introducing the concept of ownership and digital scarcity. This innovation has expanded the potential of the creative industry, enabling the development of new business models and the generation of new revenue streams for artists. However, the debate on whether royalties should be enforced or not has emerged, and it is one that could potentially destroy the digital asset and Web3 ecosystem.
The recent shift away from royalties is not only about grabbing market share, but it’s also at the expense of the creators. This is according to Yat Siu, the chairman of Animoca Brands, the company behind The Sandbox, a popular NFT game. Siu believes that royalties are an essential component of the creator economy.
Engines need fuel
Siu compares royalties to the fuel that drives an engine or even the gas fees charged to process each transaction on Ethereum’s network. He adds that culture is the cornerstone of economic activity in today’s society, whether that be in Web3 or beyond, and can’t be taken for granted. Culture is the biggest soft power and perhaps the biggest driver of economic growth, he said. Siu pointed out that the world’s richest man is co-founder and CEO of LVMH Bernard Arnault, which owns brands including Gucci, Tiffany & Co., and Hennessy.
Without an economy that’s based on culture, Siu said there wouldn’t be streaming services like Netflix and HBO or gaming consoles made by Sony or Microsoft, because culture is the fundamental reason that people engage with those technologies — whether via television shows, movies, or video games.
Siu said that reducing royalties for creators in the NFT space will erode the space’s existing culture and do more damage to the digital assets industry than good. He compared the pivot away from creators by NFT marketplaces to companies biting the hand that feeds them. “If you kill the royalties, you kill the very industry that fed you, so it has to be protected,” he said.
Not Just about profit
Maximizing profits over creators’ fair share is part of a mentality rooted in traditional finance that influences some actors in the Web3 space, according to Siu. He explained that there’s a small percentage of people, as in the finance world, that are basically from crypto Wall Street, and what they do is just look at profit maximization. Unfortunately, for people in the finance world, that’s their lens.
While NFTs are digital assets that signify ownership, often of digital art, Siu pointed out that people don’t often trade cultural items with the same frequency that they do with financial ones like stocks. Many of the items people purchase in the physical world have some meaning attached to them that contributes to one’s self-perceived identity. Siu believes that these types of purchases, where people buy a particular digital asset because it says something about them, will be a key driver of the adoption of Web3.
However, some marketplace platforms are neglecting the concept of royalties, and it could potentially be detrimental to the digital asset and Web3 ecosystem. OpenSea recently slashed fees in response to its new rival, Blur, which has surged ahead in terms of trading volume on NFTs in part by charging zero trading fees and not enforcing creator royalties. Creator royalties provide an ongoing revenue stream to NFT projects beyond their initial sales — typically a 5% to 10% cut when a token is resold.
Prioritizing profits over creators’ fair share is a mistake that could lead to the destruction of the digital asset and Web3 ecosystem. The NFT space has the potential to revolutionize the creative industry and introduce new business models. Still, it needs to ensure that artists and creators get their fair share of the revenue. Therefore, marketplaces should enforce royalties to ensure that creators’ contributions are adequately compensated