On November 6, 2022, Opensea said in a special article that it would launch an online mandatory royalty tool and would not change this decision. Because it was just proposed at that time, the market did not have any response, and the attention was not high. However, since the project owner began to use the forced royalty collection tool launched by Opensea, which caused a huge gap in the product experience of NFT community users, he began to discuss this behavior of Opensea extensively.
The Opensea chain enforces the provisions of the royalty tool. If NFT projects want to collect royalties on Opensea normally, they must use Opensea's mandatory royalty contract, which will blackout all platforms that launch custom royalties. If the NFT project party is unwilling to blackmail other trading platforms, the Opensea official will directly reduce all royalties generated by the project party on Opensea to 0.
For example, the NFT Valentine series recently released by Homa, a mobile game developer who has recently completed financing of $165 million, when it was just launched into the trading market, users can freely list transactions on multiple platforms, and buyers can also freely set royalties. However, Opensea then banned the contracts of other trading platforms, making it impossible for users to trade and register orders on other platforms. Therefore, Homa's holding users will reduce the price of Homa collections that have been launched on other platforms before being banned to 0, to silently resist Opensea's mandatory ban.
Become a standard setter in NFT field
The NFT royalty itself can be written in the code layer. The engineer can directly include the royalty into the transferFrom() function of NFT. However, any transaction of NFT collections will have to pay royalties. For example, when you transfer your NFT from one wallet to another, or give it to others, you also need to pay royalties. Therefore, the current NFT trading platform has always used its own offline system to track and pay royalties. The methods between platforms are not interconnected and unified, and there is no royalty standard.
But around royalties, some trading platforms began to make articles. Since X2Y2 introduced custom royalties, LooksRare no longer supports creators' royalties, but shares 25% of the revenue of the agreement with creators. SudoSwap adopts a zero royalty strategy. After Blur for professional users is officially launched, it also supports traders' custom royalties. Many deep users of NFT communities feel that they do not need to open Opensea to trade. Opensea's market share has gradually decreased from its previous dominance. According to the data from the one-stop NFT analysis platform NFTGo, Opensea's 30 day trading volume has dropped to 44.8% of the NFT market.
Faced with the threat of growing user groups and trading volume in other trading markets, Opensea hopes to launch mandatory royalties on the chain and force NFT project parties and creators to make choices by taking advantage of its position that still holds the main trading volume in the market. In order to obtain royalties, the project party has to choose Opensea's online royalty tool to blackout other customized royalty platforms.
First class enterprises make standards, second class enterprises make brands, and third class enterprises make products. In the long run, Opensea will have a new round of voice in the NFT field and become a company that sets standards for the industry.
To monopolize in the name of royalty
According to the official information of Opensea, it hopes to invite more creators to enter the NFT field, and first implemented offline royalties. After other platforms launched custom royalties, Opensea observed that the royalty payment rate was reduced to 20%, which could not support the creators' creative motivation, and the creators could not control their royalty income under the chain.
Opensea hopes to balance by giving more rights to creators and equipping them with tools that can control their business models. Therefore, it changes off chain royalties to on chain royalties.
At first glance, Opensea seems to be making changes for the development of the industry, but in the eyes of many project parties and community users, this is actually the selfish intention of monopoly in the name of royalty. As mentioned above, if the project party or creator wants to use Opensea's on chain mandatory royalty tool, they must agree with Opensea to blackout other trading platforms. Opensea's behavior is very similar to the e-commerce's behavior of letting merchants choose one from the other before the Double 11 Festival. And this kind of behavior is completely centralized, regardless of the open source spirit of Web3.
Opensea's insistence that it should only serve the NFT project or creator to control the business model is untenable, because the community unanimously believes that Opensea's move is a monopoly move made after being threatened by the first-class products and services of its peers.
What is the impact of Opensea's mandatory royalty tool?
Other trading platforms have no choice but to compromise，as mentioned above, Opensea's market share continues to decline, but it still holds the main market and voice. NFT project parties and creators choose to stand in the team of Opensea, which reduces the asset targets of other NFT platforms. According to the NFTGO data of the one-stop NFT analysis platform, since the launch of the compulsory royalty tool on the Opensea chain, the daily transaction volume of X2Y2 platform, which first introduced custom royalties, has decreased from 1974 ETH (data on November 1) to the current 900 ETH (data on November 19).
As a result, other trading platforms have also successively made compromises to the current market feedback. X2Y2 officially tweeted that it once believed that the best way to deal with royalties was to give both creators and traders the right to choose, which is the basic principle behind X2Y2's custom royalty function. Since Opensea released the Operator Filter, most new projects have supported it. "Code is the law", X2Y2 respects the law. X2Y2 uses the Operator Filter to delete the "Custom Royalty" setting of all newly launched NFTs.
Market liquidity is shrinking
In August, the PANews experience summarized the commission, royalties, platform features, etc. of the existing mainstream NFT trading platform. From the summary results, we can see that Zora transaction fees are 0, X2Y2 and SudoSwap fees are 0.5%, and the remaining NFT transaction platforms range from 2-10%. In addition to the 5-10% royalties set by most current NFT project parties and creators, the additional cost of user transactions is as high as 7-20%.
Such high transaction friction greatly reduces the transaction willingness and frequency of users. When the transaction willingness and frequency are greatly reduced, how can NFT project parties obtain more royalties. Moreover, the transaction frequency is also a process of community consensus exchange and expansion. In the long run, such high transaction costs are not conducive to the expansion of the NFT market from scenarios and users, the precipitation of consensus and value, and are contrary to the direction of the overall vigorous development of the market.
It can be expected that one of the development directions of NFT trading market in the future is to reduce the transaction costs of users. One is that the market evolution has forced the platform to reduce the service charge. For example, Opensea and other platforms charge users up to 2.5% of the service charge. On the one hand, the royalties of NFT collections are reduced. Currently, most project parties set about 10% of the royalties, making many project parties highly dependent on the path. PANews has written and compiled about how NFT project owners and creators can expand their profitability by expanding their business models and making a bigger cake.
Innovation in NFT market will be suppressed
Previously, Opensea had always occupied the user's cognition because of its first mover advantage, but the product had almost no optimization, which made the NFT user experience poor. Later, other NFT trading platforms gradually occupied a certain market share by operating and improving product experience. Now, NFT aggregation platforms have also won market favor by integrating market liquidity, and various platforms continue to compete healthily, so that the real needs of NFT users are constantly met.
Now, Opensea has launched a monopoly tool to make the NFT project party and the platform compromise. This action will suppress the innovation and innovation desire of the market. When entrepreneurs who want to build better products for the NFT market enter the market, they will think about whether companies such as Opensea will attack against the industry spirit when the products they build have a certain climate, so that the NFT market can not flourish in a hundred flowers.
As the analysts of thefx (safe and efficient exchange) said, online mandatory royalty is a simple decision and behavior. The NFT market really broke out less than two years ago, and too many tools and functions need to be built for the NFT space. But how much confidence does the industry have in innovation?
In this regard, Dashuo, founder of CreatorDAO, an NFT second innovation community, said that the white list system would hinder innovation, and it would be difficult for new trading platforms to emerge in the future. Because Opensea completely controls the filter of the mandatory royalty tools on the chain, Opensea can ban competitors for any other reason (politics, copyright protection, discrimination, etc.) in the future. The forced compromise of X2Y2, Blur and other innovation platforms is just the beginning. In the future, innovation will become more and more difficult. When innovation dries up the entire NFT field, it will also enter a vicious circle.
Moreover, when the filter is controlled by Opensea itself, it can cause great harm once it is used and abused. We have seen the consequences of stealing forbidden fruits from the thunderbolts of LUNA and FTX.
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