Creators are the backbone of the Web3 space, fueling the content behind NFT projects and uniting culture with the crypto-adjacent world. But many are packing up and heading out as their financial incentives dry up.
“About 80% of my creator friends are done [with Web3],” said Coco, a well-known NFT artist and founding member of the digital art collective Stardust Society. Without a steady flow of creators, brands would lose the source of their primary partnerships, and Web3 the source of its creative potential.
“If you’re not rewarding creators, you get a lack of creative output,” said Jeremy Cohen, head of Web3 investment at Publicis Media. This means less content for new projects and more emphasis on the financialization of existing assets—the very problem that is forcing out creators in the first place.
The root issue has to do with royalties, Coco said, or fees that are programmed into NFT smart contracts which enable creators to receive a small cut for every token’s resale. In November, Ad Age reported on how these payments were being sidestepped by an increasing number of marketplaces. Marketing experts at the time warned that brands needed to establish guarantees, such as through contracts, in order to protect artists.
Read more: NFT marketplaces pull back creator royalties
But three months later, the situation has unraveled significantly. OpenSea, the largest marketplace for buying and selling NFTs, announced last month that it would temporarily cut protections for creator royalties, reducing the mandatory minimum fee from 5% of the token’s price to 0.5%. The decision rolled back assurances the company put in place last fall, when it held firm on honoring royalties for existing collections, and even went so far as to block marketplaces that made royalties optional.
In a Twitter thread announcing the new policy, OpenSea wrote: “We thought we could catalyze widespread enforcement of creator earnings, and we hoped others might come up with more resilient solutions—this hasn’t happened.”
Shiva Rajaraman, OpenSea’s chief business officer, told Ad Age in an email, “The policy change we made in February was necessitated by the massive cultural shift happening in the NFT ecosystem right now: cost-sensitive collectors and power users are dominating supply and demand, and zero-fee NFT marketplaces are emerging to serve the needs of this newly segmented customer base.”