Written by Hazel J. Greene, Senior Analyst

While Non-Fungible Tokens (NFTs) have garnered significant attention for their record-breaking sales and high-profile celebrity purchases, a lesser-known aspect of this booming market is the concept of royalties. Recent insights into the NFT ecosystem on Ethereum reveal that these royalties have amassed a staggering amount, worth approximately $1.3 billion USD, or 699,816 ETH. But a closer examination of the data brings to light a decline in royalty payouts, prompting questions about the underlying factors and potential implications.

Despite the substantial sum accrued so far, a more detailed analysis of the numbers suggests a different narrative. The breakdown of annual figures unveils a significant dip in royalty payouts this year, raising concerns and warranting further investigation. Surprisingly, while NFT volumes have remained comparable, the royalties received by NFT projects in 2023 have been noticeably lower compared to previous years.

Royalties in 2023 account for only 9.4% of the total payout, despite the volume of NFT sales already reaching 50.6% of the 2022 figure. This substantial gap signifies a potential decline in royalty rates and raises questions regarding the reasons behind this downward trend.

In 2022, the average royalty rate stood at 2.5%, but by July 2023, it had plummeted to a meager 0.6%. This decline suggests that despite the surge in NFT transactions, artists and projects might not be reaping the anticipated rewards at the same pace.

Among the NFT projects that have reaped substantial rewards from royalty payouts, Yuga Labs stands out as a creative powerhouse. With initiatives like Bored Ape Yacht Club (BAYC) and Mutant Ape Yacht Club (MAYC), Yuga Labs collectively received 9.4% of all royalties disbursed to NFT projects. Their success highlights the potential of the NFT era to provide fair remuneration for artists’ work.

As the NFT market continues to flourish, it becomes imperative to carefully examine the declining trend in royalty rates. While the creation of unique digital assets remains a significant aspect of the NFT market, ensuring fair compensation for artists’ efforts is equally vital. The current scenario demands a deeper understanding of the factors that contribute to this decline and the potential implications for the sustainability of the NFT market.

In contrast to the thriving NFT market, Ethereum has shown bearish trends in the past week, experiencing a 2.3% decline. As of the time of writing, Ethereum’s price hovers around $1,857, with a modest 0.4% increase in the past 24 hours.

Disclaimer: The information provided in this research report is for informational purposes only and should not be interpreted as financial or investment advice. The cryptocurrency market is highly volatile, and readers should conduct thorough research before making any investment decisions.