- One of the largest non-fungible token (NFT) marketplaces, OpenSea, has found itself in hot water with artists and creators, who could be ready to take their business elsewhere.
Here’s a look at the reactions from an OpenSea investor and one of the largest NFT companies in the world.
What Happened: NFT marketplace OpenSea, which was valued at $13 billion in 2022, announced changes to its royalties for artists, prompting sharp backlash.
OpenSea announced that it will stop enforcing mandatory creator royalties on secondary sales of NFTs. The decision will set in place optional creator fees at the time of purchase.
While the marketplace site said that “creator fees aren’t going away,” the new policy will begin in March 2024 for all collections.
Related Link: Top 10 NFT Collections By Sales In 2022: Where Do Bored Ape Yacht Club, CryptoPunks And Mutant Ape Yacht Club Rank?
Backlash Ensues: Among those speaking out against the changes made by OpenSea was Yuga Labs, the company behind some of the most valuable and well-known NFT collections, including Bored Ape Yacht Club, Mutant Ape Yacht Club and Otherdeed for Otherside.
“At Yuga Labs, we are committed to help foster an ecosystem where new and innovative content is created and where creators are rewarded for their work,” Yuga Labs CEO Daniel Alegre said in a post on X.
Alegre said that Yuga Labs would begin to sunset support for OpenSea’s SeaPort for all “upgradable contracts and new collections,” with a goal of having it done by February 2024.
“For as much as NFTs have been about users truly owning their digital assets, they’ve also been about empowering creators. Yuga believes in protecting creator royalties so creators are properly compensated for their work,” he said.
Many have speculated that Yuga Labs could launch its own NFT marketplace in the future.
Bored Ape Yacht Club, Mutant Ape Yacht Club, Otherdeed for Otherside and Bored Ape Kennel Club all rank among the top 15 NFT collections of all time by trading volume and have over $6.5 billion in trading volume combined, according to CryptoSlam.
Digital artist Beeple highlighted the potential battle between Yuga Labs and OpenSea in his daily image on Aug. 18.
YUGA VS. OPENSEA pic.twitter.com/FuEj28KIEF
— beeple (@beeple) August 18, 2023
Another person who spoke out against OpenSea's recent announcement was entrepreneur and NBA team owner Mark Cuban.
“Not collecting and paying royalties on NFT sales is a HUGE mistake by OpenSea. It diminished trust in the platform and hurts the industry. And I say this as an OpenSea investor,” Cuban posted on X.
Cuban told a user on X that “the optional royalty approach kills future applications,” saying that this is where the “most money will be.”
Cuban also replied to a user who pointed out that OpenSea is making the change to better compete with Blur and LooksRare.
“Make the transactions free for NFTs that pay their royalty and then take a percent of the royalty as the fee. The originators still get paid most of the royalty, which is obviously better than nothing and OpenSea gets paid an amount that is probably better than the trx fee,” Cuban said.
Cuban disagreed with one X user who said creators would end up paying the fees anyway.
“It doesn’t solve the issue of moving an NFT to a marketplace that doesn’t pay royalties. But, it gives OpenSea a way to encourage NFT sellers to stay on OpenSea, it encourages creators to host there and it gives OpenSea a chance to make more money and show support for creators,” he said.
Cuban also highlighted one of the reasons why he supports royalties on NFT collections.
“It doesn't exist elsewhere and that is exactly the point. It creates unique opportunities where creators can get paid on future sales. Textbooks get resold. Author's/publishers get nothing. As a result they charge higher prices for new books knowing they will be sold and resold until they fall apart. Make them an NFT with royalties that have built in DRM and a reader and the prices of textbooks drop like a rock,” he said.
A well-known entrepreneur, Cuban invested in OpenSea in March 2021 as part of a $23 million funding round led by Andreessen Horowitz. Cuban invested again in OpenSea in a July 2021 round that also saw Kevin Durant and Ashton Kutcher invest in the NFT marketplace company.
In March, cryptocurrency platform company Coinbase Global COIN, which has an NFT marketplace, shared its stance on royalties amid the OpenSea drama.
“We’ve been committed to enforcing creator royalties from the start, and we still are,” Coinbase posted. “We’re driven by our mission and fostering a thriving web3 ecosystem that empowers more people to participate in the creator economy and profit from their work.”
Read Next: Here's Why Mark Cuban Still Believes In Crypto Despite FTX Breakdown
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