OpenSea Disables Royalty Enforcement Tool Amidst Creator Fees Debate

Updated: 18 August 2023

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OpenSea, the world’s largest non-fungible token (NFT) marketplace, is deactivating its royalty enforcement tool, enabling NFT creators to blacklist other marketplaces that did not enforce royalties.

According to the marketplace’s founder and CEO, Devin Finzer, the feature, Operator Filter, will stop blocking any marketplace from creators beginning August 31 due to various reasons that he detailed in a statement.

As an alternative, OpenSea is affecting an optional creators fee where users can specify the amount they want paid each time their NFT is sold. By enforcing Operator Filter, a creator’s NFT creation would not be listed on platforms that did not pay creator fees. This protected the creator’s earnings and ensured they kept generating income from their work.

Starting Aug 31, we’ll:
– Sunset the OpenSea Operator Filter
– Move to optional creator fees on all secondary sales for new collections
– Improve visibility of creator fee settings and listings on buyer & seller side

More below:
— OpenSea (@opensea) August 17, 2023

OpenSea’s royalty enforcement tool was launched in November last year and was a “simple code snippet” that could ensure that creators’ NFTs are only sold in marketplaces that enforced creator fees.

However, for the tool to work, according to Finzer, it required the cooperation and support of the entire NFT ecosystem. Unfortunately, the support was not accorded, and instead, the marketplace received pushback and violations from creators and other NFT marketplaces, respectively.

Given that NFT and the whole web3 space are based on decentralization and owners have absolute control over their art, creators felt that the Operator Filter limited their control over their NFTs, preventing them from having their work listed on some sites. “The Operator Filter’s restrictions come at the expense of decentralized ownership.”

“We have heard from some creators that the Operator Filter limits their sense of control over where their collections are sold, and at the same time may collide with a collector’s expectation of full ownership,” Finzer said.

On the other hand, some NFT marketplaces that do not offer creators royalties devised ways to bypass the Operator Filter. According to Finzer, Blur, Dew, and LooksRare allegedly used the Seaport contract, which made the tool ineffective in blocking marketplaces that do not enforce royalties while leaving those that do.

More Control and Revenue Streams with OpenSea

Lastly, OpenSea has chosen to diversify and expand the business model and revenue stream it offers the creators in its marketplace. Finzer stated that the potential applications and utility of NFT technology are too diverse for creators to depend solely on a single business model that only monetizes resale.

As such, the marketplace is committed to finding ways to enable its creators to earn more. “We’ve dedicated a large part of our roadmap to power new use cases – starting with digital and physical redeemables – and to merchandise those use cases more effectively across primary and secondary experiences,” Finzer stated.

While the sunsetting of the Operator Feature is a blow to some creators who were pleased by its service, Opensea has cushioned them by enforcing the creator’s preferred fees up to February 29, 2024.

Thereafter, the creator fee will become optional, as is the case for every other collection from August 31.

We’ve had a few learnings since launching our Operator Filter:
– It relied on opt-in from the entire ecosystem, which didn’t happen
– Creator fees choice is important for collectors and creators
– Creator fees are just one of many revenue streams available to creators in web3
— OpenSea (@opensea) August 17, 2023

OpenSea Strives to Stay On Top

Creator fees and royalties have been debated in the NFT landscape over the last few months. A few months after imposing its royalty enforcement tool to protect creators, OpenSea reduced its royalty requirement from 5 and 10% to a minimum of 0.5%.

Additionally, for a limited time, the marketplace also did away with the 2.5% sales fee that it would charge sellers to make a profit off creators’ sales. These moves were meant to enable it to compete with Blur, which was not charging any sales fees and only enforced a 0.5% creator’s royalty fee.

We’re making some big changes today:
1) OpenSea fee → 0% for a limited time
2) Moving to optional creator earnings (0.5% min) for all collections without on-chain enforcement (old & new)
3) Marketplaces with the same policies will not be blocked by the operator filter
— OpenSea (@opensea) February 17, 2023

The current set of changes only shows how much OpenSea struggled to keep its market share after bleeding users to Blur and other NFT marketplaces. By caving into the prevailing standards, OpenSea hopes to salvage its dominance and remain the largest by volumes.

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