Two of the biggest names in the NFT space are clashing over the future of how the tokens’ creators get paid. Yuga Labs, the company behind Bored Ape Yacht Club and CryptoPunks, said today that it would block the ability to trade its newer NFTs on OpenSea by February 2024. The move is meant to protest OpenSea’s decision to stop collecting royalties on behalf of NFT creators — a huge blow to Yuga’s business.
One of the big promises of NFTs was that their original creator would get a cut every time they were resold. For companies like Yuga, which saw explosive prices on its Bored Ape collection for a time, those royalty fees added up to tens of millions of dollars (a blog post suggests the number was $35 million for Bored Apes alone just via OpenSea trades as of November 2022).
But despite the many promises of Web3, it was ultimately up to NFT marketplaces to enforce and distribute those fees for artists. And as the NFT market has deflated, more marketplaces have been happy to cut artists out of the picture as a way to lower fees and attract sellers. The leading marketplace, Blur, only enforces a 0.5 percent fee in most cases, far lower than the 5 to 10 percent fee that artists typically set.
The ban only applies to newer NFTs
Not all of Yuga’s NFTs will be blocked from OpenSea because of technology constraints. The company said it would drop OpenSea support on “all upgradable contracts and any new collections,” which means that older collections — including its most famous, Bored Ape Yacht Club and CryptoPunks — will likely continue to be traded there, dulling the impact of this protest.
“We’ll be working toward disallowing OpenSea’s marketplace to trade our collections as they phase out royalties,” Emily Kitts, a Yuga Labs spokesperson, told The Verge. She declined to offer details on which collections would be affected.
OpenSea tried for a time to find ways to enforce creator fees, but on Thursday the company threw in the towel. It announced that as of March 2024, all royalty fees for artists would be optional — tips, essentially, that the seller could choose to distribute or not. Fees will be optional for all new collections starting August 31st.
Many NFT businesses rely on those fees. They’ll create a limited number of NFTs, sell them for a low-ish price, and then focus on growing the value of the tokens so they can pocket the resale fees later. (Bored Apes were sold for around $220 at launch, which is a lot less than the $216,000 Jimmy Fallon is believed to have paid for one less than a year later.)
Resale fees aren’t the only way that NFT businesses can make money — CrytoPunks don’t have a fee, for instance — but it’s certainly among the primary ways. The Bored Ape collection has a 2.5 percent fee, and after acquiring the Meebits NFT collection, Yuga added a 5 percent fee.
“Yuga believes in protecting creator royalties so creators are properly compensated for their work,” Yuga CEO Daniel Alegre said in a statement this afternoon. Yuga Labs has previously blocked certain transactions from happening on Blur and other marketplaces that don’t enforce royalty fees.