In brief
- Magic Eden has launched the Open Creator Protocol, which it says can enforce creator royalties on Solana NFTs that use the tool.
- In October, the leading Solana NFT marketplace made creator royalties optional for buyers to pay. That’s still true for existing collections.
Creator royalties are at threat in the NFT space, especially on Solana, where effectively all marketplaces with any significant share have stopped requiring traders to pay the fees. But now the leading Solana marketplace, Magic Eden, has taken a step towards creating a more durable system to enforce creator royalties.
The $1.6 billion startup today announced the Open Creator Protocol (OCP), an open-source tool that creators of new Solana NFT projects can implement to ensure that royalties are paid whenever their assets are traded on secondary marketplaces. It’s built on top of Metaplex’s existing SPL token standard for NFTs on Solana.
Creator royalties are fees that are paid, typically by the seller, on NFT trades. They are typically set between 5% and 10% of the sale price, with the funds going to a digital wallet controlled by the creators of the NFT project. These fees can be a lucrative source of revenue for NFT projects that generate significant secondary trading volume.
Magic Eden's OCP appears to be similar in approach to OpenSea’s recent Ethereum toolkit, allowing NFT creators to block marketplaces that won’t honor royalty fees on eligible assets. In other words, if a marketplace refuses to enforce royalties for OCP-enabled NFTs, then that platform will be put on the OCP blocklist and those NFTs can’t be traded through it.
“Creators have the option to adopt the Open Creator Protocol, which will allow them to use the protocol to protect their royalties and create their own rules of their collection’s trading,” Magic Eden CEO Jack Lu told Decrypt. “This will only be available to creators launching new collections, but we feel many will opt into the protocol.”
Lu said that Magic Eden itself will maintain a list of blocked marketplaces, but also that creators can choose to customize the list of blocked platforms. The open-source tool—which will be available for creators to use on Friday—can be supported by any Solana NFT marketplace that wishes to honor royalties on OCP projects, he added.
Magic Eden enforced creator-set royalties until mid-October, when a wave of rival Solana NFT marketplaces began rejecting royalties or making them optional for traders, resulting in more money kept by sellers. Faced with dwindling market share in the Solana NFT space, Magic Eden opted to make royalties optional for buyers to pay, similar to a tip for creators.
Ethereum NFT platforms began following suit, as well, and top overall marketplace OpenSea said in early November that it was considering a similar move. Following creator backlash, however, OpenSea said that it will continue to honor royalties on existing collections, along with new projects that use its Ethereum blocklist tool. Rival marketplace X2Y2 has since taken that approach as well.
Magic Eden’s new tool only serves creators who adopt it for newly launched projects, however, and the marketplace has not changed course on optional royalties for existing projects. The firm previously pledged $1 million towards the development of royalties enforcement tools, and Lu told Decrypt that creators may choose to re-mint projects using OCP if they wish.
“It’s not mandatory of course—it’s just an option, in the spirit of being solutions-oriented,” Lu explained. “While that might appear scary for some creators, some remain undaunted and we look forward to working with them.”
Magic Eden built the OCP tool independently of Metaplex, which is developing its own new royalties-enforcing Solana NFT asset class. Lu said that the team has been in contact with Metaplex and had already shared the tool ahead of today’s announcement, noting that Metaplex’s new standard isn’t due until Q1 2023.
“We don’t foresee any conflict between our protocol and what Metaplex plans to roll out. We want creators to have as much choice as possible,” Lu explained, pointing out that both will support migrating existing collections. “Our goal is for the ecosystem to consolidate a standard that any business can unreservedly build on top of.”
The OCP toolkit also enables additional functionality for creators, Magic Eden said. One feature is a dynamic royalty option that uses a linear price curve to cut down the total fee paid by buyers for higher-priced NFTs, potentially making royalties appear less daunting for pricey purchases.
Another feature lets creators customize certain transferability details, such as whether NFTs can be resold before the initial mint ends, as well as limits based on NFT metadata—or the details that specify an asset’s unique attributes—or total NFTs traded in a collection to date. Magic Eden suggests that such options can unlock “gamification” opportunities for NFT creators.