Key Insights:
- The zero royalty trend had taken off exponentially before we made the decision to switch to optional royalties.
- The sooner we accept this trend, the sooner we can catalyze innovative new royalty solutions.
- It’s pertinent to us that your voices are heard as we navigate the ever-evolving NFT space together.
Our optional royalty decision has spurred a lot of questions. Uncertainty. Confusion. Frustration. It’s never easy adapting to changes in a space that moves lightning fast.
Magic Eden is a rapid innovator. But the truth is we can only innovate as fast as the NFT space can adapt. Sometimes this means making hard decisions. Decisions that don’t feel good at first. But have the potential to catalyze much needed-solutions that are best for the long run.
In this recap of an AMA, ChartFu from Magic Eden chats with EasyEatsBodega to cover key questions and share views from the wider Solana community. Listen to the full AMA here.
EasyEats: How did the royalty decision happen? Give us the backstory. [7:56]
ChartFu: To start, this was not something Magic Eden intended to do. When we first saw marketplaces offer 0% royalties, the effect was very small. We knew it sucked but we were confident that we’d find a way to combat 0% royalties.
But then more and more marketplaces began introducing zero royalties. The trading stats went ballistic. As we watched the data, the number of wallets trading without royalties grew exponentially. Soon there were 60,000 to 70,000 wallets. It all happened super fast.
At that point, we knew that the zero royalty trend was not stoppable — at least not in a short period of time.
EasyEats: I’m also a huge metrics guy, so I was also watching those stats in real-time. With Yawww, there was little effect. But it gained traction with AMMs. Then Solanart was able to get a zero royalty audience on a smaller scale as opposed to Yaww. [10:13]
C: It was really hard to accept that royalties were not enforceable. But once you accept it, you can move on to new options. Solana NFTs have only been around for a year. This is time to figure out new solutions, such as:
- Royalty enforcing solutions
- Ways to incentivize people to pay royalties
- Automated market models
And in general, figuring out a new and better way of doing things.
EasyEats: What really led to the change in opinion on royalties? [12:33]
C: When the trend took over, it was clear that it’d lead to the end of our business if we didn’t adapt. We are a business and have over 100 employees to take care of.
The sooner we realized this, the sooner we could explore next steps to help creators. Before we made it official, we also wanted to be sure we had some sort of solution and that’s why we set up a $1,000,000 (research & development) fund to help creators with royalties.
EasyEats: What led to that fund and how did you select the judges? I noticed a few traders on the panel. [14:00]
C: We wanted something fast that also has maximal impact. So we needed judges to be Solana devs that also had experience running hackathons because Magic Eden didn’t have that experience. Plus, these judges can spread word to maximize participation. Altogether, this will help the ecosystem find solutions faster.
Runn1ngm8n: I applaud Magic Eden for making the change so they squeeze out the zero royalty markets. Otherwise Magic Eden would’ve went to zero market share… [15:47]
That said, the high royalties (e.g. 10-12%) is why zero royalties were appealing. Those levels are way too high for traders. If Magic Eden capped royalties at a lower percent, I don’t think zero royalty marketplaces would’ve gained traction.
C: Thank you. Yes, this trend was larger than just Solana. We saw it with Sudoswap and even the Blur marketplace on Ethereum.
EasyEats: Was there anything going on behind the scenes at Magic Eden to prepare for this trend? [18:52]
C: To be honest, we were too naive and spent too much time trying to prevent the zero royalty trend before exploring other options.
In the background, we were building Metashield — an option for creators to use. This option is still available today.
The dilemma is that if you want to enforce royalties, you have to give up full ownership. Some projects will use Metashield. Some will use AMMs. Our goal is to give as many options to creators as we can.
Sølana Chris: I saw Magic Eden mention Boots and Raindrop protocol right after the optional royalty announcement. Do you think this is a feasible solution until a royalty solution is found? [22:31]
C: For sure, it could help both short and long term. I’m honestly impressed with Raindrops and how well it works.
JonnyJpegs: Magic Eden has enough resources to build for years and these trends come and go. So wouldn’t it make more sense to do the hackathon and build solutions before switching to optional royalties? [24:26]
C: The data shows that this trend is not going away anytime soon. The sooner we accept it, the sooner we will find new solutions. No one knows how long this phase will last, so trying to predict is just speculation. It could be two months or two years. We don’t know yet. In the end, it’s better to do it sooner so we can find solutions sooner.
DeDeep: Do you believe that Magic Eden could be participating more in the community? [30:36]
C: We do keep in touch with the community and actively listen, even if we don’t always respond. The main mistake we could probably improve was waiting it out too long and the last minute communication.
Manny: What’s Magic Eden’s new monetization model? Where do NFTs go next? [34:07]
C: It all depends on a project-by-project basis. There is no one-size-fits-all solution. The important thing is figuring out enough options to support all the different types of projects.
For Magic Eden, we are also exploring new monetization mechanisms. We’re in the same boat as creators.
LibertySquare: Metaplex alluded to providing a solution to all marketplaces when Yaww first did optional royalties. Could you shed some light on this and your relationship with Metaplex? [48:58]
C: I wasn’t there for the conversation. But it wasn’t something immediately feasible at the time. When they approached us, we were heavily focused on keeping royalties alive and fighting for creators.
Hex: The data that this decision was based mostly comes from traders. But ME has a great, convenient user experience. Doesn’t optional royalties add more friction and hurt your platform in the long run? Or cause people to go to other chains? [52:01]
C: The zero royalty trend is happening on many chains. On Solana, it happened faster because it has a smaller market.
Regarding friction, the default is to pay full royalties so there’s actually more friction to disable royalties. Overall, the user experience hasn’t changed much.
Frank: Majority of people on Solana were unaware that Royalties were not enforceable…
I believe royalties will help NFTs go mainstream but the problem is the lack of enforceability. Everything happening right now will only accelerate royalty solutions, bringing them back stronger than before.
The difference between Solana and ETH is that it’s a lot simpler to blacklist zero royalty marketplaces on ETH. Solana is set up via token standards like Metaplex — a standard built by a small team in only a few weeks. There’s always issues with V1 of anything.
People need to be less bearish and more optimistic because blockchains are about social consensus and if people want something, it can happen. [1:03:33]
Hellboy: I agree, royalties will come back…
We can point fingers, but the vulnerability is in Solana and the current token standards. My main advice for ME is to strengthen your Public Relations. Even if that means breaking things down and centralizing info, so everyone’s on the same page. As the top marketplaces, you don’t need to cater to all the flak you get. [1:09:17]
C: Thank you, and yeah, it’s definitely something we can work on today. With Metashield, we didn’t introduce the problem properly and only offered the solution, which came across as too controlling.
AlphaSai: What will happen to NFTs when a new token standard is developed? Will there be a hybrid standard? [1:13:32]
C: As a marketplace, we can just implement a new standard. If an old project transitions to a new standard, the users will likely need to accept the transfer to a new standard.
Runn1ngm8n: Royalties do need to be cut and enforced on the smart contract level. Magic Eden would also make more money by lowering the royalty percent. From the Metaplex spaces, they seemed to be losing patience with marketplaces…
We need this resolved and ME can flourish on a lower royalty model. We have solidarity across the blockchain and can grow from this to become the biggest blockchain in the world. It just needs communication and people working together to see the bigger picture. [1:24:41]
LibertySquare: Sentiment can often be overlooked when viewing data. If you compare data between now and a few weeks ago, can you see an increase in Magic Eden’s market share? [1:27:57]
C: There’s been a small increase in market share. But no major solution yet. One week’s a pretty short timeframe.
Frank: I think the key is a deep understanding and clear communication of the trade-offs. If people get angry at everything, we’ll go in a downward spiral…
It’s hilarious how Metashield got FUD but now people are praising solutions that mirror what Metashield does. When you see the negativity, remember that these people have consistently been wrong. A better discourse is needed than the angry mobs. [1:30:47]
EasyEats: The angier someone is, the louder they are. It doesn’t reflect the majority of the space. I also saw something about royalty enforcement launching on Solport. Would Magic Eden be open to solutions like that on other launchpads? [1:32:44]
C: Yes, provided that it’s something open-source, available for everyone, and better than other solutions out there.
Berry: Between the time of the Metashield announcement and optional royalties, was anyone told that ME was making the zero royalty announcement? I remember the intern replying that the announcement wasn’t zero royalties. [1:35:40]
C: Yes, we talked to everyone possible. We couldn’t reach everyone in time, but we called creators, and covered around 50 projects in total before the announcement.
Runn1ngm8n: What Magic Eden did was revolutionary for their marketplace…
I love using it and despite the grill, we want to see Magic Eden succeed. We want to communicate better and work together for the future of our ecosystem. [1:37:15]
In case you missed it, you can listen to our first Town Hall on Optional Royalties here.