Royalties, optional?

37 / What happens when the transfer of ownership is tied to the payment of royalties? Tune in as we dive into NFT royalties and the different ways they can be enforced on-chain and off-chain.

Timeline

00:00 Intro

01:02 Beeple's hot note on royalties

05:40 ERC-721 -- require payment to SELL an NFT

07:21 IRL all transactions are already private

08:50 Are auction prices actually public?

12:33 Two ways enforce royalties on-chain

12:48 Sell no taksies-backsies

13:08 Sell large enough increment

15:33 Managing at the token contract level

14:31 Off-chain enforcement

14:56 These are encumberences

15:47 HOAs and NFTs

17:18 Are NFTs owned or really licensed?

Participants

Episode notes

Edit these notes…

https://twitter.com/fulldecent/status/1559363564179279872

Artist royalties, discussing these:

https://twitter.com/beeple/status/1558573319347179520
- @beeple
https://twitter.com/ZachSpaded/status/1559004142256865280
- @ZachSpaded

Can NFT royalty payments be ENFORCED on-chain?

Yes, ERC-721 can require payment (of Ether) to transfer (the buyer or seller!) an NFT. But ERC-1155 cannot require this in the safe(Batch)?TransferFrom function.
Question: how many OpenSea transactions are already using side channel buyer-seller collusion to avoid fees?
- Key point: the smart contract does NOT know the full sale price (just like government does not know full sale price of your car @snapboogie)
- Enforce:
  - Seller consigns the asset to auctioneer with no minimum bid
  - If the bid increment is larger than the collusion saving (i.e. royalty/tax/marketplace cost)
- Enforce on-chain:
  - Only reliable if the fee is a fixed-price fee
  - Using pricing set by some kind of bonding curve or more generic function
    - Time-based (velocity)
    - Total amt of ETH
- Enforce off-chain:
  - Use an appraiser (oracle, tax investigator)
Other encumberances in assets sales (transactions with other silent parties involved)
- Land grant → sales restrictions to certain parties (“no [certain racial group]”) or use restrictions (“no houses” -> local watershed)
- Each new party agrees to the full terms of sale
Should NFT be “sales” or should should be “licenses”, licenses have different kinds of terms and there is a different expectation of agreement/law/redistribution/terms from recipients/licensees/”buyers?”
- ERC-721 uses the word “owner” all over it / ergo there is a reasonable expectation that this is “sale” and a license
- Is there scope to create ERC-721 specification clone for licenses (that are transferable?) or an extension that is specifically for licensing (soulbound?)

Ways around just about anything

Wrapper contracts

Moral stance