NFT marketplace OpenSea to disable royalty enforcement tool

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OpenSea’s royalty enforcement tool Operator Filter is going to be turned off, according to the NFT marketplace’s founder and CEO, Devin Finzer.

Nonfungible token (NFT) marketplace OpenSea is sunsetting its on-chain royalty enforcement tool — Operator Filter — that allows creators to blacklist NFT marketplaces that don’t enforce royalties.

The change is set to take effect on Aug. 31, according to an Aug. 17 statement by OpenSea founder and CEO Devin Finzer.

The Operator Filter feature was first introduced in November 2022 and was described as a “simple code snippet” that could restrict NFT sales to only marketplaces that enforced creator fees.

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

However, Finzer said that the tool hadn’t had the success they had hoped, as it didn’t have the needed support from the NFT ecosystem.

Finzer claimed that NFT marketplaces such as Blur, Dew and LooksRare had circumvented the Operator Filter by integrating the Seaport Protocol to bypass OpenSea’s blacklist and therefore avoid creator fees.

Finzer said they also saw pushback from creators, who saw the tool as encroaching on their control over where their collections were sold.

“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.”

“The Operator Filter’s restrictions come at the expense of decentralized ownership,” he added.

Finally, Finzer explained that while creator fees are useful for certain business models, its only one of many revenue streams available to creators and there are a number of other use cases of NFT technology that need to be considered.

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

“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,” he said.

Starting from Aug. 31, the Operator Filter will no longer block any marketplaces. However, any collections that are using the tool and for existing collections on non-Ethereum blockchains, the creator’s preferred fees will be forced up to Feb. 29, 2024.

“To be clear, creator fees aren’t going away — simply the ineffective, unilateral enforcement of them,” Finzer added.

A possible blow for NFT artists

The move is considered by some to be a potential blow for NFT artists looking to make passive income.

Several members of the NFT community expressed disappointment toward OpenSea’s decision, stating on Aug. 17 that collectors should support NFT creators on platforms that mandate royalties:

Opensea is caving into pressure from its competitors to kill royalties.

As members of nft communities the best way to impact this royalty problem and support your project is to only use platforms that will support your communities and honor their royalties.

Stop supporting…
— ROCKΞT (@RocketEGC) August 17, 2023

However, a Reddit avatar artist believes it may have been the right move, suggesting the business model aimed to profit too much off of hype trading.

Magazine: NFT Collector: Grails’ lucky dip of famous NFT artists, new hope for PFP holders

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OpenSea launches new "on-chain" tool to enforce NFT royalties

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Coin Telegraph

Royalty enforcement tool only applies to new NFT collections at this stage, with a decision to be made on existing collections at a later date.

Nonfungible (NFT) marketplace OpenSea appears to have taken a position in the NFT royalties debate — launching a new "on-chain" tool helping creators enforce royalties.

The NFT marketplace, which according to CoinGecko commands 66% of the market share in NFT marketplaces been relatively silent on the issue of royalties and enforcement while others in the space have been implementing their own strategies over the last few months.

In a Nov. 6 blog post, OpenSea CEO Devin Finzer noted that in marketplaces where fees are optional, they’ve “watched the voluntary creator fee payment rate dwindle to less than 20%”, while in other marketplaces creator fees are “simply not paid at all.”

The OpenSea CEO announced the marketplace has launched a new tool that will allow creators to deliver “on-chain enforcement” of their royalties.

There’s been a lot of discussion over the past few months about business models for NFT creators & whether creator fees (“royalties”) are viable.

Given our role in the ecosystem, we want to take a thoughtful, principled approach to this topic & to lead w/ solutions.
— OpenSea (@opensea) November 6, 2022

Finzer described the tool as a "simple code snippet," which allows creators to enforce royalties on new and future NFT collection smart contracts, and existing upgradeable smart contracts. The code will also restrict NFT sales to only marketplaces that enforce creator fees.

"It's clear that many creators want the ability to enforce fees on-chain; and fundamentally, we believe that the choice should be theirs to make — it shouldn't be a decision made for them by marketplaces," Finzer said.

Finzer also said that OpenSea will enforce royalties for any new collections using an on-chain enforcement tool, but won't do so for new collections that don't opt-in.

Finzer explained in an accompanying Twitter Spaces that OpenSea is "not requiring folks to use our specific solution," creators can use "whatever solution you want and implement it anyway."

"We provide a template GitHub repo that helps you use a solution that basically blocks lists marketplace that doesn't support creator fees, you don't have to use that solution; the requirement is that if you want creator fees, you have to enforce them on chain."

The tool also won’t be rolled out for existing NFT collections for the moment due to implementation challenges.

"To the best of our knowledge, the only way to achieve on-chain creator fee enforcement for existing collections with non-upgradeable smart contracts is to take drastic measures with their communities, like shifting the canonical collection to a new smart contract," Finzer said.

"In our opinion, by far the better option is for existing creators to explore new forms of monetization and alternative ways of incentivizing buyers and sellers to pay creator fees, and to ensure that future collections enforce creator fees on-chain," he added.

According to Finzer, this includes options such as continuing to enforce off-chain fees for some subsets of collections, allowing optional creator fees and collaborating on other on-chain enforcement options for creators.

Reaction among the NFT creator and Twitter community has been mixed. Wab.eth, founder of the Sappy Seals NFT collection and co-founder of The Pixlverse and Pixl Labs told their nearly 60,000 followers that while “I don't fundamentally agree with the removal of royalties, I do appreciate this execution.”

I don't fundamentally agree with the removal of royalties though but I do appreciate this execution. There has to be give and take with these things.

Recognizing you are making a (unavoidable) change that harms your audience but also simultaneously presenting a solution.
— wab.eth ❁ (@wabdoteth) November 6, 2022

Others users had questions they felt were not answered. Betty, the pseudonym for one of the creators of the Deadfellaz NFT collection, told their 89,000 followers, “it feels like there is no plan and no clear answers were given in regards to existing collections & artist’s royalties.”

Although later noted, “I look forward to reading more concrete communication from them soon in regards to proposed strategies.”

After speaking with @opensea it feels like there is no plan and no clear answers were given in regards to existing collections & artist’s royalties. Communication has been misleading and facts are not there. Speak up if you feel a certain way about this because it has impact.
— BETTY (@betty_nft) November 6, 2022

creator fees