Beyond Resale Royalties
So Why Is DADA Ditching Royalties?
By Beatriz Helena Ramos
A Bit of History of NFT Royalties
Back in 2017 when we launched the Creeps & Weirdos collection, one of the most exciting aspects was the possibility to guarantee resale royalties for artists in perpetuity. DADA was the first platform to ever code resale royalties on smart contracts: 60% would go to the collector, 30% to the artist, and since we are a collaborative community, 10% would go to DADA’s community fund. These royalties were applied on the profit.
At the time, the Ethereum ecosystem was filled with idealistic ethos like “banking the unbanked”, and our first collectors were all early adopters of the technology. No one ever questioned the resale royalties. On the contrary, it was exciting to be part of an upcoming revolution for artists. While Cryptopunks and Cryptokitties were projects owned by companies with a particular business model, DADA was a weird hybrid of an art creation platform, an artist collective, and a decentralized marketplace. It was essential for us to guarantee royalties for each artist and for the DADA community.
Unfortunately, following the success of CryptoKitties, the NFT ecosystem was motivated not by art with an artist-first approach, but by collectibles with a collectors’ first approach. OpenSea capitalized on the revenues generated by Cryptokitties by adopting the ERC 721 standard, which doesn’t include royalties.
We approached OpenSea early on to come up with a royalties standard together. SuperRare and Known Origin were just a couple of months old at the time, but when we spoke with Devin he couldn’t justify putting resources into this since there was no money in art. Since programmable royalties were a value proposition of smart contracts, we couldn’t allow our art to be sold on OpenSea if they didn’t guarantee royalties for our artists, so we blocked all resales of the Creeps & Weirdos.
I remember John Crain saying in 2018 that they had implemented 10% royalties on SuperRare, inspired by DADA. But I was surprised to learn that by early 2020 SuperRare had brought them down to 3%, and no other marketplace had implemented any royalties at all.
Not a great track record for an ecosystem that praises itself as revolutionary for artists, and that touts resale royalties as the one thing that distinguishes it from the traditional art market. It took a group of brave artists led by Matt Kane, Coldie, and Sparrow Read to organize amid a global pandemic and negotiate a 10% royalty standard on all the platforms. Currently, Known Origin leads with a 12%.
Fast forward three years since we tried to devise a royalty standard, and now it is art and not collectibles that is bringing hundreds of millions of dollars into the NFT ecosystem. Yet OpenSea is now too busy to put resources into guaranteeing resale royalties on their platform. Today, if an artwork is sold on a crypto art marketplace and resold on OpenSea, the artist does not get royalties.
We support the implementation of the EIP-2981: NFT Royalty Standard
From “Commissions” to Value.
I suppose that, since we’re artists, everyone expected us to fight the royalties fight until the end. Our decision is not dogmatic but based on a deep understanding of economics and a clear vision of where NFTs are heading.
While all the crypto art platforms focused on building a market, we focused on creating an entirely new socioeconomic system called The Invisible Economy. We wrote about the problem of replicating the star systems of the art market in The Complacency of Crypto Art. We analyzed the real impact of speculative markets in The Inconvenient Truth About Crypto Art Secondary Markets Part 1 and Part 2, and we have explored in great depth the extrinsic and intrinsic motivations of collectors.
Today’s crypto art market is an investor’s market. Artists are vetted but collectors aren’t. Star systems are created around the number of sales. NFTs are seen as assets, and crypto art is seen as a store of value. DEFI has opened all kinds of financial possibilities: investors no longer need to sell their art to get ROI, they can collateralize it and get loans or dividends, they can fractionalize it, wrap it, and launch social tokens around their collections. In all those cases resale royalties are moot.
I still see a use case for resale royalties when it comes to mass market products like books, music, and tickets, but when it comes to art as a store of value we need a completely new approach. Our few art collections currently in the market all represent a store of value. These collections are historically significant as they were part of the birth of crypto art and they all pre-date 2020.
- The Creeps & Weirdos were launched right after Cryptopunks and before Cryptokitties.
- Pop Art was the first cross-platform collaboration of layered NFTs. Cryptokitties could collect DADA art.
- Descontrol was presented at the first NFT.NYC and it was our first stand-alone collection of a visual conversation.
- Sight Unseen was auctioned live as it was being created at the first RadicalXChange conference. It was the first ever experiment of a channel auction.
- Simply María: The Art of María García was presented at the first CADAF.
- Soul In The Machine, which also had a physical component, was created live over one day at the Ethereal Summit.
- Animalia was a gift to the crypto art community at the Rare Art Fest 2.
- Screens: An Exploration was the introduction of the DADAGAN and it was created live at the Tate Modern in London, the first time that a crypto art platform appeared at a major museum.
All these collections are considered vintage NFTs. They are all under market value because we blocked resales on the secondary market. Our intention was to keep them in the DADA reserve of the Invisible Economy, but recently an “archaeologist” discovered the Creeps & Weirdos, and even though they were not on sale and they were bought through a back door, we have found a great community of collectors and supporters and we think it is fair for them to get liquidity.
Our fight is not about royalties, our fight is about capturing the value we create as a community. We believe our art collections will accrue significant value in the future, which is why we have decided to lift all restrictions on the secondary market and launch a social token exclusively for these collections. This token will be distributed between DADA and all collectors of DADA NFTs. 100% of DADA’s revenues will go into the community Trust in the Invisible Economy.
This is how we joyfully say goodbye to the market and we welcome a new era of ethical, equitable, and collaborative value creation.