NFT Marketplaces Pay $2 Billion To Creators In Royalties For Secondary Sales
In the past two years, NFT marketplaces have paid out nearly $2 billion in royalties to non-fungible token creators for secondary sales.
This is revealed by the 2023 State of Cryptocurrency Report by a16z crypto , one of the leading equity firms driving Web3 marketplace development. Faced with this figure, Meta allocated $1,000 million until 2022, a figure that the capital firm describes as “surprising”, taking into account that Facebook, Instagram and WhatsApp add up to around 3.74 billion monthly users. Web3 is used by only tens of millions of users today, he says.
How do NFT royalties work?
Thanks to smart contracts, creators can earn profit from secondary sales through royalties. NFT royalties are automatic payments to the NFT creator from resales that are encoded in smart contracts. With each resale, the smart contract grants an NFT marketplace development with the royalty percentage decided by the creator.
If a game or platform uses NFTs, these royalties are paid out of NFT trading fees. In other words: if someone buys your virtual art on the blockchain and resells it, they will pay a small fee to do so. This fee is paid to creators and developers.
NFT royalties creators
a16zcrypto explains that the 2023 report aims to address the imbalance “between the noise of price movements and the data that tracks the signals that matter, including the enduring progress of Web3 technology.” In this regard, the report reflects a healthier industry than market prices may indicate. With a constant cycle of development, product launches and continuous innovation, he says.
As key conclusions, the report collects the active addresses on the blockchains reached an all-time high in March, reaching 15 million, double the number of the last two years, he says. The increase, according to a16zcrypto, is due to the growing variety of apps and services, such as games, that offer people new ways to participate.
Regarding DeFi and NFT activity, the report notes that it seems to be increasing as new promising uses and applications emerge. “After a frenzied speculative period and the subsequent cooling off, it seems more people are buying NFT marketplace platform development in recent months. Meanwhile, on decentralized exchanges, more than $100 billion was traded in March, marking the third consecutive month of positive growth in transaction volume.
Zero Knowledge Technologies
Regarding the number of active developers in the crypto industry, a16zcrypto points out that it has remained stable and that almost 30,000 contributed to crypto projects in March, increasing more than 60% in the last three years. The report highlights that zero-knowledge technologies, once virtually impossible, are becoming very real. Zero-knowledge systems are advancing at a staggering pace, which will unlock greater blockchain scalability and a new category of privacy-based applications (not to mention AI applications), the study indicates. In this regard, he states that the data shows a positive trend in ZK-related research, developer activity, and usage.
The report also notes that the United States is losing its leadership in Web3. Between 2018 and 2022, the proportion of US-based cryptocurrency developers fell by 26% compared to the rest of the world. To reverse the situation, a16zcrypto proposes careful regulation.