Empowering Creators: DeHub NFT Marketplace with Royalties

By DeHub Team — 2022-04-06

In Q2 2022 we launched an NFT marketplace with a royalty distribution system.

The royalty problem, as of 2022

Creator royalties in that era were mostly a convention. A collection declared a royalty percentage, marketplaces honoured it, and everyone described it as though it were a property of the asset.

It was not. It was a policy of whichever venue the trade happened on. Within about a year, that convention collapsed — marketplaces competing on fees made royalties optional and then default-off, and a large number of creators discovered that their long-term income had been a courtesy all along.

What we built instead

Our marketplace distributed royalties as part of the transaction rather than as a service the marketplace performed. The distinction sounds academic and is the entire thing.

If the venue processes the royalty, the royalty exists at the venue's discretion. If the transfer itself carries the distribution, it happens because the transaction happened.

That approach constrains you. It means a narrower set of designs, more work per sale, and less flexibility to add whatever trading feature is fashionable that quarter. We took the constraint because the alternative was building the same fragile arrangement everyone else had.

Royalties as a business model, not a bonus

The wider point is that this was consistent with everything else we were building. The tokenised documentary that quarter, tokenised uploads with a 90% ad revenue share the following year, tradable subscriptions in 2024 — all of them rest on the same claim.

The claim is that a creator's economics should be a property of the thing they made, enforced by the chain, not a term in an agreement with a platform that can revise it. Every platform in the traditional creator economy has revised those terms, usually downward, usually with notice measured in weeks.

If that claim is true, royalty enforcement cannot be a marketplace feature. It has to be structural, and it has to survive us.

What we would revisit

The marketplace itself was narrower than it should have been. It was built primarily for assets originating inside DeHub, which made it coherent but limited its reach, and by the time the broader NFT market cooled we had a well-built venue for a category that had lost most of its participants.

The royalty mechanism was the durable part. The marketplace around it was a product of its moment.

Why it still matters

Because the argument was settled in public shortly afterwards, and not in favour of the people who had assumed goodwill. Creators who relied on marketplace-honoured royalties in 2022 mostly do not receive them now.

We would rather have built the constrained version and been right about why.

The uncomfortable qualifier

Enforcement is only as strong as the venue's willingness to route through the mechanism.

Nothing we built prevents an asset from being traded somewhere that ignores the distribution entirely — that is the nature of transferable tokens, and any project claiming otherwise is describing a restriction that would break the asset in other ways.

What structural enforcement gives you is that the honest path is the default path, and that circumventing it requires deliberate effort rather than merely using a different website.

That is a weaker claim than "royalties cannot be avoided" and it is the true one. We would rather state the limit than let people discover it, which is roughly what the wider market did to creators in 2023.