Op-Ed: We Need a New Blueprint for NFT Marketplaces
One of the primary reasons I was drawn to Web3 was the concept of a new ecosystem where creators are fairly compensated for their work. Verifiable ownership of digital assets, on-chain provenance, and the ability to create and record in an immutable way — Web3 has the potential to completely disrupt the wonderful but exploitative industries of art, tech, finance, music, and more.
To me, this looked like the future. I still feel this way. Despite the current actions of marketplaces, I am confident that, as an industry, we will correct the course and remember why we’re here building this together.
What do we value as a community?
For me, the discovery of Web3 was an altogether life-changing moment.
I had begun to feel increasingly frustrated operating within systems with many barriers to innovation and progress. I was co-director at a creative production agency. I spent the rest of my time organizing community-level support systems for women and gender-diverse people to access everything from mutual aid to workshops. I was passionate about my work, but I had begun to doubt the effectiveness of its impact and was looking for ways to challenge systems I felt were failing while building something new.
The day I became aware of Web3, I felt I had found the answer.
I discovered that, in Web3, I could build community around shared ideas, values, and intentions. The concept of royalties meant that, following the initial mint of a piece (or pieces) of art, a creator could support themselves from the earnings they received from the asset changing hands. They could continue to profit from the value they created and also continue to build. A new value exchange between creators and consumers had emerged — one that acted as a launchpad for creators to fast-track development of their projects without relying on external funding.
Decentralization in Web3 covers many things. But in relation to this topic, it’s the distribution of opportunity, wealth, and power. Creators should have the power to determine their royalty percentage and how (and where) their work is sold — and traders can choose whether or not they collect those pieces. Decentralization should not mean the distribution of power to traders to exploit the artist.
We should all have the ability to choose how we participate in this ecosystem. We should not have the ability to determine what other people should or shouldn’t receive for the value they bring to the world.
How royalties benefit us all
The circular value exchange created by royalties in Web3 has transformed the lives of many artists. It has also provided funding and capital for almost every major NFT collection up until this point and architectured the landscape of this industry. Today, there isn’t a project in this space that hasn’t had its initial development facilitated by royalties in some way.
The valuations of the companies that have emerged from the last two years — as well as the valuations of the marketplaces themselves — are all due to royalties and fees. These payment structures sent strong signals to Web2 industries, encouraging them to participate. They also solidified trust in the continued investment in the space and elevated us beyond insular tech developers and crypto traders by creating communities that shift culture.
It’s also important to note that this model has benefitted underrepresented individuals in art, tech, and finance in particular. These payment structures enabled them to build something themselves without needing to traverse the gatekept landscape of venture capital. It is a disappointing but very real fact that less than two percent of VC funding is afforded to women, and even less goes to Black women and women of color. And only eight percent of Venture Capitalists are women.
The systems and structures in Web2 are not designed for everyone to receive equal opportunity, and inherent biases affect every level of development. To have a system that breaks down those walls and allows people (like myself) to get immediate cut-through despite the hurdles has been a paradigm shift and has felt like the catalyst of very meaningful social change.
The problem we are facing
The problem we face right now is the disruption of the all-important circular dynamic between creators, collectors, traders, and marketplaces. Third-party platforms (in this case, marketplaces) have the ability and the authority to intervene and disrupt this direct relationship. They would replace this more equitable value exchange for short-term gain for a small few — ultimately sliding us back toward the unfair, nontransparent value exchange that currently exists in Web2.
This benefits only the marketplaces and traders, but completely cuts out the benefit previously afforded to artists and collectors. To eliminate aspects of an ecosystem is to invite imbalance and chaos. And with no discernable long-term strategy to benefit all participants, this feels like a race to zero.
There currently aren’t many places to purchase art that benefit the creator at large scale. The marketplaces with the highest volumes now only cater to traders. This has shifted the association of many projects from “culturally valuable” to “tradeable,” undermining the positive value and impact many projects have brought the world.
It removes the ability for the artist/creator to utilize royalties to facilitate further meaningful change, which many projects did prior to this, like Ed Balloon’s Run Ed, Run. In Ed’s case, 50 percent of royalties from the project went towards buying art from Black and Brown artists.
This is no longer possible due to current policies.
Trading and flipping is an undeniably important part of this space, but it is not the foundation of value, and to reduce the artistic expression of the brilliant people here to tradeability subverts the value of creative expression itself. We may as well be trading colored squares.
Solutions and the way forward
Collaboration is one of the foundational cornerstones of this space. Typically, you see creators in Web3 operating from a space of abundance rather than scarcity. Your opportunity does not mean my lack of opportunity. Your value is not my lack of value. Instead, we generally work collaboratively and strengthen each other as we go, opening doors for others to do the same. Unlike Web2, most creators in the space recognize the importance of this and embrace it to galvanize their communities.
In this particular moment, as a by-product of the bear market and the increasing greed from traders, we’re seeing major players in the space abandon the concept of collaboration.
What we are seeing in this race to zero is multi-billion dollar companies burning the bridges of trust with the artists and creators by setting new policies that are in direct opposition to the benefit of the creators who made their platforms valuable in the first place. A marketplace cannot exist without creators producing art to sell.
An obvious solution to this is for individuals to create their own marketplaces and own the commerce that comes from the trading and collecting of their creations. This is a good solution for larger, established companies and creators, but it removes the aspect of discoverability, fractures the attention of the market, and creates homogenous communities void of collaboration and crossover. These solutions are also not easily utilized by emerging creators, encouraging the ever-growing gap between smaller artists and larger communities to grow.
Another solution is the adoption of creator tools and resources. There are multiple smaller marketplaces offering structures that benefit artists; however, these marketplaces don’t have the volume or attention often desired by artists. There are several incredible companies that focus on developing resources for creators to remain self-sovereign over their work — and I would encourage anyone reading this article to investigate them.
What we really need, and what I know multiple people are working on, is a new marketplace blueprint that benefits all participants of the ecosystem equally. One that embraces the creator, the trader, the collector, and the culture. The concept of royalty payments is essentially a social contract. So, how do we encourage individuals and organizations to honor that contract?
I’m a firm believer that positive reinforcement is the best way to encourage anyone to do anything. So we must carefully choose what platforms we use and engage with and lend our support to the ones that are aligned with our values. Rather than berating others, we should uplift those who share our goals.
A lot of people may read this and feel strongly that creators shouldn’t rely on royalties as revenue. And I actually agree. Deadfellaz and most other projects that launched in 2021 no longer rely on royalties and have established many revenue streams. However, we were only able to do so with the initial fuel of royalties.
The reason I speak up is not for Deadfellaz or myself, but for non-established projects and emerging artists. I believe they should be given the same opportunity we were given when we launched in 2021. In order for the Web3 ecosystem to continue existing, it requires us to maintain healthy entry points for others to come up. We cannot disrupt the status quo and continue to expand this industry if we close doors behind us when a select few reach certain heights.
And if we’re supporting a landscape where centralized platforms are dictating an artist’s ability to build, we’re further marginalizing already underrepresented creators. For many, royalties have meant paying rent, buying groceries, or accessing equipment they previously couldn’t. For most people, it doesn’t mean making millions.
Action and dialogue are needed to instill change, and so I will continue to utilize the platform and visibility I have, alongside my peers, to speak up in the hopes of setting our industry standards with humanity at the center, while supporting people building solutions. To the executives reading this who are responsible for recent events, I would encourage you to assess why you started working in this space — and to focus on building bridges instead of burning them.
Betty is the co-founder and Director of Deadfellaz, a collection of 10,000 zombie-themed NFTs that live on the Ethereum blockchain. She has emerged as one of the NFT space’s leading voices in the fight to protect creator royalties.
The post Op-Ed: We Need a New Blueprint for NFT Marketplaces appeared first on nft now.