OpenSea, a leading NFT marketplace, has announced support for the ERC-721C token standard, aiming to address the challenge of enforceable on-chain royalties for NFT creators. This new standard enables “programmable earnings,” offering a solution to fight against NFT wash trading, where creators previously lost out on royalties when NFTs were resold in secondary markets.
Before the introduction of ERC-721C, creators often missed out on royalties as NFTs changed hands in secondary markets. With royalties typically ranging between 2.5% to 10% per sale, this was a significant issue. Top NFT collections have collectively earned over $345 million in royalties to date.
OpenSea began collaborating with Limit Break, the blockchain gaming firm behind the standard’s development, to integrate ERC-721C. This standardisation of token transfer conditions, including royalties, across all channels helps ensure creators receive their rightful earnings, irrespective of where the NFTs are traded.
Limit Break explains that ERC-721C addresses the loophole that allowed traders to avoid paying royalties by transferring NFTs through platforms that did not honour creators’ royalty requirements.
Limit Break explains the transition to ERC-721C succinctly in a Medium blog post.
“In the long-run, this allowed for the incentivization of zero-fee, royalty-optional trading with airdrops, effectively turning tokens intended to be non-fungible into proxies for fungible tokens,” in which case “traders were incentivized to farm tokens by wash-trading NFTs among their own wallets, which is bad for the NFT industry,” the blockchain gaming firm said.
The standard is backward-compatible with ERC-721, maintaining continuity while enhancing enforceability.
The recent Ethereum network upgrade (Dencun) on March 13 facilitated compatibility for ERC-721C on OpenSea. Creators enforcing earnings using this standard will have sales supported exclusively on OpenSea and other marketplaces powered by LimitBreak’s Payment Processor. However, creators can still list their artwork on other platforms, with OpenSea matching the lowest royalties set by the creator.
For creators using OpenSea Studio, implementing the ERC-721C standard is seamless, allowing them to set and enforce earnings percentages and recipient addresses in their collection settings. Custom smart contract creators need to upgrade their contracts to be compatible with ERC-721C or ERC-1155-C and configure earnings on OpenSea accordingly.
