What is Royalty Fee?

Royalty Fee (also known as Creator Fee) is an amount paid by a third party to an owner of a product (NFT) for the use of that product or patent. The terms of royalty payments are laid out in a licensing agreement. Creators can fix a royalty in the smart contract during the minting of the NFT. Usually, the royalties vary from 5 percent to 10 percent, and the amount is automatically sent to the artist's wallet once a subsequent sale is executed. in some cases, royalty fee can be zero (0%).

What is NFT?

A Non-Fungible Token (NFT) is a unique digital identifier that cannot be copied, substituted, or subdivided, that is recorded in a blockchain, and that is used to certify authenticity and ownership.

Methodology

In this dashboard, I am going to mainly use jacktheguy’s Queries from its amazing dashboard for the analysis of Great Solana Royalty Debate to perform an analysis of Solana NFTs royalties and mints to answer the following questions

• What projects have been more reliant on NFT royalties than others?

• What collections were wallets pivoting towards using 0% royalties more frequently?

• Are flowing royalties a sign of project health and sustainability?

• How much volume from 0% royalty sales can be accounted for by wash trading rather than actual user interest?

• How does of Rising of 0% royalty market behavior on Solana Compare to Ethereum?

The main tables used for this dashboard are solana.core.fact_nft_mints (for mints data), solana.core.dim_nft_metadata and solana.core.dim_labels (for collection’s label), solana.core.fact_nft_sales & solana.core.fact_transfers (for sales and royalty data) and ethereum.core.ez_nft_sales (for Ethereum NFT sales and royalty data).

Moreover I am going to mainly consider top 25 Solana NFT collections (extracted from ) for this anlaysis.

What is Solana?

Solana is a highly functional open source project that implements a new, permissionless and high-speed layer-1 blockchain. Created in 2017 by Anatoly Yakovenko, a former executive at Qualcomm, Solana aims to scale throughput beyond what is typically achieved by popular blockchains while keeping costs low. Solana implements an innovative hybrid consensus model that combines a unique proof-of-history (PoH) algorithm with the lightning-fast synchronization engine, which is a version of proof-of-stake (PoS). Because of this, the Solana network can theoretically process over 710,000 transactions per second (TPS) without any scaling solutions needed. Solana’s third-generation blockchain architecture is designed to facilitate smart contracts and decentralized application (DApp) creation. The project supports an array of decentralized finance (DeFi) platforms as well as nonfungible token (NFT) marketplaces. Solana blockchain was rolled out during the 2017 initial coin offering (ICO) boom. The project’s internal testnet was released in 2018, followed by multiple testnet phases leading to the eventual official launch of the main network in 2020.

Solana is already one of the world's most popular blockchains when it comes to non-fungible tokens (NFTs) and decentralized finance (DeFi). It's currently ranked as the fourth-most popular cryptocurrency globally, and there's no question that interest in Solana NFTs, in particular, is heating up.

According to the above charts, Genopets Habitats have generated the most volume of Minting NFTs (more than 2.488M SOL) and the NFT collection “Boryoku Eggz” is on the second with total 1.21M generated SOL from mints.

Totally, we can barely see traces of top-rated Solana collection in this list. So, maybe when Magic Eden has published its tweet, they were mainly analysing these types of non-popular NFT collections.

As an confirmation of previous description, we can see the total minting volume of Solana Top-Rated NFT collections is way too lower than the NFTs that were listed on the previous chart (with the highest mint volume).

Among the top 25 NFT collections on Solana, Just Ape. and Primates have gained the highest volume from minting tokens with amost 50k (Just Ape.) and 40k (Primates) generated SOL.

As mentioned, this amount of SOL is much lower than 2.488M SOL generated by the Genopets Habitats minting process and even lower than

On the left chart, I have classified Solana NFT collections by comparing their total Mint and Royalty Fee amount.

The NFT collections which their total Mint Volume was more than Royalty Fee were defined as “Mint Reliant” and the NFT collections which their total Royalty Fee was more than Total Mint Volume were defined as “Royalty Fee Reliant”.

So, Based on the above definition, almost 57% of all NFT collections on Solana are Mint Reliant and the other 43% are Royalty Fee Reliant.

So, we can say Magic Eden Tweet was right in this terms!

Overall Sales Stats

Based on the above charts, ABC is the most popular NFT collection among these top 25 projects with almost 48k sales. But, the number of unique buyers and sellers for the Primates ollection is more than other top projects.

In terms of volume, Okay Bears has by far generated the most USD volume and Degen Apes has generated the most SOL volume.

In terms of average sale volume, we can see Solana Monkey Business has both highest USD and SOL price.

And on the above charts, we can see the total generated royalty fee and also total mint volume of top Solana NFT projects.

It is obvious that all of these top 25 projects have generated the highest volume from Royalty fees rather than Mints volume.

So, in this terms, Magic Eden Analyst was quite wrong !

Just Ape. collection has the highest share of Mint-Volume to its Royalty Fees but only with 31.7% which is still way lower than its generated volume from Royalties.

Now on the above charts, We can see the Solana NFT sales distribution (in both terms of volume and sales count) by their reliant status. NFT collections that were listed among the top 30 projects with highest mint volume are marked as Mint Reliant Collections and NFT collections that were listed among the top 30 projects with the highest royalty fee volume are marked as Royalty Fee Reliant Collections.

As we see, the number and volume of sales and also the median sales volume (which can be assumed as the collection’s token price) on Royalty Reliant Collections are way more than Mint Reliant Collections.

So, it seems users tend to trade Royalty Reliant Collections way more than Mint Reliant ones.

On the above and left charts, we can see in almost all weeks, the total sales volume and also number of sales of Royalty Reliant Collections are more than Mint Reliant ones.

During September 2021 and January 2022, Mint Reliant Collections sale has overtook the Royalty Reliants by after a while again, Royalty Reliants have taken the lead.

Moreover we can see in almost all week (except 1 week on July 2022) the median price (~ tokens price) of Royalty Reliant collections is more than Mint Reliant ones.

According to the above analysis, during the first days of the chart (before October 2021) majority of NFT sales on Solana were don on 0% marketplaces. But, during October 2021 - February 2022, we can see the marketplaces with Royalty Fees have have their share increased in and had overtook the lead from 0% markets. But again after May 2022, we can see quite increasing share of sales on 0% marketplaces to the extent that during recent days, more than 90% of all NFT sales on Solana are done within 0% marketplaces !

So, seems people tend to perform more and more trades with 0% royalty fees that shows the popularity of 0% royalty fees marketplaces and collections among NFT traders.

On the left chart, we can see from July 2022, the tokens' price of 0% marketplaces is increasing over time to the extent that currently the median price of these tokens are more than Royalty related ones.

As we see on the above charts, Magic Eden has by far the highest washtrade ratio in the Solana marketplaces. On the next rank, we have Coral Cube marketplace and recently the share of Hadeswap washtrades is also increasing over time.

as we discussed before opensea', 'magic eden', 'solana monkey business marketplace were among the marketplaces with royalty fee marketplaces but the marketplaces such as Hadeswap, Solanart and Yaww and Coral Cube were listed among 0% royalty fees.

So, we can say there are many wash trades on both types of marketplaces (0% royalty fee and with royalty fee)

On the above charts, we can see the highest peak of top Solana NFT collections sales was during September 2021 (in terms of volume) and also July - Sep 2022 (in terms of sales count).

Moreover, we can see Degen Apes had the majority of Solana NFT sales during the first months of the chart but after a while, its dominance has been decreased more and more over time and currently collections such as ABC and DeGods have taken the lead from other top NFT projects.

Mints vs Royalty

On the left chart, we can see the top 30 Solana NFT collections with the highest generated Royalty Fees.

As we see, many of these projects are among the top 25 Solana NFT collections so we do not analyse them anymore !

Okay Bears and Degen Apes and Degods collections (which all of them are among top 5 Solana NFT collections based on ) have generated the highest Royalty Fee for their creators.

We can see also many other top-rated proejcts such as Solana Monkey Business, Trippin Ape Tribe, Aurory, ABC and … on this list.

So, maybe if Magic Eden has analysed these NFT projects, the results of its analysis would be quite vice versa !

Totally on the above analysis, we hav seen that the generated volume from Mints on some collections is more than their royalty fees but on many other projects, the total generated volume from Royalty fees is more than their generated volume from Mints. So, we can not definitely say that which source of revenue has generated the most fund.

On the left and above charts, we can see the floor,ceiling and the median price of Top-rated Solana NFT collections over time. As we see, majority of NFT collections (which all of them are defined Royalty Reliants) have experienced rise in their Floor and Median and Ceiling over time.

So, we can say the floor price and price ceiling and also median tokens’ price of Royalty Reliant collections is increasing more and more over time.

Marketplaces

In this part, Solana NFT marketplaces are classified into 2 groups:

Royalty Marketplaces are the markets that the majority of sales on them are done with royalty fees. (opensea', 'magic eden', 'solana monkey business marketplace')

0% Marketplaces are the markets that the majority of sales on them are done with 0% royalty fee or their default royalty fee ratio is 0. ('yawww', 'solanart', 'hadeswap', 'solport', 'coral cube')

So, considering the above definitions, we are going to analys the sales activity on these 2 types of marketplaces on Solana:

On the above charts, we can see the top NFT projects in both types of Marketplaces.

As we can see, on 0% marketplaces, Degen Apes and Aurory are the most popular NFT collections and on Royalty Marketplaces, Okay Bears and Shadowy Super Coder are the most popular ones.

The interesting thing is that both of these projects, were defined as Royalty Reliant since their Royalty Volume was way more than Mint Volume !

Wash Trades

In this part, I am going to analyze Wash Trades on different marketplaces on Solana and also classify them by their royalty fee status.

==Wash trade happens when Trader 1 sells an NFT to Trader 2 and then the same NFT is sold again from Trader 2 to Trader 1.==

Was this actual user demand, or were decisions made based on inflated data?

To answer this question, I am going to expand this subject to the 0% fee on the Binance cryptocurrency trading platform.

Both traditional and crypto investors consider trading fees as one of the most significant liabilities when it comes to investing over exchanges. So no wonder when Changpeng “CZ” Zhao, the founder and CEO of Binance, asked investors about their interest in trading on the crypto exchange with no fees, the response was a resounding yes despite the inherent risks pointed out by the entrepreneur.

Binance stands as the biggest crypto exchange, outdoing its nearest competition FTX by 10x in terms of trading volume. CZ, known for implementing features based on community feedback, reached out over Twitter to gauge investor sentiment regarding the complete removal of trading fees.

Over 30,600 investors voted on CZ’s poll at the time of writing — with around 65.5% inclined to trade with no fee whatsoever.

Binance continues to spread its roots across the world as it steadily acquires registrations and operational licenses from regulators.

So, we have seen that despite the possibility of wash trades, users still want 0% fees on all markets !

As another answer to this question, listen to this story!

A community-owned marketplace is a double-edged sword

LooksRare NFT marketplace on Ethereum started with good intentions to share profits within the community. The token incentives and the trading rewards were essentially the secret weapon that attracted high volumes and beat OpenSea in light-speed fashion right after its launch, but these same factors have also become the very weapon wash traders are using to flood the marketplace.

LooksRare appears to have foreseen the possibility of wash trading that could be induced by the lucrative trading rewards, but according to LooksRare Docs, it believed that the cost of trading from platform fees and royalty fees would be too high to create any incentives for wash trading. Interestingly, reality shows the opposite.

daily users and daily transactions from LooksRare are only a tiny portion (2%–3%) of OpenSea, but the volumes are more than triple or even quadruple OpeaSea’s.

Basically, what the data shows is a very small group of users executing trades worth hundreds of thousands of dollars. This surely does not sound like a playground for normal NFT buyers. With a 2% platform fee, royalty fee and the volatile gas fee from the Ethereum network, wash traders seem to still be able to find a sweet spot to balance their cost and profit.

A large portion of the rewards goes to a small number of wash traders. This does not exactly follow NFT Marketplace’s philosophy of “By NFT people, for NFT people.” Sharing the profit within the community seems to have failed so far, and the lion’s share of the profit only goes to just a few traders.

As Delphi Digital correctly pointed out, this model is unsustainable in the long term, and the trading volume is likely to drop significantly as wash traders gradually leave when it is no longer profitable.

So, “Wash trading in NFTs can create an unfair marketplace for those who purchase artificially inflated tokens, and its existence can undermine trust in the NFT ecosystem, inhibiting future growth,” Chainalysis commented.

Wash trading is not always a guarantee of profits, however.

So, we can see similar to the Solana ecosystem, there were high number of sales without Royalty fees during the first months of the chart but after a while, we can see increasing share of sales with royalty fees over time. Currently, the share of sales with royalty fees is more than sales without royalty fees (despite Solana).

But, in terms of volume, we can see the share of sales without royalty fees are more than sales with high royalty fees.

(you can see a deep analysis of royalty fees comparison on Ethereum on this Flipside dashboard)

So, Totally, We can say Solana users are actually less likely to pay royalties compared to the Ethereum NFT traders !

Royalty Fees on Ethereum

On the below charts, I have analyzed the NFT sales on Ethereum over time breakdown by their creator (royalty) fee status. The main table that I have used is ethereum.core.ez_nft_sales. The royalty fee is extracted from creator_fee(USD) column on this table. Since there are several currencies to pay royalty fees with, we are going to analyze fees by USD currency (using creator_fee_usd column). In some cases, there are null values in this column, so, I am going to exclude them from the results for a clear and better analysis.

Summary and Conclusion

Based on the above charts, we have seen that the share of sales with royalty fees is increasing more and more over time.

Magic Eden tweet about Mints vs Royalty Fees was not 100% wrong but this subject can get expanded in many ways and we can not 100% surely decide which source of revenue is bringing more funds for NFT projects. Also, each NFT project has a different politic, some are Mint Reliant and majority of them (on Solana) are Royalty Fee Reliant. Also, it depends on the length of each project existence in each of these groups.

As we have seen, among the top 25 NFT projects on Solana, all 25 of them were Royalty Fee Reliant and majority of their revenue is coming from Royaltys.

Totally, Mint is a one-off one-time inflow of cash whereas royalties are recurring revenue…They are not the same. $900k from a mint vs $100k per year in perpetuity are quite different, wouldn’t be right to call royalties “only 10%” in this case.

So, maybe Magic Eden used median projects. top and bottom projects make up both extremes and of course, median will be low in a data set like this.

Moreover, on this analysis we have seen that Ethereum users are tend to perform more and more 0% royalty trades but the growth rate of Solana users is more than Ethereum NFT traders and seem Solana users are less likely to pay royalties compared to the Ethereum traders. Maybe because Ethereum NFT traders are more worthy.

Moreover, many Solana marketplaces (such as its leading one, Magic Eden) and projects (such as DeGods) are moving to 0% royalty fee system because they tend to attract more users that tend to not pay royalty fees ! although it may not be a good point because many creators are losing one of their main source of revenue but seems this event is inevitable !

Many NFT creators set a royalty that sees a small amount of any secondary sale automatically sent to the original artist or creator by the marketplace in question. However, these royalties are not fully enforceable on-chain using current NFT standards, creating loopholes that some marketplaces have used to lure traders. On Ethereum, marketplaces like Sudoswap and X2Y2 have either eliminated or made creator royalties optional in recent months amid the ongoing crypto and NFT bear market. The effect has been more pronounced on Solana, where leading marketplace Magic Eden—which has about a 90% market share within the Solana network—caved and followed suit after other marketplaces did the same. Many of these moves have just come in recent months, although many NFT artists and creators have pushed back against the “race to the bottom” to reject royalties.

“The growth of zero-royalty marketplaces has eroded the general willingness to pay royalties throughout the NFT space,” LooksRare wrote. “Good news for traders, but with a big downside: the move away from royalties has removed an important source of passive income for most creators.” Along with stripping out required creator royalties and giving creators a share of protocol fees,

Discord: Ali3N#8546

Twitter: Alik_110

Mentioning Credit Again: jacktheguy’s Queries from its amazing dashboard

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