In cryptocurrency, a royalty is a payment to creators from each resale of their digital asset, calculated as a preset percentage of the secondary market sale price.
Royalty Meaning in Cryptocurrency
In the realm of cryptocurrency, royalty signifies the earnings a creator receives from the resale of a digital asset or art. This payment, a preset percentage of the sale, ensures creators gain from subsequent sales on secondary markets.
Understanding NFT Royalties
NFT creators earn from their digital assets, such as music or art, through NFT royalties. These royalties represent a pre-agreed slice of the sale price paid to creators each time their NFT is sold again.
- An NFT’s smart contract sets the royalty terms.
- Royalties are automatic, thanks to the smart contract’s rules.
- The percentage typically ranges from 3% to 10% of the resale price.
How NFT Royalties Function
Just as musicians earn from radio plays, NFT creators earn from resales. When an NFT is minted, the smart contract includes royalty terms. These terms are then enforced automatically during secondary sales.
- The royalty is deducted from the sale price.
- It provides a steady income for creators.
- The enforcement of royalty payments can differ across NFT marketplaces.
For instance, if an NFT you created with a 5% royalty sells for 100 ETH and is later resold for 1,000 ETH, you receive 50 ETH from that resale. The same percentage applies to all future sales, providing a sustainable income stream.