What are NFT royalties and are they enforced?

NFT royalties are a cut of every resale of an NFT that goes to the person or project that created it. If an artist sets a 5% royalty and a collector resells the piece for 1 ETH, 0.05 ETH is meant to reach the artist. Whether that money actually arrives depends on how the NFT's contract is built and where it is sold. The selling side, including marketplace fees, is covered in what is an NFT marketplace.

What is an NFT royalty?

Physical artworks rarely earn their creator anything when they are resold. NFTs promised to change that, because every sale is recorded on a blockchain and can, in principle, trigger a payment automatically. The creator chooses a rate and a receiving address when setting up a collection. On Solana's Metaplex Core standard, for example, royalties are set in basis points, where 500 means 5%, and can be split among up to five creators.

How does ERC-2981 work?

ERC-2981 is the Ethereum royalty standard, created in September 2020 and now marked final. It adds one function to an NFT contract. A marketplace asks for a token ID and a sale price, and the contract answers with a receiving address and a royalty amount. The rate must be a fixed percentage of the price, and the royalty must be paid in the same currency as the sale.

The standard does not move any money itself. Its authors state that royalty payment must be voluntary, and that a marketplace which ignores the standard pays nothing. It works alongside the ERC-721 and ERC-1155 token standards.

Are NFT royalties enforced?

Usually not by default. A standard ERC-721 token can be moved by any app, so a marketplace can simply skip the payment. In 2022 and 2023 several trading platforms did exactly that. OpenSea tried a tool called the Operator Filter, which blocked sales on marketplaces that did not pay creators, but it switched the tool off on August 31, 2023. OpenSea said too few marketplaces adopted it, and that collectors wanted full control over their tokens. Creator fees on new collections became optional at that point.

How do creators enforce royalties today?

Enforcement now comes from limiting who can transfer the NFT:

• ERC-721C. Made by the gaming company Limit Break, this contract design checks every transfer against creator rules. OpenSea added support in April 2024, and enforced items can only be sold on OpenSea and marketplaces that use Limit Break's payment system.
• Allowlists on Solana. Metaplex Core lets a creator choose a ruleset. With no ruleset, its docs say royalties are advisory only. With an allowlist, only approved programs can move the asset.

The trade-off is control. Restricting transfers protects creator income but limits where owners can sell or move their tokens. Before buying, it is worth checking a collection's royalty rate and transfer rules on the marketplace page, as explained in how do NFTs work.