Decaying Royalties Explained
Mol LeArt is a community-governed creative commons.
Overview
Decaying royalties is a royalties model where artists get X% from secondary sales, first collector gets (X-1)%, second collector gets (X-2)%, and so on. By opening up the royalties pool to collectors after each transaction, it shifts ownership of NFTs from personal to communal ownership and encourages stewardship of art. It is distinct from models employed by existing NFT platforms, where royalties are flat (only artists receive X% from secondary sales).
Decaying Royalties
To illustrate, we will start with artist Alice minting and selling an NFT to Bob for $1. Bob resells it to Cathy for $2 (2x), Cathay resells it to Darren for $4 (2x), Darren resells it to Emily for $8 (2x) and so on until the NFT reaches Karen at a sale price of $512. Put simply, Alice’s NFT starts with a price of $1 and is sold at a flip multiple of 2x per secondary resale.
Now, suppose Alice minted her NFT with 10% decaying royalties. This means that Alice would receive 10%, Bob 9%, Cathay 8% and so on from each secondary sale. Eventually, Jack would receive 1% and Karen would be left with 0%. By adding up the royalties payouts from each transaction for each individual, we get the following:
In contrast, this is what flat royalties look like. Take your pick.
Decaying royalties is Mol’s first attempt at building NFTs for communal ownership, where artists can use it for relationship and community building purposes to grow the pie for everyone involved. For better or worse, it also makes flipping harder as the royalties pool increases per transaction.
Communal Ownership
Thus far, NFTs have largely been regarded as personal assets, and exclusive to the owners. But personal ownership is an ownership feature that we’re familiar with in meatspace, it need not be the only feature we implement in Web3.
Indeed, communal ownership of NFTs is an emerging concept. Another example is Async Art.
Async.art
Async is a digital art platform where each piece of artwork comes with a master and its layers. Master is a 1 of 1 complete work of art, layers are individual elements that make up the master, and both master and layers are tokenized on Ethereum (Async contracts). Collectors of the layer tokens may control and change the state of their layers to alternative states made available by the artists.
Sournce: Async Art
Through Async’s smart contract, artists tokenize artworks that incentivize communal ownership. It also gives digital art a life of its own by allowing layer owners to experiment as a community. @DefiantSquid’s “One more Turn III” and @tsmoreau’s “Phase Space #1: Spiral Riders” are great examples.
Flip a Karen
For artists, encouraging communal ownership through decaying royalties is an option to consider at mint. For collectors, decaying royalties is a way to steward art, or add experience to owning NFTs. Maybe strategic flipping is a better description.
Either way, here’s an experiment to try out. Remember Karen? As the 10th collector, Karen would receive 0 royalties % from selling to Larry. And so the experiment is this, can you flip an NFT 10 times to ultimately Flip a Karen. Remember, you’re not flipping Karen alone, collectors of your NFT are also in on it.
To experience decaying royalties and experiment with Flip a Karen, you have a selection of smart contracts to play with - MolGamma, MolGammaDrop, and MolScribe. Artwork credit - “Our Ship Has Come In“ by Terrence S Moreau.
MolGamma
MolGamma spawns one NFT store/factory for minting NFTs with decaying royalties. It is an extension of GAMMA, a feather weight NFT compliant with ERC721s. In fact, deploying a store via GAMMA costs 1,220,720 gas, MolGamma at 1,808,603 gas, and Mintbase at 3,355,344 gas.
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MolGammaDrop
Do you have a $social? Do you airdrop $social to collectors? If yes and yes, in addition to everything that MolGamma does, MolGammaDrop airdrops $social to collectors whenever NFTs change hands. No more tracking down collectors for ETH addresses and manually transferring $social afterwards. You may also pick the amount to airdrop, as well as the $social to airdrop at any point in time. MolGammaDrop will simply airdrop the next collector with updated $social and airdrop amount.
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MolScribe
MolScribe is a smart contract that scribes existing ERC721s with decaying royalties. Almost like using ERC721s to sign off of future royalties payments! Credit to Conlan for his work on NFT Scribe.
Rather than minting a new NFT, owners use ERC721s to access a registry with records of royalties payments and dictate a royalties scheme for a given token. This is especially advantageous for ERC721s that did not come with a royalties layer, or perhaps one that’s unsatisfactory.
Through MolScribe, even those with limited artistic talent can experiment Flip a Karen with previously purchased ERC721s. Just remember to add artist to the royalties pool, you’re all in this together!
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Lastly, you’ll need to decide a royalties % to decay from (e.g., 5%, 7%, etc.) when scribing an NFT. For the purpose of Flip a Karen though, you should set it at 10%.
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