It’s clear that the market for non-fungible tokens (NFTs) has grown at an unprecedented rate. Recent statistical data revealed that there was a 328% rise in NFT transactions over the first three quarters 2021. This is due to a variety of mainstream entities like Microsoft, Home Depot and Tesla joining this rapidly-evolving space. This has helped it grow at the speed it has.
It is worth mentioning, however, that the NFT market is fragmented in its current form. A few players continue to control the industry’s direction despite the fact that barriers to entry to the sector have fallen significantly in recent years. These unique digital offerings are unique because they provide users with an independent way to verify ownership of a variety of assets, including rare collectibles, artwork and music.
NFTs have received a high level of mainstream support in terms of adoption. Ex-Twitter CEO Jack Dorsey, a tech-savant, was able to sell an NFT copy of his genesis tweet earlier this year for a substantial $2.9+ million. Researchers at UC Berkeley also sold CRISPR-Cas9 and two patents for cancer immunotherapy to potential buyers for a substantial $50k, demonstrating the wide appeal of this burgeoning asset.
The current NFT market’s problems
NFT smart contracts, which are designed to pay musicians and artists royalties in transparent ways, have seen a lot of interest over the past year. This is why ecosystems like Zora and OpenSea as well as Rarible & Foundation continue attracting attention. They offer a ‘creator’s royalty option in addition to any secondary sales of an individual’s work.
However, it is often not clear that creators are entitled to these royalties only if secondary sales occur via the same marketplace through which the original transaction was initiated. Their future earning potential is severely limited by the fact that the original author can’t prevent their patrons listing their NFTs across different platforms.
The actual infrastructure that splits royalties among collaborators is still largely manual driven. This is especially true since many of these platforms use a blockchain-driven design.
A second issue is the sale of original NFTs via private sales events. This is done to reduce transaction fees for selling or listing an NFT. Creators are also prevented from generating secondary income if the sale had taken place from the original minting source.
These problems are being addressed by new solutions.
Conservative estimates suggest that the NFT market will grow by over 1000% in the next decade. This raises the issue of royalty distribution via secondary platform sales.
CXIP is a platform for minting-asa-service (MaaS). It was created to provide every content creator with a unique smart contract that clearly defines their rights. This allows them to access any royalties-based income streams that they may have (as a result from third-party sales).
CXIPs smart contracts solutions are replete in sections that clearly describe technicalities, such as the NFT creator’s name. This is in contrast to the current system which only mentions generic details like “produced using OpenSea Wallet”. The platform offers optional add-ons such as the ability to register artists’ work with U.S. Copyright Office provides additional legal protection.
Investors around the world continue to invest in the NFT market. It stands to reason that this awareness will continue to grow. This will help open this new asset class up to people who might have been skeptical about the idea of an NFT acting long-term as a digital store of value (SoV). It will be fascinating to see how this market develops from now on.
Disclaimer: This article is intended for informational purposes only. This article is not intended to be used for legal, tax, investment or financial advice.