Magic Eden changes the terms of royalties model
Magic Eden, the leading Solana-based NFT marketplace, no longer forces traders to pay NFT creators royalties. The changes were due to competitors who already conduct transactions without additional payments.
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Now traders can decide whether to pay royalties and how much. Platform representatives announced it on their Twitter. Magic Eden took this step after rival upstarts cut into its market share.
Buyers would also have three options to choose from to set their preferred royalty percentages to the artist for the use of his copyright. Traders can set up their user profile to input a specific royalty percentage payment that will apply to all NFTs they purchase on Magic Eden. It is also possible to select a royalty percentage for a particular collection or a single NFT.
After some difficult reflection and discussions with many creators, we’ve decided to move to optional royalties,
Magic Eden said in the Twitter announcement.
Magic Eden had been the most dominant NFT marketplace on Solana, typically owning 90% of market share. The project rode that momentum to a $1.6 billion valuation in June 2022. Recently, however, upstart marketplaces that do not require sellers to pay creator royalties on secondary sales — such as Hadeswap and Solanart — began cutting into Magic Eden’s dominance.
In addition, the platform said it would temporarily waive the 2% platform fee.
The negative consequences of both decisions have already manifested themselves. It has led to a sudden rise in wash trading. It has allegedly been done by project creators and backers in an attempt to boost the tracked trading volume of those respective projects, thus elevating them in the sales rankings. The leading royalty-paying NFT platform OpenSea announced that it would temporarily stop including Solana NFT projects on its overall market-wide leaderboard due to the apparent manipulation.
Magic Eden also announced plans for a hackathon to inspire Web3 developers to create NFT technologies and standards that can make royalties fully applicable on the blockchain. The company will award $1 million in prize money, and Solana co-founder Anatoly Yakovenko is among the judges for the hackathon.
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