Digital artist creating an NFT with blockchain code, representing the future of NFT royalties.

Unlocking NFT Royalties: A New Era for Digital Creators

Lena Voss in Tech & Innovation August 2025 • 4 min read.

"Discover how a self-assessed royalty system can balance liquidity and utility in the NFT market, empowering artists and collectors alike."

The world of Non-Fungible Tokens (NFTs) has opened up exciting new avenues for digital creators, but it also presents some unique challenges. One of the most pressing is how to ensure that artists continue to benefit from their work even after the initial sale. Creator royalties, a kind of sales tax on secondary market transactions, have emerged as a way to address this, channeling over $1.8 billion back to artists. However, these royalties have often relied on a fragile social contract, leading to inconsistent payments and the rise of zero-royalty alternatives.

The existing NFT standard, ERC-721, doesn't inherently support royalty enforcement. This means that royalty payments often depend on the goodwill of marketplaces and the honesty of buyers, creating an environment ripe for exploitation. To address this critical gap, researchers are exploring programmatic solutions that can guarantee royalty payments without relying on third parties.

Now, a groundbreaking development promises to revolutionize the way creator royalties are handled. The ERC-7526 introduces an incentive-compatible mechanism that ensures royalties are paid in full while maintaining complete compatibility with the widely-used ERC-721 standard. This innovative approach balances the need for creator compensation with the importance of market liquidity, paving the way for a more sustainable and equitable NFT ecosystem.

The Problem with Current NFT Royalty Systems: A Broken Promise?

Digital artist creating an NFT with blockchain code, representing the future of NFT royalties.

Charging a royalty on a digital item seems straightforward. The current approach relies heavily on the voluntary participation of marketplaces, but this system is far from perfect. Creator royalties, intended to give artists a stake in the future value of their work, have become increasingly difficult to enforce, creating a precarious situation for digital artists.

The core problem is that ERC-721, the dominant NFT standard, lacks built-in support for royalty enforcement. It allows NFT owners to grant third-party operators (marketplaces) the right to transfer tokens, but it doesn't mandate royalty payments. Marketplaces that honor royalties do so by choice, forwarding a portion of the sale price to the creator. But ERC-721 contracts are oblivious to these transactions, treating a sale, a gift, or a transfer to a personal wallet the same way. This lack of awareness makes it easy for less scrupulous actors to bypass royalty payments.

Voluntary Compliance: Existing systems rely on marketplaces to voluntarily enforce royalties.
ERC-721 Limitations: The NFT standard doesn't inherently support royalty enforcement.
Circumvention: Buyers and sellers can easily bypass royalties by trading on non-compliant marketplaces or through direct transfers.

Ultimately, creators are forced to trust that buyers and sellers will act in good faith and use marketplaces that respect their rights. This dependence on trust creates a system vulnerable to exploitation, undermining the original promise of creator royalties.

ERC-7526: A Brighter Future for NFT Creators

The ERC-7526 offers a compelling solution to the challenges of NFT royalties. By introducing an incentive-compatible mechanism, it aligns the interests of buyers, sellers, and creators, fostering a more sustainable and equitable ecosystem. This innovative approach promises to unlock the full potential of NFTs, empowering digital creators and driving innovation in the digital art world.

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Everything You Need To Know

What is the main problem with the current NFT royalty systems?

The primary issue lies in the reliance on voluntary compliance from marketplaces and the limitations of the ERC-721 standard. Since ERC-721 does not inherently enforce royalties, payments depend on the goodwill of marketplaces. This system is easily circumvented, leading to inconsistent royalty payments and a lack of financial security for creators. Buyers and sellers can bypass royalties by using non-compliant marketplaces or directly transferring tokens, undermining the original promise of creator royalties.

How does ERC-7526 address the shortcomings of the existing NFT royalty systems?

ERC-7526 introduces an incentive-compatible mechanism that guarantees royalty payments. This innovative approach ensures that creators receive their due compensation while maintaining compatibility with the widely-used ERC-721 standard. By aligning the interests of buyers, sellers, and creators, ERC-7526 fosters a more sustainable and equitable NFT ecosystem, removing the dependency on trust and voluntary compliance.

Why is the ERC-721 standard insufficient for ensuring creator royalties?

The ERC-721 standard, which is the prevalent NFT standard, lacks built-in support for royalty enforcement. It allows for the transfer of tokens but doesn't mandate royalty payments. This means marketplaces must voluntarily honor royalties. Furthermore, ERC-721 contracts don't differentiate between a sale, a gift, or a transfer to a personal wallet. This lack of awareness creates opportunities for royalty circumvention, making it difficult for creators to receive consistent compensation.

What are the key benefits of using ERC-7526 for NFT royalties?

ERC-7526 offers several key benefits. It guarantees royalty payments through an incentive-compatible mechanism, which is crucial. It maintains complete compatibility with the widely-used ERC-721 standard, ensuring broad adoption. It balances the need for creator compensation with market liquidity. This approach fosters a more sustainable and equitable NFT ecosystem, empowering digital creators and driving innovation. ERC-7526 aims to solve the problems associated with the current systems that rely on voluntary compliance and trust.

How can the introduction of ERC-7526 impact the NFT market's future?

The implementation of ERC-7526 has the potential to revolutionize the way creator royalties are handled, fostering a more sustainable and equitable NFT ecosystem. By ensuring creators are fairly compensated, ERC-7526 can increase the attractiveness of creating NFTs. This innovation can lead to greater trust between creators, buyers, and marketplaces, and increased financial stability for digital artists. This in turn will encourage innovation and growth within the digital art world. It will also provide the artists with more motivation and help drive innovation in the NFT space overall.