Royalties are a key element in the strength and durability of the NFT art market.
Defined as a right to future payment streams for the continued use or sale of an asset, royalties are a particularly powerful economic construct within SuperRare because they allow for multiple parties to partake in the shared ownership of value accrual on an artwork.
SuperRare introduced the world to automated artist royalties on NFTs in 2018, and as of July 2021, collectors on SuperRare can now earn royalties through their participation in the art market as well. This means that all participating community members within SuperRare – both those creating art and those supporting the art – can now share in an artwork’s growth in value.
Read below for a breakdown of how royalties work on SuperRare!
Artist Royalties on SuperRare
On the primary sale of any artwork, also known as a “mint sale” (the sale directly from the artist themselves after minting the artwork), the artist gets 85% of the sale price, and SuperRare takes the remaining 15% as a commission fee.
Any sale following a mint sale is considered a secondary sale. During a secondary sale, when a collector resells an artwork to a new owner, the collector gets 90% of the sale, and the original artist gets 10% as a royalty.
On all sales, whether primary or a secondary, a 3% network fee is added to the total sale price, paid by the buyer.
Note: Transfers do not count as sales. In the event that an artist mints an artwork and then gifts/transfers the piece to a new owner in lieu of selling it, that piece would then need to sell twice to trigger the artist royalty. Its first instance of being sold would count as the "mint sale", with the first collector receiving 85% of the sale price; the second instance would then be eligible for an artist royalty payout to the original creator of the piece.
Collector Royalties on SuperRare
While artists earn royalties for any secondary sale (e.g. any sale that follows the artist’s original sale of the work, aka the “mint sale”), collectors can now earn royalties on the artworks they trade as well.
Much like Artist Royalties in 2018, Collector Royalties are a new concept for the NFT ecosystem as a whole. Because of this concept’s novelty, the Collector Royalty program is being conducted as a 12 month pilot, and may require ongoing modifications to ensure its efficacy and sustainability. We look forward to perfecting this new mechanism for value accrual with the feedback of our community!
Which artworks do Collector Royalties apply to?
As of July 13th, 2021 and onward, Collector Royalties apply to any artwork collected on SuperRare. This applies to all SuperRare tokens, regardless of the contract or date on which they were minted.
Royalty payments on pre-07.13.21 works will begin "where the ball lies" (e.g. no retroactive payments, but we'll pick up each royalty stream wherever it is today).
In other words, royalty payments on artworks sold before 07.13.21 will begin with the first collector selling the work on or after 07.13.21.
This first royalty payment will be dependent on how many previous sales an artwork has had. For example, if the first sale of a work after 07.13.21 is mint sale + 5 on an artwork's sales chain, the collector selling the work (and other owners in the chain) will receive 0.125% (see the section below for an explanation of this royalty amount.)
How much is the royalty?
The first collector of an artwork receives 1% after the 1st secondary market transaction to which they are no longer a direct participant (mint sale +2). This 1% is funded from the 3% network fee a new collector pays when purchasing an artwork.
Royalties then decay by 50% for each subsequent transaction in an artwork's chain of ownership (as pictured below):
Why is this important?
Collectors have been integral to both SuperRare and the growth of countless artist careers. We believe collector royalties will make collecting a more social activity, incentivize both primary and secondary sales, and continue to unleash artistic expression.
When do I receive my Collector Royalty?
Royalty payments will be computed monthly and credited directly to the accounts of qualifying collectors on SuperRare.
Since this program is currently a pilot, we will be monitoring transaction data closely and administering payments off-chain before any automation takes place. It is within the SuperRare ethos to never directly handle the funds of our users, as all transactions otherwise are carried out via smart contracts, but as this is a completely novel payment structure, we want to ensure we perfect it before automating it. We look forward to bringing Collector Royalties on-chain when the pilot period is complete.
We’re closely listening to feedback from the community to make adjustments as needed. We've been overwhelmed by the positive response so far and welcome further ideation from the community. We’re thrilled to bring this exciting new economic construct to the art market and hope it continues to expand the commercial success experienced by both artists and collectors alike.