OpenSea, a trading platform for nonfungible tokens (NFTs), has introduced support for the ERC-721C token standard, allowing creators to establish and enforce royalties. This move aims to address the issue of NFT wash trading by standardizing token transfer conditions, including royalties, across different platforms. Previously, users could bypass creator royalty commissions on secondary markets by transferring NFTs through self-custody wallets or other marketplaces that did not honor royalty requirements.
The ERC-721C token standard was developed by Limit Break, a blockchain gaming company, in May 2020. By implementing this standard, OpenSea now enables creators to enforce their earnings with just one click. According to Limit Break, the previous lack of standardized token transfer conditions incentivized zero-fee, royalty-optional trading, with traders engaging in wash trading among their own wallets. This practice had a negative impact on the NFT industry.
OpenSea developers have revealed that compatibility for ERC-721C was made possible by the Dencun upgrade on the Ethereum network, which occurred on March 13. By enforcing their creator earnings according to the provided steps, sales will only be supported on OpenSea and other marketplaces powered by LimitBreak’s Payment Processor. However, creators can still manually list their digital artwork on other platforms, with OpenSea matching the lowest royalties set by the creator on those platforms.
Additionally, OpenSea’s Seaport 1.6 is compatible with the new feature, allowing NFTs to be sold under specific conditions, such as altering metadata in response to sale volume. While the exact royalty percentage is determined by the creator, NFT royalties typically range between 2.5% to 10% per sale. The top 10 NFT collections have earned a combined total of over $345 million in royalties since their inception.
In summary, the introduction of support for the ERC-721C token standard on OpenSea aims to address the issue of NFT wash trading by enabling creators to set and enforce royalties. This move standardizes token transfer conditions and ensures that creators receive their deserved earnings.