NFT royalties were one of the big promises of the NFT boom: artists would earn a percentage every time their work was resold. Many buyers still assume this happens automatically. It does not. This guide explains what an NFT royalty is, how the ERC-2981 standard signals it, and why marketplaces decide whether creators actually get paid.
What an NFT royalty is
A royalty is a fee, normally a percentage of the sale price, paid to the original creator or rights holder when an NFT changes hands on the secondary market. Wikipedia mentions royalties as a use case across industries. Entertainment artists can seek royalties through NFTs, and a 2019 paper proposed NFT event tickets that pay organisers or performers a royalty on every resale.
The ERC-2981 standard
Ethereum’s ERC-2981, titled the “NFT Royalty Standard” and created in September 2020, is now a final standard. It gives NFT contracts that use ERC-721 or ERC-1155 a common way to signal royalty information. A marketplace calls a function named royaltyInfo() with the sale price, and the contract returns the address to pay and the amount owed. Royalty amounts are always a percentage of the sale price.
The motivation was fragmentation. Before the standard, large marketplaces each built their own royalty systems, and these did not work with one another. ERC-2981 lets any marketplace read the same information wherever the NFT is resold.
The key detail: payment is voluntary
The standard itself says the royalty payment must be voluntary. The reason is that functions like transferFrom() move NFTs between wallets, and a transfer does not always mean a sale happened. The contract cannot tell a gift from a sale, so it cannot charge a fee on its own. ERC-2981 only provides the amount and the recipient. The marketplace has to carry out the payment. In the words of the standard: if a marketplace chooses not to implement it, no funds are paid for secondary sales.
What this means for buyers and creators
- Buyers: the price you pay can differ between marketplaces, depending on whether the royalty is collected. The standard’s authors expected buyers to weigh royalties when deciding what to buy.
- Creators: royalty income depends on where your collectors trade. That makes it a hoped-for revenue stream, not a guaranteed one.
- Collectors: royalty claims say nothing about who owns the copyright. Check the licence, as explained in NFTs without hype: tokens, licences and secondary risk.
Security angle
Royalty settings sit in the NFT contract. Scammers sometimes copy popular collections, deploy their own contracts and even advertise “creator royalties” on fake listings. Before you buy, compare the contract address with the official one published by the creator. Never approve unlimited spending to unknown marketplace contracts. Our wallet hygiene guide covers approvals and drainers.
A quick checklist before buying
- Look up the royalty percentage in the collection’s contract or on the marketplace.
- Check whether the marketplace you use actually pays it.
- Add the royalty to your break-even price if you plan to resell.
- Read the licence: owning a token does not give you copyright.
- Confirm the contract address from the creator’s official channels.
How the royalty amount is calculated
ERC-2981 is deliberately “unit-less”. The contract does not care whether the sale was paid in ETH, a stablecoin or euros on an off-chain marketplace. The marketplace passes in the sale price, and the contract returns a percentage of it. So a 5% royalty on a sale of 2 ETH is 0.1 ETH, and on a sale of 1,000 USDC it is 50 USDC. The standard sends the royalty to one address, so creators who split income among several people have to arrange that themselves, for example with a separate splitter contract. The authors describe ERC-2981 as a minimal, gas-efficient building block for future royalty mechanisms. They leave the details of payment and notifying the recipient to later proposals.
The bottom line: a royalty is information plus goodwill, not an enforced tax. Treat it as an incentive the marketplace may or may not honour.
Crypto risk note: Crypto-assets are highly volatile and largely unprotected. You can lose all the money you put in. This article is general education, not financial, tax or legal advice. Never invest more than you can afford to lose.