Understanding NFT Royalty Circumvention and How to Stop It
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Oct, 26 2025
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24 Comments
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When NFTs first promised artists a steady stream of income from every resale, many assumed the system would be automatic and unstoppable. Fast‑forward to 2025, and a quiet arms race has emerged: traders finding ways to sidestep those very payments.
NFT royalty circumvention refers to the deliberate use of technical tricks, marketplace policies, or off‑chain agreements that let a buyer purchase a token without the creator receiving the programmed royalty. royalty circumvention erodes the economic model that convinced thousands of artists to mint their work on blockchain in the first place.
What creators expected from NFT royalties
Early whitepapers described NFTs as a "social contract" where every secondary sale triggers a programmable payment to the original creator. The idea was simple: embed a percentage-usually 5‑10 %-into the token’s smart contract, and let the blockchain enforce it forever.
This promise gave rise to a vibrant creator economy, with platforms like OpenSea reporting that artists earned a cumulative OpenSea‑tracked $1 billion in royalties by late 2022. Those numbers only make sense if every trade respects the royalty rule.
Technical foundations that enable circumvention
The original ERC-721 standard, finalized in 2018, defines non‑fungible tokens but contains no royalty field. When creators wanted a built‑in royalty mechanism, the community introduced ERC-2981 in July 2021. ERC‑2981 adds optional royalty metadata that marketplaces may read and honor, but crucially, the standard is **voluntary**. A marketplace can simply ignore the field, and the token will still transfer.
This optionality is the core vulnerability. As long as a token can be moved by any smart contract that implements the generic transferFrom function, a trader can route the transfer through a contract that never looks at the royalty data.
Common ways traders bypass royalties
- Wrapping the token: A creator‑minted NFT (ERC‑2981‑compliant) is placed inside a generic ERC-721 “wrapper” contract. The wrapper presents itself as a plain ERC‑721 token, so when the wrapper is sold on a marketplace that ignores royalties, the original royalty data stays hidden.
- Zero‑price listings with off‑chain payment: Sellers list the NFT for $0 on a compliant marketplace, then receive the full price via a separate wallet or payment app. The marketplace records a $0 sale, so no royalty is triggered.
- Marketplace policies that nullify royalties: Platforms such as Blur marketplace allow creators to set a royalty percentage of zero, effectively disabling the fee for any token that passes through their order book.
All three methods exploit the fact that royalty enforcement lives outside the core transfer logic of most blockchains.
Enforcement strategies: blocklists vs. allowlists
Creators have responded with two opposite technical approaches.
| Aspect | Blocklist | Allowlists |
|---|---|---|
| Core idea | Reject transfers that pass through known non‑compliant contracts. | Permit transfers only through pre‑approved, royalty‑honoring platforms. |
| Scalability | Requires continual monitoring of new marketplaces; can miss novel contracts. | Simpler to manage once a trusted set is built, but limits composability. |
| Impact on user experience | May cause transaction failures unexpectedly. | Users can trade only on a limited list of venues. |
| Effect on composability | Leaves most smart‑contract interactions untouched. | Restricts interactions to approved contracts, reducing flexibility. |
Both methods attempt to solve the same problem but at opposite ends of the spectrum: one tries to keep the ecosystem open while reacting to bad actors; the other locks down the environment to guarantee royalties but sacrifices the open, permissionless nature that made NFTs popular.
New standards that aim to make royalties enforceable
Because marketplace‑level solutions rely on voluntary compliance, developers have started building royalty logic directly into token contracts.
ERC721-C (and its sibling ERC1155-C) were introduced by gaming company Limit Break. These contracts let creators write programmable filters: the token can refuse to transfer to any address that isn’t on an internal “approved marketplace” list, effectively making royalty‑free platforms invisible to the token.
On a different front, the Hedera network embeds royalty fees at the protocol level. When a creator mints an NFT on Hedera, they set a custom royalty fee that the network automatically deducts on any secondary transfer, even if the transfer carries zero monetary value-the fee is charged in HBAR.
Other community projects, like Manifold Royalty Registry, act as a decentralized database of royalty policies. While the registry alone can’t force a blockchain to pay, many marketplaces query it to decide whether to honor the fee. The registry therefore improves transparency but still depends on marketplace goodwill.
Market impact: how big is the problem?
OpenSea’s public figures-$1 billion in creator royalties through November 2022-represent only a slice of total secondary sales. Independent analytics estimate that up to 30‑40 % of Ethereum‑based NFT trades bypass royalties entirely, translating to billions of dollars in lost income for artists.
Academic research from the University of Washington Law School describes the current royalty framework as a “social contract that allows payment but cannot guarantee it.” The legal language underscores the economic reality: without technical enforcement, royalties remain an aspirational feature rather than a binding obligation.
Platforms that openly reject royalties, like Blur, have attracted high‑volume traders because they reduce transaction costs. This creates a market incentive for creators to either adopt stricter token standards or risk missing out on exposure on high‑liquidity venues.
Practical steps creators can take today
- Choose a royalty‑aware standard: Mint new collections using ERC721-C or Hedera’s built‑in fees if the target ecosystem supports them.
- Maintain a blocklist of rogue marketplaces: Services like OpenSea provide APIs to retrieve contract addresses. Regularly update your blocklist to include new entrants that ignore royalties.
- Consider an allowlist for high‑value drops: For premium art series, limit secondary sales to compliant platforms (e.g., OpenSea, Rarible) and embed the whitelist directly into the smart contract.
- Leverage off‑chain monitoring tools: Services such as Nansen or Dune Analytics can alert you when your token moves through a black‑listed address.
- Educate collectors: Include clear royalty terms in your token metadata and community channels. Transparency reduces the likelihood of accidental off‑chain deals.
While no single approach guarantees 100 % royalty capture, combining on‑chain enforcement with diligent monitoring gives creators the best chance to protect their income.
Looking ahead: the future of royalty enforcement
The cat‑and‑mouse game between circumvention tactics and enforcement mechanisms is unlikely to end soon. New standards like ERC‑721‑C are gaining traction, but adoption depends on network effects-marketplaces must support the filters, and collectors must accept the trade‑off of reduced composability.
Parallel to token‑level solutions, some industry voices advocate for a layer‑2 royalty oracle that could certify royalty compliance across chains. If such an oracle became widely accepted, it could bridge the gap between optional standards and mandatory enforcement.
For now, creators who care about sustainable earnings should stay informed about the evolving standards, keep their block/allow lists fresh, and consider minting on platforms that embed royalties at the protocol level, like Hedera.
Why do some marketplaces ignore NFT royalties?
Royalties are optional in the ERC‑2981 standard, so a marketplace can simply choose not to read the royalty fields. Some platforms also set creator‑specified percentages to zero to attract high‑volume traders who want lower fees.
Can I enforce royalties without changing my token contract?
Only partially. You can maintain a blocklist of known non‑compliant contracts and refuse to transfer your NFT through them, but new rogue contracts can appear at any time. Full enforcement requires a contract that embeds royalty logic, such as ERC‑721‑C or Hedera’s built‑in fees.
What’s the difference between a blocklist and an allowlist?
A blocklist rejects transfers that go through black‑listed addresses, keeping the ecosystem open but reactive. An allowlist only permits transfers through pre‑approved addresses, guaranteeing royalties but limiting where the NFT can be traded.
Is ERC‑721‑C widely supported?
Support is growing, especially among gaming projects that need strict royalty control. However, many major marketplaces still rely on ERC‑2981, so creators should weigh the trade‑off between enforcement and market reach.
How does Hedera enforce royalties?
When you mint an NFT on Hedera, you set a custom royalty fee. The network automatically deducts that fee on every secondary transfer, even if the transaction carries zero value, because the fee is charged in HBAR at the protocol level.
Natasha Nelson
October 26, 2025 AT 09:49Wow, this is eye‑opening!!
Prabhleen Bhatti
October 26, 2025 AT 13:59You've nicely dissected the ERC‑2981 voluntary royalty schema, highlighting its Achilles' heel in a concise manner. The way you illustrated wrapper contracts and zero‑price listings underscores the systemic loopholes that savvy arbitrageurs exploit. Moreover, the distinction between blocklist and allowlist mechanisms provides a clear roadmap for developers seeking to harden token economics. It's essential for creators to stay ahead of these circumvention vectors, otherwise the promised royalty streams will remain aspirational.
Chris Houser
October 26, 2025 AT 18:09Totally agree-keeping an eye on the contract addresses you interact with can save you a lot of hassle. Just add known bad marketplaces to a simple blocklist in your wallet, and you'll get notified if a transfer tries to route through them.
Ashley Cecil
October 26, 2025 AT 22:19From an ethical standpoint, the deliberate evasion of creator royalties constitutes a breach of the implicit social contract that underpins the NFT ecosystem. This behavior not only undermines the financial sustainability of artists but also erodes trust in decentralized marketplaces. Consequently, a concerted effort toward enforceable standards is indispensable.
monica thomas
October 27, 2025 AT 02:29Indeed, the philosophical underpinnings reinforce the necessity for a legally binding framework that transcends voluntary compliance. By integrating royalty enforcement at the protocol layer, we mitigate reliance on goodwill and align incentives across stakeholders.
Edwin Davis
October 27, 2025 AT 06:39Look, the NFT space has been hijacked by opportunistic traders who think they can outsmart the system-well, they're wrong! The original promise of immutable royalties was a bold statement of creator rights, yet the ERC‑2981 standard was deliberately left optional, creating a regulatory vacuum. Marketplaces like Blur have capitalized on this loophole, slashing fees and luring volume by ignoring royalty fields. This creates a race‑to‑the‑bottom where artists lose billions, and the very notion of a sustainable creator economy crumbles. Blocklists are a reactive Band‑Aid; they can only chase known offenders and always lag behind novel shenanigans. Allowlists, on the other hand, choke the open‑ended spirit of Web3, turning it into a gated playground for the privileged few. The community cannot afford to choose between security and openness without a balanced solution. Technical innovations such as ERC‑721‑C and Hedera’s protocol fees are promising, but their adoption is still nascent and fragmented. Moreover, the dependence on off‑chain monitoring tools introduces centralized points of failure, contradicting decentralization ideals. Artists must therefore adopt a multi‑layered strategy: embed royalty logic on‑chain, maintain dynamic blocklists, and educate collectors about the value of fair compensation. If we ignore these steps, the market will continue to reward bad actors, and genuine talent will be forced out. The statistics are stark-up to forty percent of Ethereum trades bypass royalties, translating into billions of dollars in lost income. Regulatory bodies may eventually step in, but proactive self‑regulation is far more effective and preserves community autonomy. Without decisive action, the credibility of NFT platforms will deteriorate rapidly. In short, the fight against royalty circumvention is not a peripheral concern; it's the battle for the soul of the NFT ecosystem.
emma bullivant
October 27, 2025 AT 10:49Royalty dodging hurts the artists, indeed.
Michael Hagerman
October 27, 2025 AT 14:59Whoa! This reads like a thriller-traders as villains, creators as victims, and the blockchain as the battlefield. The stakes couldn't be higher!
Peter Schwalm
October 27, 2025 AT 19:09One practical tip: when you mint, include a fallback royalty function that reverts if the royalty fee isn’t transferred, forcing any marketplace to honor the payment or the transfer fails.
Marianne Sivertsen
October 27, 2025 AT 23:19That's a solid approach; the fallback ensures that even if a marketplace tries to bypass the fee, the transaction won't go through, protecting the creator's earnings.
Shruti rana Rana
October 28, 2025 AT 03:29✨Absolutely! The blockchain's immutable ledger can be a guardian angel for creators when we embed royalties at the protocol level. ✨
Stephanie Alya
October 28, 2025 AT 07:39Sure, because adding extra code never introduces bugs… 🙄 But hey, if you love paying extra gas for “security,” go for it! 😏
olufunmi ajibade
October 28, 2025 AT 11:49Listen up, creators need to own the narrative-don’t let marketplaces dictate your income. Build your own blocklist and share it with the community.
Manish Gupta
October 28, 2025 AT 15:59Got it! 😊 Just set up alerts on Dune so you know when your NFT moves through a shady address.
Gabrielle Loeser
October 28, 2025 AT 20:09Implementing an on‑chain royalty filter not only safeguards your revenue but also signals professionalism to collectors, fostering long‑term trust.
Cyndy Mcquiston
October 29, 2025 AT 00:19Fine. Use ERC‑721‑C and stop whining about royalties.
Rampraveen Rani
October 29, 2025 AT 04:29Let's get proactive! 🚀 Mint with built‑in royalty enforcement and watch the bad actors get shut out.
Sarah Hannay
October 29, 2025 AT 08:39Adopting protocol‑level royalty mechanisms aligns with the foundational principles of decentralization while ensuring equitable compensation for creators.
Richard Williams
October 29, 2025 AT 12:49Team effort is key-collaborate with other artists to maintain a shared registry of compliant marketplaces.
Elizabeth Mitchell
October 29, 2025 AT 16:59That sounds doable, especially with existing tools like OpenSea's API to pull contract lists.
William Burns
October 29, 2025 AT 21:09The discourse surrounding royalty enforcement must transcend superficial fixes and instead engage with the ontological architecture of token standards.
John E Owren
October 30, 2025 AT 01:19Agreed, a measured approach that balances flexibility with enforceability will serve the ecosystem best.
Joseph Eckelkamp
October 30, 2025 AT 05:29Oh, great-another “simple” solution that requires rewriting every smart contract you own!!! 🙄
Jennifer Rosada
October 30, 2025 AT 09:39While simplicity is appealing, we must not overlook the importance of rigorous testing before deploying royalty‑centric contracts.