Lets Talk About Exchanges and Royalties
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As the popularity of non-fungible tokens, or NFTs, continues to rise, it is important to understand the market mechanics behind these unique digital assets. While NFTs have gained significant attention for their potential to revolutionize the way we think about ownership and value, the market has also experienced its share of exchange wars as various players compete for a stake.Â
In this article, we are continuing our dive into NFT’s, but today delving into the exchange wars that have characterized the NFT market and exploring potential solutions such as over-the-counter trading and the incorporation of royalties at the protocol level.Â
By examining these issues, we aim to provide a comprehensive understanding of the market forces at play in the world of NFTs and how blockchains like String can help in this evolution.
NFT markets have experienced a number of exchange wars in recent years, as various platforms have competed for market share and dominance. One of the main drivers of these exchange wars was the rapid growth of the NFTs. As the market for NFTs exploded in popularity, more and more platforms emerged, each one trying to capture a piece of the pie. This led to intense competition between platforms, as they tried to outdo each other in terms of features, usability, and overall appeal to users.
These exchange wars which were characterized by intense competition between platforms all truly came down to a fight for a larger share of the market. While competition is generally seen as healthy for a market, the exchange wars can and have created confusion and uncertainty for NFT holders and collectors.Â
One response to the NFT exchange wars was the emergence of OTC, or over-the-counter, NFT trading. OTC trading refers to the buying and selling of NFTs directly between buyers and sellers, rather than through a public exchange. This can provide a more private and secure way for NFT holders to sell their assets, as well as avoiding potential fees and liquidity issues on centralized exchanges.
Another key part of the exchange wars and key issue in the NFT market overall has been royalties on the NFT’s themselves. Royalties refer to a percentage of the sales price of an NFT that is paid to the creator of the underlying digital asset. With the emergence of many exchanges and OTC trading of NFT’s, there has been controversy surrounding the honoring of royalties for NFTs on some marketplaces and exchanges. This has disadvantaged NFT creators, as they may not receive future revenue from their work. Previously, exchanges were responsible for enforcing royalties, but some have stopped enforcing them or taken them off their exchanges entirely.Â
A solution to help creators still receive their fair share is to solve the problem at the protocol level. By building royalties into the protocol level that are enforceable, creators of NFTs can ensure that they are compensated for the ongoing sales of their assets. This also incentivizes to create and produce high-quality NFTs that will continue to generate value over time.
The potential issues seen currently in the marketplace are things that can be solved with well designed technology. Blockchains like String will have a huge role in the evolution of the NFT marketplace by helping build well designed protocols that allow for royalties at the point of creation of the NFT;Â thus incentivizing creators, allowing permissioning on the NFT itself driving more flexibility in the process and by providing a decentralized and transparent platform for buying and selling NFTs through the String SuperDapp. By making some of these changes such as eliminating the need for centralized exchanges and empowering users, String can help to reduce the potential for exchange wars and provide a more fair and efficient marketplace for NFT creators and collectors.