Art Blocks Co-Founder Erick Calderon Uses Free Market Ideals to Defend NFT Royalties

AUSTIN, Texas — Erick Calderon, the co-founder of Art Blocks, tried to turn down the heat on the battle around non-fungible token (NFT) creator royalties at CoinDesk’s Consensus Festival. He made his own opinion on the matter clear, however: According to Calderon, royalties “let the creator keep creating.”

Art Blocks is an NFT collection and organization focused on generative art – artwork that is generated autonomously according to rules set by its creator. (In the context of NFTs, the term usually refers to art that’s generated by computer programs that are made to live on blockchains.) Recently, Art Blocks debuted an NFT marketplace that bakes in creator royalties as a default feature.

Royalties – money paid out to an NFT’s creator each time it is sold – have long been a matter of debate among creators and collectors. Some artists view built-in royalties as a key value-add – if not the key value-add – of NFTs, and they’ve been dismayed when NFT marketplaces and collectors have taken steps that erode the practice of rewarding royalties as a norm.

Read full coverage of Consensus 2023 here.

In his address at Consensus, Calderon made a case for creator royalties while remarking that the fundamental value-add of NFTs – royalties aside – remains the same.

“No matter what the stock market cycles do, no matter what [failed crypto exchange] FTX does and no matter what happens with our regulation in our government, the value proposition of being able to prove ownership of a digital asset cannot and will not change,” said Calderon.

Referring to buzzy concepts such as international marketplaces and creator royalties that are unlocked by NFTs, Calderon said that “all of those are value-add on top of the basic premise of being able to prove ownership of a digital asset.”

On the subject of royalties, however, Caderon said they are valuable for creators as well as for the wider NFT ecosystem – including the collectors and investors who might typically avoid purchasing assets that require artists to get a cut each time they are sold.

There are obvious reasons why an artist might prefer to sell NFTs that pay out a royalty.

“The concept of being able to not slog through continuously releasing artwork in order to make a living – but being able to be more thoughtful on your releases and create something that can generate in perpetuity, additional income,” is appealing to creators, said Calderon.

As for NFT buyers that want to avoid royalties that can cut into their profits, “there are opportunities that can be missed here if we just look at royalties as a transfer tax,” said Calderon.

Calderon delivered a defense of creative royalties – and the incentives that they encourage on the part of artists – that wouldn’t be out of place in an Ayn Rand novel. According to Calderon, NFTs incentivize artists to think more deeply about their artwork and engage continuously in the NFT community. With the prospect of a bigger, prolonged payday, Calderon thinks artists will create better, more valuable artwork – with the benefits (and profits) trickling down to speculators.

Royalties aside, argued Calderon, the Web3 art marketplace will always be fundamentally more artist-friendly.

“A lot of things in the traditional art world happened behind closed doors,” he said. “Here, everything is happening in the open. We are all building in the open. We are all innovating in the open. We are all transacting in the open. We know exactly who’s paying royalties and who’s not paying royalties.”

Anti-royalty marketplaces and NFT collectors still have a place in this ecosystem, he continued. When the debate around NFT royalties boiled over earlier this year, “it was a lot of people shaming people for operating within a way that this ecosystem perfectly permits them to operate in.”

Calderon admitted his free-market logic in defense of creator royalties also applies to those who seek to dismantle them: “It’s like gun laws. You have these rights, and people get very aggressive about their ability to retain that right. When you’re talking to a decentralized ecosystem, actually, you have every right to participate in it however you wish.”

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