Royalty Math

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Comic Transcript

B: So here’s the thing about smart contracts that is making NFTs — at least, the NFTs in their current form — so popular: you can set the terms of your smart contract so you not only get paid for the initial sale of an NFT, but also every time it’s resold.

A: You can do what?

B: It’s pretty simple: you put in the smart contract an initial sale price — you get all of that. You can also add an additional term that stipulates that you get a percentage any time the NFT is sold after that.

A: That’s crazy.

B: So if I sell you an NFT I can not only get money from the first time you buy it, but I can also get paid if you sell it to someone else. And get paid AGAIN if THEY sell it to someone else.

A: Is there anything preventing me from adding terms to the smart contract when I sell it?

B: You can’t change an existing smart contract.

A: What if I created my own? Like, what if I created a supplemental smart contract, like a rider? After I bought the NFT from you, could I create a smart contract of my own that stipulates that after you get a cut of all resales, I also get a percentage if the person I sell it to sells it in turn?

B: I… don’t know.

A: Of course the next person who sold the NFT could then add a smart contract of their own and every time the NFT was sold after that we’d all get a cut of the theoretical profit!

B: I think you’re getting a little carried away with this.

A: We could create a theoretically endless chain of smart contracts, giving out ever-decreasing percentages to an ever-growing crowd of former owners of the NFT, each taking their cut.

B: It can’t be endless! You can only sell 100% of a thing. Eventually you’d run out of 100%.

A: Once it hit a certain point — say, 90% — it would switch to fixed sums. The original resellers would all get percentages and then everyone else would get like .000003 Etherium every time it sold. That means we’d just have to keep raising the price of the NFT to cover all the fixed costs.

B: I feel like there’s a flaw in your logic.

A: WE COULD MAKE MONEY FOREVER.

B: No! Bad Circle!


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