Royalty-Friendly Digital Asset Exchanges on Blockchains

Abstract

The distribution of royalties associated with the exchange of digital assets, especially Non-Fungible Tokens (NFTs), is now more than ever a strong point of contention. Between conceptual disagreements and technical limitations, actors have implemented a variety of solutions tailored to their needs. In the process, creators and buyers have lost the possibility of transparent, trusted, and interoperable exchanges of said assets, often having to compromise to connect with the rest of the community. This study deals with the automatic distribution of royalty payments. We first investigate the current day limitations, and formally state their underlying requirements, before advancing a royalty-friendly NFT marketplaceagnostic trading framework. The advanced solution, referred to as the RM-TLSC -Royalty Management Token-Level Smart Contract, establishes synergies between the token and Smart Contract paradigms, thus ensuring royalties are managed throughout the life cycle of the asset. A comprehensive, open-source software implementation is provided for the Ethereum blockchain, while the generality of the approach is cross-checked by an open-source proof of concept for the Tezos blockchain. The effectiveness of the results is illustrated through a case-study related to ISO 21000-23 Smart Contracts for Media standard.

Blockchain Asset Lifecycle Management for Visual Content Tracking

“…Specifically, blockchain marketplaces are decentralized applications that provide wide arrays of features and rules, but fundamentally simply connect NFT sellers and buyers for a fee. Most rely on a Swap Contract model, where a central Smart Contract manages sales, as illustrated in Figure 2 [70]. It is interesting to note that interoperability between marketplaces is limited, even when they operate in the same blockchain ecosystem.…”

“…These royalties are far from negligeable, as Ethereum marketplace royalties have already added up to almost 2 billion USD [84]. Marketplace-agnostic royalty modules also exist and can be added to our token before being distributed, e.g., the EIP2981 [84] standard on Ethereum or a Royalty Managing Token Level Smart Contract (RM-TLSC) brought forth in [70]. The former relies on Intellectual Property (IP) and royalty metadata being appended to the token which can then be enforced by sellers whilst the latter sets the token in a separate Smart Contract which enforces a set of rules.…”

“…This initialization will also send the token to the Smart Contract where it will remain until retraction rules are fulfilled according to the initializer's demands. A simple instance of such a Smart Contract and its use can be found in [98], and further details about TLSCs can be found in [70].…”

“…Upon addition, the App requests the creation of ERC721 NFTs using the Token Prototype and sends the tokens to the operating wallet of the architecture for extra protection steps to be taken before distribution. Here, we use an RM-TLSC [70] to enforce the fact that a percentage of all subsequent sales of the token will automatically be sent to the wallet. The same tool can be used to cap the price of the token if the museum wanted to limit speculation.…”