How do royalties work on secondary NFT sales?
When you sell an NFT that you bought from another collector on a secondary marketplace, the original creator typically receives a percentage of the sale price - this is the royalty. Royalties are enforced by smart contracts or marketplace rules, not by goodwill, and they are paid automatically at the time of the sale, before you receive your net proceeds.
How royalties are specified and stored
The creator of an NFT collection sets a royalty percentage - usually between 2.5% and 10% - and a recipient wallet address when they first deploy the collection’s smart contract. This royalty configuration is written into the contract's metadata, typically using the EIP-2981 standard. When a marketplace recognizes a collection as compliant with EIP-2981, it reads the royalty rate and payout address directly from the contract, then calculates and distributes the royalty at each secondary sale.
If a collection does not use EIP-2981, the marketplace may rely on an internal database or an off-chain royalty registry, such as the one used by OpenSea before its on-chain enforcement. In those cases, the marketplace checks its own records for the royalty percentage and creator address. This approach is less reliable because the marketplace controls the data, and creators must manually register their royalty settings.
Where the royalty comes from
The royalty is deducted from the final sale price before the seller receives their cut. Suppose you list an NFT for 1 ETH, the sale goes through, the marketplace fee is 2.5%, and the creator royalty is 5%. Here is how the funds are split:
- Buyer pays: 1 ETH (plus any gas fees)
- Marketplace fee: 0.025 ETH (2.5% of 1 ETH)
- Creator royalty: 0.05 ETH (5% of 1 ETH)
- Seller receives: 0.925 ETH (1 ETH - 0.025 ETH - 0.05 ETH)
The royalty is paid to the creator before the seller gets any proceeds. If the sale involves a bid accepted below the listing price, the royalty is still calculated as a percentage of the actual sale price, not the original listing.
Creator wallets and changing royalties
The royalty recipient is almost always a single wallet address set by the creator during minting. That address can be a personal wallet, a multisig, or a smart contract that splits payments among multiple team members. Creators cannot retroactively increase the royalty rate on already-minted tokens unless they update the on-chain royalty contract, which requires a governance process and is rarely allowed.
Royalties can be lowered or turned off entirely by the creator, but this is unusual because it would reduce future income. Some marketplaces allow the seller to override or waive royalties on a per-sale basis, but this is discretionary and not standard.
Marketplace Enforcement Varies
Not all marketplaces enforce royalties the same way. Major platforms like OpenSea, Blur, and Rarible enforce EIP-2981 royalties by default. However, some marketplaces - especially newer or lower-volume ones - may not comply with on-chain royalty standards. In those cases, royalties are simply not paid, and the creator receives nothing from secondary sales on that platform.
Creators can try to prevent royalty avoidance by using a royalty-enforcing smart contract that rejects trades on platforms that do not honor the royalty. This approach, often called a "fee-on-transfer" mechanism, blocks transfers to known non-compliant marketplaces or imposes a separate fee that the platform cannot bypass. This is technically possible but is not widely adopted because it can break composability with other smart contracts and can appear hostile to traders.
What happens when you accept an offer
When you accept a private offer on your NFT, royalties still apply. The royalty is calculated from the offer price, not from any higher listing. For example, if your NFT is listed at 2 ETH but someone offers 1.5 ETH and you accept, the creator royalty is based on 1.5 ETH. The marketplace fee and royalty are deducted from the 1.5 ETH, and you receive the remainder.
Collection-Level vs. token-level royalties
Most collections set one royalty rate for all tokens within the collection. Some rare collections allow individual tokens to have different royalty rates, but that is unusual and requires custom contract logic. If a collection has a 5% royalty, every NFT in that collection pays 5% on secondary sales, regardless of which specific token is sold.
Why Royalties Matter
Royalties are the primary way NFT creators earn ongoing income from their work after the initial mint. For projects with active secondary markets - especially art, music, and profile-picture collections - royalties can represent a significant portion of total revenue. Without royalty enforcement, creators have no built-in mechanism to profit from resales, which is one of the core promises of NFTs as a creator-supporting technology.
The main practical takeaway for sellers: royalties are a fixed cost of selling an NFT on a compliant marketplace. They reduce your net proceeds, and you cannot avoid them unless you use a platform that does not enforce them - in which case, the marketplace may also lack trust or volume. Always check the royalty rate for a collection before listing, and factor it into your minimum acceptable price.
Not financial advice. whateverape.xyz publishes market data and general information about digital assets. Crypto assets are volatile and you can lose everything you put in. Nothing here is a recommendation to buy, sell or hold, and we make no price predictions.
Prices are sourced from third parties and may be delayed or wrong. Verify anything you intend to act on against a primary source.