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The Subscription Solve for NFT Royalties
Rethinking smart contracts and musing on their use cases in hospitality
Today’s post comes to you courtesy of Jake Schlessinger, a product manager here at Blackbird Labs, Inc. Jake will be using the space below to discuss NFT royalties, subscription models, and how the utility of the latter might be able to fix the inherent problems with the former. We hope you enjoy it and, as ever, we’d love to hear from you: either in the comments below, on Twitter, or by dropping us a line at firstname.lastname@example.org.
We spend a lot of our time thinking about web3 applications and their best use cases for consumers. Or, specific to Blackbird, how both diners and restaurants will benefit from the functionality of a platform designed to bring both parties closer together.
All this means we invariably think about NFTs, too. NFTs net a lot of press these days. Some of it good, most of it bad…or at the very least misunderstood. That’s due to the fact that there’s a fair amount of confusion surrounding the idea of on-chain digital assets, especially those coming in some form of visual art. Where’s the value in owning an ape or a punk or a penguin (yes, we have one; please don’t ask how much we paid), people gripe, as if such assets and the underlying smart contracts are suspect.
Whether or not a piece of digital art will accrue in value — or that the character depicted within will be part of a larger Marvelesque universe and thus the gateway to gobs of money and pop culture notoriety — is the subject for another post and another publication altogether. Though we would argue that there’s no difference in buying digital art or IRL art if we’re talking about anything beyond appreciating it for what it is; everything else comes down to speculation. At any rate, where NFTs do get interesting — certainly for the artists producing them — is when we talk about royalties. One of the best and most successful examples of NFT royalties done right would be a collection produced by the digital artist Beeple called, “The First Drop.” Beeple — whose real name is Mike Winkelmann and whose other headline-grabbing NFT project “Everydays: The First 5000 Days” sold in 2021 at Christie’s for a record-breaking $69 million — baked in a 10 percent royalty into each NFT belonging to The First Drop collection. However, the NFTs were sold initially for only $1. Beeple knew this would cause a lot of secondary trading and the market would determine a fair price, all while collecting 10 percent of sales along the way. Pretty smart.
Unfortunately, royalties have gone awry since. In the wake of NFTs’ waning popularity, many marketplaces have entertained removing royalty enforcement. Creators are considering removing the artwork or nullifying their NFTs if sales are made without paying royalties. None of this is a good thing for the NFT ecosystem. The prospect of no royalties seriously disincentivizes digital artists from creating on-chain work, meaning we either get subpar creators slinging subpar art or, worst case, no artists partake and the whole market collapses.
All this turmoil and uncertainty has led us to think about subscription NFTs, specifically those that grant the user access to real world benefits. In this case, the holder of the NFT gets whatever benefit they pay for on a monthly or annual basis, while the artist continues to be paid. Sell the NFT on a secondary market, and the new owner simply takes over said subscription without stiffing the artist on payment. Win-win.
To see how this might work, we recently joined a proof of concept group called “This is a subscription NFT.” Unimaginative name aside, it’s been totally worth it. For $0.99 a month, we get access to a private Telegram group of (so far) 16 members, most of whom are building small crypto projects, and we all share interesting ideas on subscriptions now that NFT royalties have been avoided. We were able to purchase the membership with a credit card.
What’s all this mean? Ok, back to Blackbird. Without giving too much away, we can say that we view our forthcoming restaurant partners as artists, and that a subscription model is one of the use cases in which we are thinking about creating relationships in which both sides of the contract — restaurant and diner — benefit in ongoing ways.
Thanks for reading.
Blackbird Labs, Inc.
Thanks for reading! Blackbird will launch in select restaurants later this year. In the meantime, if you dug this, please give it a like! We’re also on Twitter and would love to hear from you there.