NFT Utility & Royalties | Asset Taxonomy

At a Glance

NFTs can deliver access, rewards, and ongoing royalties for creators. You'll learn common utility patterns and the realities of royalty enforcement.

Utility PatternsRoyalty MechanicsProject Evaluation

Who Is This For?

•Creators designing NFT collections
•Collectors assessing long-term value of NFT projects

Learning Objectives

01List utility patterns beyond static art
02Explain how royalties are set and enforced
03Evaluate sustainability of NFT-driven communities

Section 1

Utility Patterns

NFTs aren't just JPEGs. The most successful projects offer real utility that makes ownership valuable beyond speculation.

Explore Utility Patterns

🔑

Access & Membership

NFTs that grant entry to exclusive communities, events, content, or experiences. Holders get benefits non-holders cannot access.

Real Examples

Bored Ape Yacht Club

Private Discord, events, IP rights

VeeFriends

VeeCon conference access

Proof Collective

Curated community, early access

STRENGTHS

✓ Creates genuine community
✓ Ongoing value beyond art
✓ Network effects strengthen over time
✓ Token-gating is technically simple

CHALLENGES

! Value depends on community quality
! Must continuously deliver value
! Holders may not engage
! Exclusivity can limit growth

Sustainability Assessment

High if community remains active and valuable. Requires ongoing effort from team.

Utility Pattern Quick Reference

Pattern	Sustainability	Effort	Best For
🔑 Access	High	Medium	Communities, creators
🎮 Gaming	Medium	High	Game studios
⭐ Loyalty	Medium	Medium	Brands, protocols
🎟️ Tickets	High	Low	Events, venues
🪪 Identity	High	Low	Credentials, DAOs

Section 2

Royalties in Practice

Royalties promise creators ongoing income from secondary sales. But the reality is more complicated than the promise.

How Royalties Work (In Theory)

1

Creator Sets %

When deploying the NFT contract, creator specifies royalty percentage (typically 2.5-10%) in metadata or contract.

2

NFT Gets Traded

When someone buys the NFT on a marketplace, the marketplace reads the royalty setting.

3

Creator Gets Paid

If the marketplace honors royalties, it automatically sends the % to the creator's wallet.

The Problem: Enforcement Is Optional

Royalties are not enforced at the protocol level. They're just metadata that marketplaces can choose to respect or ignore. In 2023, most major marketplaces made royalties optional or reduced them to attract traders.

Royalty Reality Calculator

See how much creators actually receive on different marketplaces:

Sale Price (ETH)

Creator Royalty %

Expected Royalty

0.050 ETH

Actual Royalty by Marketplace (estimated)

OpenSea

0.025 ETH50% honored

Largest marketplace. Made royalties optional in 2023, then added operator filter support.

Blur

0.005 ETH10% honored

Pro trader focus. Built around zero/low royalties. Offers airdrops to offset.

Magic Eden

0.025 ETH50% honored

Solana-first, now multi-chain. Allows creators to enforce or make optional.

Foundation

0.050 ETH100% honored

Art-focused. Always honors creator royalties. Lower volume, higher quality.

LooksRare

0.010 ETH20% honored

Trader incentives via LOOKS token. Royalties often skipped.

Emerging Solutions

Operator Filter Registry

Smart contract that blocks transfers to marketplaces that don't honor royalties. Creators can choose to enforce it.

✓ Protects royalties✗ Limits liquidity

EIP-2981 Standard

Standard way to signal royalty info on-chain. Marketplaces can read it, but still aren't forced to honor it.

✓ Standard format✗ Not enforced

⚠️ Creator Reality: Don't rely on royalties as your only revenue model. Build products, services, or experiences that generate value regardless of marketplace policies.

Section 3

Evaluating an NFT Project

Before buying or creating an NFT collection, use this framework to assess sustainability and quality.

Project Evaluation Checklist

For each criterion, mark if it's a green flag, red flag, or unknown:

Team

Is the team doxxed with verifiable track record?

Green: Public identities, past successes, active communication

Red: Anonymous team with no history, vague backgrounds

Roadmap

Are promises realistic and technically feasible?

Green: Clear milestones, achievable scope, regular updates

Red: Vague promises, "soon" on everything, scope creep

Utility

Does the utility already exist or is it just promised?

Green: Working product, live features, demonstrated value

Red: All utility is "coming soon" with no timeline

Treasury

Is treasury/royalty usage transparent?

Green: Public wallet, regular reports, community governance

Red: No visibility, personal spending, no accountability

Community

Is the community healthy and engaged?

Green: Active discussion, diverse holders, organic growth

Red: Dead chat, whale concentration, bot activity

Technical

Is art/metadata stored securely (IPFS/Arweave)?

Green: Decentralized storage, on-chain when possible

Red: Centralized servers, broken links already

Community Health Indicators

Healthy Signs

• Organic discussion about utility
• Diverse holder distribution
• Regular team updates
• Constructive criticism allowed

Warning Signs

• Only price discussion
• Heavy whale concentration
• Sporadic communication
• Echo chamber vibes

Red Flags

• Dead chat / bot activity
• Team gone silent
• Mass selling by insiders
• Criticism gets banned

Watch Out

Common Mistakes & Gotchas

Even experienced collectors fall for these traps. Stay vigilant:

💸

This project has 5% royalties, so creators always get paid

Royalties are only suggestions. Many marketplaces let buyers skip them entirely. Check where most trading happens.

🗺️

The roadmap promises a metaverse game—must be legit

Building games takes years and millions. Most NFT projects can't deliver on gaming promises. Look for working products, not promises.

✅

I'll just check if it says 'Official' in the name

Scammers copy names and art constantly. Always verify the contract address matches the official source. Check project Twitter/Discord for the real link.

🏗️

The art is cool and the Discord is active, that's enough

Also check: Who pays for ongoing costs? How will utility be maintained? What happens when hype fades? Sustainability matters.

⚠️ Golden Rule: If a project's value depends entirely on floor price going up, it's speculation, not utility. Look for projects that deliver value even if the price stays flat.

Test Yourself

Knowledge Check

Let's see how well you understand NFT utility and royalties.