The NFT space is a relatively new wild west, and currently, royalties are the swinging saloon doors everyone’s fighting over. Jack Butcher is a minimalist maestro. He’s the guy who created Visualize Value, Checks and Opepen, and he’s back to rock the boat again this time with his contrarian attitude. He's questioning the sacred cow of NFT royalties, and frankly, he's got a point. He's not just some random dude yelling into the void; he's a seasoned designer, a shrewd observer of internet dynamics, and someone who's built a thriving business on the principles he espouses.
Royalties Reward Churn, Not Creation
Butcher’s argument, at its most basic level, is that royalties encourage the improper behavior. More importantly, they’re a lottery where artists are rewarded according to the speculative secondary market activity of their work. Simply put, as he says, they are “getting paid on churn.” It makes no more sense to reward a chef just because their leftovers are being served up twice. It does a disservice to their incredible culinary talents. Put priority on making breakthroughs, moving the goalposts on what can be achieved. Don’t get attached to the past success of any one piece.
Think about it this way: imagine Picasso getting a cut every time someone resold a painting. Would he have been just as motivated to always innovate and iterate? Maybe, maybe not. The incentive structure would be completely transformed. He might be incentivized to protect the value of his existing work, rather than creating something entirely new that could potentially devalue the old.
That’s not just theoretical musings, but rather it translates to the real-world. High royalty rates can stifle innovation. They can raise the price of collecting, rendering trading and more importantly experimentation more costly. Consequently, this creates a detrimental lack of liquidity and market participation across the sector. And who suffers most? The next generation of artists, the ones who require that first bit of thrust to surge to the other side.
The Myth Of Passive Income Is Dangerous
The allure of passive income is strong. After all, we’re all in pursuit of the American dream of making money while we snooze. We’d be the first to say that in the NFT world having royalties be your sole source of income is a disaster waiting to happen. It's like building your house on sand. The market is fickle, the trends change overnight, and what’s in vogue today might be out of style by next week.
Butcher's perspective aligns with Naval Ravikant's philosophy of leveraging the internet through code, content, and capital. Royalties require a much greater burden on the “capital” side, requiring an upfront investment with the hope of a long-term income flow from developed assets. A more resilient approach focuses on producing compelling content. Finally, it focuses on constructing systems, or algorithms/code, that create value rather than extracting value through parasitic secondary market activity.
He understands this deeply. He didn’t start out with Visualize Value because of some family fortune or passive income—it’s built from the ground up. And he knows that the future lies in creating value, not in extracting it.
While UBI seeks to eliminate the anxiety of survival and provide a safety net, critics contend that it ultimately disincentivizes work and fosters dependency. Overreliance on NFT royalties encourages cronyism. That doesn’t just hurt artists’ ambition to push boundaries and keep creating new work.
Data Shows Royalties Favor The Few
Butcher rightfully identifies the power law distribution at work here. In fact, the overwhelming majority of NFT artists make next to nothing off of their royalties. The lion’s share continues to go to a small fraction of well-known creators. The artists most in need of such royalties are often the ones who get shortchanged the most.
Let's be brutally honest: the NFT space, like the traditional art world, is rife with inequality. The potential to democratize access to art ownership and empower a diverse array of creators is quickly dimmed by the chilly truth of a winner-take-all marketplace.
Numbers from secondary marketplaces like CryptoSlam and onchain intelligence tools like Nansen confirm this. Notice how royalty payouts are distributed across the various collections. And finally, you’ll notice a striking difference in quality between the top 25 projects and everyone else. This isn’t an argument against success, though it’s sometimes presented as such. This is an argument for a more equitable and sustainable system.
Royalties are like the blockchain's version of trickle-down economics. The idea is that if you give enough money to the top, it will eventually trickle down to everyone else. However, as is often the case in practice, it seldom plays out that way.
So, what's the alternative? Butcher argues for affordable pricing, for an emphasis on producing new work, and for establishing one-on-one connections with collectors. It’s not about limiting your creativity, it’s about treating your art like a business, not a lottery ticket. It’s not just about making a quick buck on the next big fad — it’s about forging new and sustainable career pathways.
In the grand scheme of things, Jack Butcher is not out to tank the NFT ecosystem. And he’s working to do it in a stronger, more resilient, and more equitable way. After all, he’s creative since he’s pushing us to question our assumptions about value, ownership, and what the future holds for art that lives on digitally. And that’s a discussion we sorely need to be having. We hope that, by daring to challenge the status quo, we can create a more equitable future for all creators and collectors.
