Further, Jack Butcher, NFT influencer extraordinaire and the creator of the hit NFT project Visualize Value, has joined the fray by encouraging debate with his take on NFT royalties. He says that getting paid based on royalties is equivalent to “getting paid on churn.” Here’s why this system isn’t better for creators in the long run. This article explores Butcher’s combative position. It looks at other approaches NFT creators should consider taking to drive sustainable income and create enduring value, illustrated with lessons from his work on Visualize Value, Checks and Opepen.

Butcher contends that these NFT royalties, typically 5-10% of the sale price, help incentivize the ongoing cycles of buying and reselling NFTs. This incentive has sparked a robust market for these digital assets. Smart contracts with programmable royalty structures generate passive income for creators as their NFTs change hands. It rightly raises alarm over the sustainability of this model in the long run. In this sense, “churn” refers to the rapid sales cycle of NFTs. All creators, Butcher believes, should focus less on maximizing immediate value and more on creating enduring value. The worldwide NFT market is projected to surge from $3.0 billion in 2022 to $13.6 billion by 2027—an astonishing compound annual growth rate (CAGR) of 35.0%. By 2030, it might be a mind-blowing $232 billion! Even with this expansion, the growing dependence on royalties as the principal income source remains contentious.

That’s one of the biggest problems with NFT royalties in general: inconsistent enforcement. Second, NFT marketplaces need to decide to enforce royalties. Without this added layer of enforcement, creators would be poised to lose a large part of their income from resales. NFT projects make things worse by encouraging “royalty-free” trading to lure in buyers. This trend might trigger a race to the bottom, forcing creators to forfeit their own revenue stream just to keep up with competition. Adding to the farce are the newer “zero-fee” platforms. These platforms work on a professional “zero-royalty” model, which is unsustainable for creators who depend on consistent income over time. The inconsistency in royalty payments has even led some NFT artists, like Tyler Hobbs, to blacklist NFT marketplaces that evade royalties, highlighting the challenges in ensuring consistent royalty payments. Most creators set royalties between 2.5% and 10%, depending on the platform and their risk tolerance. This decision impacts their creative growth due to uncertain income.

Alternative Strategies for Sustainable Income

Therefore, if NFT royalties aren’t the most sustainable long-term model, what should we be doing instead? Jack Butcher's own experiences offer valuable insights into how creators can build lasting value and generate income in the NFT space.

Building a Brand and Community

Jack Butcher’s project, Visualize Value, is a perfect example of what a powerful brand and community can do. This highly successful merch business pulls in over $1 million a year and has built an audience of over half a million people. By doubling down on delivering the best content and most innovative products he can, Butcher has built a fierce tribe that becomes his best defenders. This creator-friendly approach gives creators new ways to earn, helping them diversify their income streams and therefore reduce their reliance on NFT royalties. It inspires them to build things off of what they discover, driving further investigation in a virtuous cycle.

Exploring Tokenomics and Utility

Outside of royalties, NFT creators need to be thinking about new and innovative ways to develop a sustainable income stream that adds value to NFT creators and holders. These strategies include:

  • Tokenomics: Govern how tokens are issued, circulated, and used.
  • Staking and Holding: Offer governance rights and bonus rewards to holders, incentivizing them to hold onto their assets.
  • Affiliate Income: Implement a referral engine that allows users to earn income by referring others to the platform.
  • Ad Engagement: Reward users with tokens for engaging with ads.
  • Marketplace and Services: Offer a range of services, such as transportation and music DApps, learning and certification modules, and allow users to spend tokens on these services.

Focusing on Principles and Value Creation

Butcher approaches all of his projects with a “principles first” approach. He is a strong advocate for knowing the foundational building blocks of knowledge necessary to practice effectively. He developed Checks, one of the most interesting series of checks/1/1s in VV universe. His emphasis on social themes and shifts in the digital art paradigm led us to create this open edition. Even in the face of this bear market, the success of Checks really captured this big web3-native movement. By focusing on deep principles and making great content, Butcher has developed a committed audience that funds most of his work.

The Future of NFTs: Utility and Value

Locally, the future of NFTs is bright. Utility and value-driven projects, creative collaborations not yet imagined, and a strong demand for real world applications could combine to create a market resurgence in 2024 so stay tuned. This change reflects the fundamental focus of this administration on utility and value creation. NFT project creators need to focus on projects that deliver tangible value to NFT holders rather than relying solely on the speculative side of NFTs. With rising utility and value of NFTs, we’re hoping to see the market make a comeback in 2024. By focusing on these aspects, creators can build lasting value and generate sustainable income in the NFT space, moving beyond the "getting paid on churn" model that Jack Butcher critiques.