A short intro (with maths & numbers) for NFT creators on DeSo

If you’re a creator on DeSo, NFT royalties are definitely one of the coolest ways to get paid for your work: You put in the effort to create something amazing today and then, for the rest of your life, you get paid every time someone buys or sells that something. Every. Single. Time.

Awesome, isn’t it!

And if you want to max out on those earnings, all you have to do is make your royalties really high, right? 

Unfortunately, it’s not quite that simple. Let’s look at an example:

Say you buy an NFT for 100 DESO. Maybe the creator was a bit greedy and set the royalties to 50%. What this means is that of the 100 DESO you pay, only 50 go to the seller and the other 50 go directly to the artist. Sounds good so far - after all we want to support the creators, right? 

But here’s the catch:

If you now sell the NFT again for 100 DESO, the same thing happens - 50 go to you and 50 to the artist. So you’re down 50 DESO! Even though the price of the NFT stayed the same. 

So how could you get your money back? For that, the price of the NFT would have to double. Then you could sell it for 200 DESO, of which you’d get to keep 100 (with the other 100 going to the creator). In other words, you’re sure to lose money unless the NFT doubles in value.

Now that you know this, do you still want to buy it? Probably not.

And that’s why, as a creator, you shouldn’t set your royalties too high. If you do, no one will want to buy (or sell) your work! 

To get a better idea of this, let’s look at some more numbers. Again, let’s assume you buy an NFT for 100 DESO. For how much would you have to sell it to get your money back? We already saw the case of 50% royalties, but what if the royalties are bigger or smaller? For those cases, let’s take a look at the following table:

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Royalties             | Sell Price

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0% | 100 DESO

5% | 105 DESO

10% | 111 DESO

15% | 118 DESO

20% | 125 DESO

25% | 133 DESO

30% | 143 DESO

35% | 154 DESO

40% | 167 DESO

45% | 182 DESO

50% | 200 DESO

55% | 222 DESO

60% | 250 DESO

65% | 286 DESO

70% | 333 DESO

75% | 400 DESO

80% | 500 DESO

85% | 667 DESO

90% | 1000 DESO

95% | 2000 DESO

So if you thought that the price of our hypothetical 100 DESO NFT could go up by 20% to 120 DESO, you would probably be willing to accept royalties of 15%, but not 20% (not investment advice of course).

By the same token, you’d have to be super bullish on a project to justify paying high royalties. There are really only three situations where that might make sense:

1. You believe the project or artist will blow up like crazy
2. You believe you’re an amazing salesperson and/or have a large following so that you can sell the NFT for a lot more than you paid for it.
3. You don’t plan to sell it again.

As a creator, you therefore have to find a fine balance:

• If your royalties are too low, you won’t get very much money from them.
• If your royalties are too high, very few people will be bullish enough to buy your work and you won’t earn a lot in royalties either.

But what is ‘too high’ or ‘too low’?

Unfortunately, there’s no easy answer to this. It will depend on plenty of factors like how hyped your fans are about your project or what their appetite for risk is like. These things are very hard for you to measure, so what can we do? 

To get a rough idea of how high to set your royalties, we can take a look at the strategies that work for successful NFT artists here on DeSo:

• @Unicat & @Mythica royalties are 20% (10% each for coin holders and creator)
• @CloutRocks royalties are 17.5% (7.5% for coin holders and 10% for the creator)
• @Wormals & @Diegorobot royalties are 15% (5% for coin holders and 10% for the creator)
• @Desomon royalties are 15% (7.5% each for coin holders and creator)
• @BoopsBoutique, @HakAndAi, & @PaulyHart royalties are 15% (10% for coin holders and 5% for the creator)
• @CyberPunkApes royalties are 14% (7% each for @TheCollectionStorage and @octane - the test account of @ItsAditya)

These ten artists (or projects) all set their royalties in a very small interval - from 14% to 20%. If you're just starting out and have no idea what to do, this might be a good place to start experimenting.

Having said that though, there are bound to be great creators who set their royalties higher or lower than that. If you know of a way to make that work for creators, we'd love to hear about it in the comments!