What Is ERC721-C?
Ethereum Request for Comment 721-C (ERC721-C) is an augmentation of the ERC721 non-fungible token (NFT) standard on Ethereum. It aims to give NFT creators increased control and customizability over their NFT collections and how royalties are treated for them.
ERC721-C is opt-in. If a new or existing NFT collection decides to implement it, individual NFT holders can decide whether or not to adopt it. Details on how the opt-in process works can be found here.
How To Buy ERC721-C Tokens?
Limit Break, the organization spearheading ERC721-C development, has whitelisted the addresses of several NFT marketplaces (e.g., OpenSea, X2Y2, Rarible), which could theoretically support ERC721-C tokens.
Other marketplaces whose addresses have also been whitelisted can be found here. The curated whitelist is maintained solely by Limit Break and is controlled by a company multi-sig wallet.
According to Limit Break, NFT marketplaces will need to explicitly integrate the new token standard in order for the new royalty features to go live. So, while ERC721-C tokens are currently supported on certain NFT marketplaces, it will likely be some time before new royalty capabilities are added.
The Limit Break team has stated that if top marketplaces do not support the new token standard, it will launch its own NFT marketplace that does.
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What Blockchains Support ERC721-C Tokens?
Limit Break’s official “Creator Token Transfer” library, which houses all documentation, is currently live on Ethereum and Polygon. It is also supported on Ethereum’s Sepolia Testnet and Polygon’s Mumbai Testnet.
What Are NFT Royalties?
NFT Royalties are fees paid by NFT purchases to creators when subsequent trades (i.e., all trades of NFTs after they are minted) of NFTs occur. In other words, royalties allow NFT creators to generate recurring revenue following their launch of an NFT collection. The more valuable an NFT creator’s collection becomes and the more the collection is traded, the more royalty revenue the creator generates.
In their current state under ERC721, royalties are not fully enforceable on-chain for Ethereum NFTs. Accordingly, NFT marketplaces such as OpenSea and Blur wield significant influence over enforcing royalty payments.
An Example
For example, while NFT creators canrequest different levels of royalties, Blur currently onlyenforcesa 0.5% minimum creator royalty on its platform. These low royalties encourage trading activity on the platform by driving down costs for users.
However, these low royalties are detrimental to NFT creators as they reduce their earnings and could be a net-negative for the NFT ecosystem as they reduce incentives for creators to remain engaged in their projects over the long term.
Blur is also using its control over royalties on its platform to compete with rival NFT marketplace OpenSea. So long as NFT creators on Blur block the trading of their NFT collections on OpenSea, they will receive any royalty fee they request - not just the 0.5% minimum.
What Are Programmable Royalties?
With ERC721-C, royalty logic can be directly incorporated into Ethereum smart contract code. This gives NFT creators direct control over royalty settings and could reduce the influence that marketplaces currently wield over them.
Examples of how NFT creators can experiment with the programmability of ERC721-C include:
- Shared Royalties:Rather than NFT creators earning all NFT royalties, they could be split between NFT creators and holders to reward early adopters.
- Minter-Only Royalties:NFT minters could be the sole earners of royalties - not creators.
- Contingent Royalties: Different criteria could be applied to determine whether or not royalties would be paid out on certain NFT trades. For example, one could configure an ERC721-C contract such that royalties would only be paid out on trades where the secondary sale price is higher than the original mint price.
- Transferrable Royalties:NFT creators could issue their holders a separate NFT, which grants holders the rights to royalty income. For example, when one mints “NFT X,” they would also be issued “NFT Y,” which is entitled to all of the royalties generated by “NFT X.”
Frequently Asked Questions
With ERC721 NFTs, creator royalties exist as a “social contract” rather than being enforceable on-chain. With ERC721-C, creators will have increased control over their NFT design and can make royalties enforceable on-chain.
Limit Break, a free-to-play gaming development studio, introduced the concept of Creator Tokens in January 2021. Version 1.1 of the ERC721-C standard, which operationalized many of the concepts of Creator Tokens, went live in May 2023.
