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NFT royalties, once the reigning recurring fee to benefit creators, have been sent to the gallows. 

This year marked a race to the bottom among marketplaces to remove royalties and cut NFT trading costs to as little as possible. Meanwhile, popular NFT creators have taken their own stances on the issue, vowing to forgo them completely or use smart contract coding to block the marketplaces that evade them. 

Here’s a chronological breakdown of every major event pertaining to NFT royalties this year — and what it means going forward.  

What happened 

A royalty is a fee that’s paid to the creator every time their work has been sold. They’re almost impossible to enforce on-chain using an Ethereum token standard because they can easily be bypassed through NFT wrapping, The Block previously reported.  

For creators to get their royalty, marketplaces must choose to implement that payment. But 2022 saw a rapid decline in marketplaces enforcing royalties.  

One of the first popular NFT marketplaces to demote NFT royalties was X2Y2, a token-based platform which rewards users for staking.  

X2Y2 experimented with 0% royalties during its beta launch on Feb. 4, 2022.

X2Y2 accrued meager transaction volumes compared to other marketplaces the first few months after its launch. In February and March, the marketplace earned $11.1 million and $9.46 million respectively, compared to $3.59 billion and $2.49 billion for the same months, according to The Block’s Data Dashboard.  

Perhaps due to X2Y2’s low initial trading volume, its royalty fee model did not cause a stir until five months later.   

This was around the time the team behind the decentralized NFT marketplace Sudoswap launched a new platform called SudoAMM on July 8, nixing all  creator royalties to keep fees down to 0.5% per transaction. SudoAMM earned saw $50 million in total trading volume two months after the platform launched. 

Sudoswap cut royalties upon introducing its new NFT trading platform SudoAMM on Jul. 8, 2022.

Sudoswap’s actions sparked a major debate on the value of NFT royalties, swelling into the main topic on crypto Twitter in August of this year. Some users claimed that removing artist royalties exploited artists who struggle to find ways to find recurring revenue from their creativity. Others emphasized that market conditions will favor platforms that keep fees low, and projects with thousands of NFTs don’t need royalties as much as single creations from artists do.  

Artists even took matters into their own hands to defend their royalties.  

Fidenza artist Tyler Hobbs and the Seattle-based digital creator Dandelion Wist created the QQL Mint Pass, an NFT which uses its smart contract to block trades with marketplaces that evaded royalties, particularly X2Y2. X2Y2 was quick to hit back at the QQL creators, stating that “When someone else can decide where you can transfer your NFT, you are not the real owners anymore.” 

Arguments to remove royalties had swayed other NFT creators, though — even those who had defended the recurring fee.  On Aug. 13, 2022, the creator of Solana’s popular NFT project DeGods named Frank said that NFT royalties are “simply the best alignment of incentives between founders and holders (right now)” and “if you want to remove royalties, that’s fine. Just don’t be mad when mints become more expensive and more projects rug.”  

Nearly two months later, however, DeGods moved to a 0% royalty model.  

What came next were more marketplaces moving to either side of the royalty spectrum. Two to downgrade their royalties were Ethereum-based LooksRare and Solana-based Magic Eden. Magic Eden made royalties optional on Oct. 15, and on Oct. 27, LooksRare removed royalties and opted to allocate 0.5% of trading fees to creators. Mooar, however, a new marketplace for the Solana-based Stepn move-to-earn ecosystem, made royalties compulsory on Nov. 1.  

OpenSea also championed NFT royalties through a tool for new collections – one that restricts NFT sales only to marketplaces that enforce royalties. The NFT enforcement apparatus was rolled out on Nov. 8 and is the first of numerous planned tools to benefit creators. 

What’s lost when royalties get cut 

Royalties for Ethereum-based NFT projects brought in a total of $1.8 billion in funds, according to the research arm of the financial services firm Galaxy Digital. The main beneficiaries from NFT royalties so far have been the most popular projects, such as Bored Ape Yacht Club bringing in $147.6 million and Art Blocks accruing $82 million.  

Bored Ape Yacht Club earned the most royalties out of any NFT project, according to data compiled by Galaxy Digital’s research arm.

 Major web2 corporations earned millions of dollars from NFT royalties as well. Sportswear firms Nike and Adidas drew $91 million and $4.7 million respectively from creator fees.  

Overall, 482 NFT projects seized 80% of all NFT royalty sales, lending credence to arguments that removing royalties only affects the larger, more corporate NFT projects.   

TL;DR Timeline 

• February 4. X2Y2 is one of the first known marketplaces to experiment with downgrading NFT royalty payments to artists. This action goes largely unnoticed.   

• July 8. Sudoswap’s newly launched NFT trading platform SudoAMM nixes royalties to cut transaction fees down to 0.5% per trade. This action sparks a growing debate in the NFT community. 
   
• August 15. The NFT community debates whether marketplaces should enforce royalties. Royalty supporters say that artists should get properly compensated for their work while those against royalties say that artists  

• September 28. QQL Mint Pass, an NFT project co-created by Fidenza’s Tyler Hobbs, blocks X2Y2’s wallet in the smart contract coding, effectively blacklisting the royalty-evading marketplace. Dandelion Wist, a Seattle-based digital artist and co-creator of QQL, explained that they blocked X2Y2 as a way to defend royalties. 

• October 10. After its founder claimed support for NFT royalties in the past, Solana’s popular NFT project DeGods moves to a 0% royalty model.  

• October 15. Solana’s biggest NFT marketplace Magic Eden switches to an optional royalty payment model.   

• October 27. Ethereum marketplace LooksRare removes royalties, instead opts to allocate 0.5% of trading fees to creators.  

• November 1. Stepn creator Find Satoshi Labs launches a new NFT marketplace with compulsory royalties called Mooar.   

• November 6. OpenSea plans to add a tool for new collections that restricts NFT sales only to marketplaces that enforce royalties.   

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Sam Bankman-Fried built a “backdoor” to his FTX exchange in an effort to change financial records and move funds without alerting others, according to a report by Reuters citing two people with knowledge of the matter. 

He used bespoke software that was designed so that even external auditors would not be notified of changes to FTX books, the report said. It meant that no red flags were raised when $10 billion of funds were moved to FTX’s sister trading arm Alameda. 

Bankman-Fried, who has since resigned as CEO, denied such a “backdoor” existed when asked by Reuters. He also said he “disagreed with the characterization” of the $10 billion transfer. 

A serious liquidity crisis brought on by revelations about its balance sheet pushed FTX toward insolvency. Binance, which signed a letter of intent that could have led to an acquisition, ultimately passed on the deal, citing due diligence concerns as well as reports of investigations by American regulators.

On Thursday, following a spectacular week of twists and turns, FTX and Alameda filed for Chapter 11 bankruptcy protection, amid a shortfall of as much as $8 billion.

Filings showed that Alameda has more than 100,000 creditors.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Funds were seemingly being channelled out of Alameda wallets, with millions in tokens being redirected to one address this morning. 

Transactions to the wallet included 9.8 million wrapped XRP (around $3.6 million), about 6.8 million in the Render network token (around $3.4 million), about 3.4 million in xSUSHI (about $5.3 million) and 100 million in BitDAO’s token (around $30 million), according to logs on block explorer Etherscan, as of 5:45 a.m. ET. Data also showed 11 million in the stablecoin Tether moved from crypto exchange Kucoin. These total just under $55 million.

On Thursday, following a spectacular week of twists and turns, FTX’s CEO Sam Bankman-Fried said that Alameda — a sister trading company of the exchange — would wind down. One day later, FTX and Alameda filed for Chapter 11 bankruptcy protection, as it was revealed that it faced as much as an $8 billion shortfall.

The moves from Alameda wallets follow funds flowing out of FTX itself. On Friday, more than $400 million was transferred to a single wallet address. The wallet had acquired tens of millions of dollars worth of several types of tokens by draining FTX accounts, and began selling tokens that it received from FTX.

FTX’s general counsel Ryne Miller said the exchange was “investigating abnormalities with wallet movements related to consolidation of FTX balances across exchanges — unclear facts as other movements not clear. Will share more info as soon as we have it. @FTX_Official.” 

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Crypto hedge fund Galois capital has told its investors that almost half of its funds are stuck on the failed crypto exchange FTX, according to a report in the Financial Times. 

Kevin Zhou, co-founder of Galois, wrote to investors in recent days, saying that it had been able to pull some money from the exchange, but that about half of the funds were still stuck, the FT report said.

“We will work tirelessly to maximise our chances of recovering stuck capital by any means,” wrote Zhou, adding that if the exchange did file for bankruptcy protection, the firm would become a creditor. FTX filed for Chapter 11 bankruptcy protection on Friday.

Galois, one of the biggest crypto quant hedge funds, had tweeted last night that “significant funds” were stuck on the exchange and it had not used “any Bahamian method to move funds out.”

“I’m sorry guys. Seriously, I didn’t see this coming. Didn’t see the 3AC situation either. Lessons learned. Will try to do better,” the company said.

As of this past summer, Galois was managing more than $200 million worth of assets, the FT report said.

The Block contacted Galois for comment but did not immediately hear back. 

Read more: FTX collapse timeline: Six days that rocked the crypto industry

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Crypto exchange FTX claims it has been hacked for all its funds. 

Late Friday night, a message sent in its Telegram stated “FTX has been hacked. All funds seem to be gone.”

Additionally, the FTX mobile app and website are compromised and could download malware and Trojan viruses onto peoples’ devices.

“FTX apps are malware. Delete them,” FTX said on its Telegram account.  “Don’t go on FTX site it might download Trojans.” 

This follows news that more than $400 million was drained from FTX accounts to a single wallet address.

FTX’s collapse roiled the crypto world this week, culminating in the firm filing for Chapter 11 bankruptcy protection and with the ouster of CEO Sam Bankman-Fried. 

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Crypto exchange FTX is seeing millions of dollars flow out of its exchange with early reports of some user account balances being completely empty.

So far, over $400 million has been transferred to a single wallet address. The wallet has acquired tens of millions of dollars worth of several types of tokens by draining FTX accounts, and began selling tokens that it received from FTX.

FTX’s general counsel Ryne Miller claimed the exchange is “investigating abnormalities with wallet movements related to consolidation of FTX balances across exchanges – unclear facts as other movements not clear. Will share more info as soon as we have it. @FTX_Official.” 

Separately, Reuters is reporting that at least $1 billion in customer funds at the exchange disappeared last weekend, citing two former senior employees briefed on the company’s finances. 

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Ethereum founder Vitalik Buterin made his first direct comments on FTX’s spectacular collapse late Friday, accusing former FTX CEO Sam Bankman-Fried of “virtue signaling.”

Unlike past collapses, FTX — and Bankman-Fried — courted, and caught the ear of, lawmakers and regulators in an attempt to burnish crypto’s image. But the events of the past week suggest the exchange was as unstable, and potentially fraudulent, as other high-profile failed crypto projects.

“MtGox ‘looked’ sketchy and never tried too hard to whitewash itself. Luna too,” Buterin tweeted. Mt Gox, a Tokyo-based exchange, failed in 2014, after hundreds of thousands of bitcoin were stolen from its wallet. Luna’s collapse earlier this year brought down the Terra ecosystem. 

“FTX was the opposite and did full-on compliance virtue signaling (not the same thing as compliance),” Buterin tweeted. “The second kind of fraud cuts deeper than the first.”

Buterin’s comments come at the end of a tumultuous week for crypto, which culminated with FTX filing for Chapter 11 bankruptcy protection and the ouster of Bankman-Fried as its chief executive. 

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Bitcoin stocks were mostly up on Friday, Nov. 11. 

The price of bitcoin was around $16,616 when markets closed. 

(BTCUSD chart by Trading View)

Stocks with the biggest gains included Core Scientific (44.28%), Greenidge Generation (28.45%), TeraWulf (26.37%) and Iris Energy (24.27%).

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

The past week may well be the most tumultuous the crypto world has seen yet. In less than seven days, FTX went from industry darling to bankruptcy protection, with its crashing native token FTT spurring a liquidity crisis. 

Here’s a timeline of how the dramatic events unfolded. Time stamps are based on when The Block published articles and are in Eastern Standard Time. 

Sunday, Nov. 6: Binance plans to sell its FTT position

Monday, Nov. 7: FTX is “fine”

Weekend tensions surrounding FTX seemed like they were simmering down as the week kicked off. Monday started off relatively quietly.

8:05 a.m. – Sam Bankman-Fried says FTX is “fine”

The day started off with FTX CEO Sam Bankman-Fried (SBF) insisting that the exchange is “fine” following Binance’s announcement. “A competitor is trying to go after us with false rumors,” Bankman-Fried tweeted. “FTX is fine. Assets are fine. FTX has enough to cover all client holdings. We don’t invest client assets (even in treasuries). We have been processing all withdrawals, and will continue to be.”

3:04 p.m. – FTT price stabilizes 

The price of the native FTX token, FTT, appeared to be calming down after intense volatility over the weekend. 

10:41 p.m. – FTT token drops sharply 

FTX’s native token fell sharply from about $22 to below $18 Monday evening. 

Tuesday, Nov. 8: Binance plans to acquire FTX 

Tuesday marked a huge milestone for FTX, with Binance making the breathtaking announcement that it planned to acquire the crypto exchange. The news moved markets, prompted companies to start declaring whether they had exposure to FTX and started turning the heads of regulators.

8:52 a.m. – FTX apparently pauses withdrawals 

Signs of an FTX liquidity crunch started emerging early, when on-chain data pointed to FTX apparently pausing its withdrawal requests. When The Block reported the news, withdrawals had been stopped for more than two hours. 

11:12 a.m. – FTX strikes an acquisition deal with Binance for its non-U.S. business

In a shocking revelation, Bankman-Fried said that FTX had agreed to an acquisition deal with Binance for FTX’s non-U.S. business. 

“Our teams are working on clearing out the withdrawal backlog as is,” he tweeted. “This will clear out liquidity crunches; all assets will be covered 1:1. This is one of the main reasons we’ve asked Binance to come in. It may take a bit to settle etc. — we apologize for that.” 

Sources said that FTX had been looking for capital before revealing the deal, seeking a $10 billion-$20 billion valuation.

FTX’s native FTT token jumped 38% minutes after the Binance announcement. 

1.12 p.m. – SBF tells employees that withdrawals are effectively paused

Bankman-Fried told employees via Telegram that the exchange had effectively paused withdrawals, Reuters reported.

8:22 p.m. – SBF apologizes to investors 

Bankman-Fried apologized to FTX investors for a lack of communication about the proposed deal with Binance, saying that it was still working on a non-binding agreement for Binance to buy the troubled company. 

Wednesday, Nov. 9: The deal is off

Binance walked away from the deal to acquire FTX, marking a major turning point in the company’s journey towards bankruptcy. 

11:06 a.m. – Crypto markets respond to uncertainty over deal 

Crypto markets responded with volatility as the world waited to see whether Binance would go through with the FTX purchase. Bitcoin dipped below $17,000, and several other tokens associated with the FTX CEO dropped sharply. Meanwhile, people were taking large quantities of crypto off of exchanges.

11:11 a.m. – Doubts mount about whether the deal will go through

Blockchain-based predictions market Polymarket raised doubts about whether the Binance takeover of FTX would happen. 

12:12 p.m. – Investigators look into FTX’s handling of customer funds and relationship with FTX.US

Bloomberg reported late morning Wednesday that the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) had been investigating FTX. Meanwhile, Semafor reported that most of FTX’s compliance and legal teams left the exchange the previous day. 

3:57 p.m. – Binance backs out of the deal 

In a major twist, Binance announced that it would not buy FTX after taking a closer look at the exchange’s balance sheet. 

“Our hope was to be able to support FTX’s customers to provide liquidity, but the issues are beyond our control or ability to help,” Binance said in a statement.

4:17 p.m. – Bitcoin losses continue after news of failed deal

Bitcoin continued to lose value after news that the Binance-FTX tie-up wouldn’t happen, hitting a low of $16,027. 

5:33 p.m. – FTX website becomes unstable

FTX’s international website started going down multiple times, showing an error message to users trying to log on. 

5:43 p.m. – SBF explains bankruptcy scenario to investors

With the Binance deal out of the picture, the likelihood that FTX would be heading for bankruptcy became clearer. Bankman-Fried told investors that the company would need to file for bankruptcy if it did not find more cash, Bloomberg reported. The CEO told investors that FTX faced an up to $8 billion shortfall.

9:10 p.m. – The U.S. DOJ and SEC are probing FTX 

The U.S. Department of Justice (DOJ) and SEC are probing FTX US, the Wall Street Journal reported.

Thursday, Nov. 10: FTX starts to quickly unravel

9:21 a.m. – SBF says he f*cked up, confirms Alameda trading winding down

Thursday started off with Bankman-Fried apologizing on Twitter. “I’m sorry. That’s the biggest thing,” he said in a tweet. “I f*cked up, and should have done better.” 

The CEO also added that the company was doing everything it could to raise liquidity, and that the international business had a total market value of assets and collateral higher than client deposits.

Bankman-Fried added that its sister trading firm Alameda Research would be winding down trading. 

9:42 a.m. – Tether freezes 46.3 million of FTX USDT after law enforcement request

Tether said it froze $46 million worth of USDT owed by FTX, per law enforcement request.

11:11 a.m. – FTX appears to have resumed withdrawals 

On-chain data showed that FTX appeared to have been processing withdrawals again, after they were paused for more than 48 hours. More than $8 million was withdrawn in the first hour, but experts raised questions about where the funds were headed. Zane Tackett, FTX’s former head of institutional sales, later said the company was making withdrawals of funds in the Bahamas to comply with regulators.

Tron and FTX also came to an agreement about withdrawals for several tokens.

11:15 a.m. – FTX reportedly lent Alameda billions in customer assets

The Wall Street Journal revealed that FTX lent about $10 billion in customer assets to Alameda Research, citing conversations with investors.

1:30 p.m. – FTX US says it could halt trading

One of the first signs that FTX US could also be in trouble was when it said it could halt trading in coming days. The statement came despite comments from Bankman-Fried earlier in the day stressing the U.S. business was separate. 

“FTX US, the U.S. based exchange that accepts Americans, was not financially impacted by this sh*tshow,” said one of the tweets. 

1:46 p.m. – FTX US leaves D.C. crypto advocacy group

FTX US left the industry trade group Crypto Council for Innovation. 

6:30 p.m. – Bahamas securities regulator freezes FTX assets

The Bahamas’ securities regulator froze FTX Digital Markets’ assets, a press release circulating on social media showed.

6:45 – More details emerge about FTX equity, assets

News reports continued to emerge with new information about the FTX fallout. A source told The Block that Bankman-Fried sold company equity to employees at a 50% discount in the spring, and Bloomberg reported that FTX US employees were trying to sell various assets.

Friday, Nov. 11: FTX files for bankruptcy

The FTX saga came to a climax on Friday, when FTX and more than 100 corporate entities including those related to FTX US filed for bankruptcy protection. 

9:23 a.m. – FTX files for bankruptcy protection, Bankman-Fried resigns

FTX filed for Chapter 11 bankruptcy protection in Delaware, and said it has more than 100,000 creditors. Bankman-Fried resigned. In his place now is John J. Ray III, the attorney who was in charge of the Enron liquidation. 

10:54 a.m. – SBF apologizes again 

Bankman-Fried apologized yet again for the situation, saying he was “shocked” by how the events played out during the week.

“I’m piecing together all of the details, but I was shocked to see things unravel the way they did earlier this week,” Bankman-Fried wrote in a Twitter thread. “I will, soon, write up a more complete post on the play by play, but I want to make sure that I get it right when I do.”

The Bloomberg Billionaires index showed that the former crypto CEO lost his entire fortune this week — about $16 billion.

With additional reporting from The Block editorial team.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Solana-based gaming metaverse Star Atlas saw its cash runway cut in half after the collapse of crypto exchange FTX, its CEO said on Twitter.

Star Atlas is the latest crypto company to be affected by the shocking collapse of the Bahamas-based crypto behemoth. 

ATMTA, the Star Atlas development studio, had “material cash exposure” on deposit at FTX, according to CEO Michael Wagner. Despite the turmoil, the company still has a “strong balance sheet,” he said.

“While previously we had multiple years of runway given current operations ahead of us, that has presently been reduced by approximately one-half,” Wagner said. He hosted a Discord town hall on Friday evening to discuss the news. 

Wagner apologized to Star Atlas employees and users, saying his “trust has been betrayed” by FTX. The company did not say how much cash it lost in the FTX collapse. 

“I believed this liquid cash position to be custodied with a reliable and trustworthy institution. I put my confidence and trust into an individual I believed to be a stalwart of the industry,” Wagner said. “Clearly that trust has been betrayed. Poor timing, and a failure to have sufficient backup measures in place to respond expeditiously to situations such as this resulted in a compromised position. That is on me, and for that, I am sorry.”

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.