What is a programmable NFT (pNFT)?
What is a programmable NFT (pNFT)?
What is a royalty fee?
NFT royalties are payments made to the creator each time their work is sold on the secondary market. Royalty rates can vary for each NFT collection, but a fee ranging from 5-10% of the sale price is typically considered standard. For larger NFT collections, lower royalty fees around 2.5% are also common.
For example, let's say an artist creates an NFT collection on OpenSea, with a base price of 20 ETH, and OpenSea's platform requires a 10% royalty fee. Now, the artist wants to sell one NFT from their collection on the OpenSea marketplace at the base price. In addition to the transaction fees, the artist would also need to pay a 10% royalty fee, which amounts to 2 ETH, calculated based on the base price.
What are programmable NFTs (pNFTs)?
The issue of royalties has garnered widespread attention in the Solana NFT community and has become a highly debated topic. While several groups have proposed various solutions to ensure the enforcement of royalty fees, there is currently no one method that can genuinely solve this issue.
Metaplex has recently introduced a new standard for programmable NFTs, allowing creators to control how their NFTs are used by implementing whitelist and blacklist mechanisms for certain users or wallets. A whitelist consists of approved users who are permitted to buy, sell, or transfer pNFTs. On the other hand, a blacklist comprises users who are prohibited from performing any actions involving pNFTs.
The introduction of this new standard ensures that those who wish to enforce royalty payments for their collections can restrict NFT owners from engaging in transactions on royalty-free markets. This, in turn, allows creators to receive a predetermined share of revenue from future NFT sales.
This new functionality is expected to increase the control artists and creators have over their creations in the NFT market and ensure they can continue to benefit from sales of their works in the future. It represents an interesting example of ongoing evolution and improvement in the NFT space to cater to the needs of different creators and collectors.
How do programmable NFTs work?
The essence of programmable NFTs lies in the ability to specify custom rules that must be met for each operation on an NFT. In simple terms, selling an NFT is not much different from transferring it from one wallet to another. Technically, when users list an NFT on the marketplace, they are transferring it to the marketplace's wallet.
With the new pNFT standard, creators can only allow NFTs to be transferred to wallets or platforms that support royalty enforcement. If the criteria are not met, the transfer cannot proceed. This means that for the system to work properly, these NFT marketplaces must also support programmable NFTs.
Here are some platforms that are fully compatible with pNFTs:
- Magic Eden
- Solflare Wallet
- xNFT Backpack
- Rumble Kong League
Beyond automated royalty enforcement, programmable NFTs also have the potential to increase the value of creative content in different ways. For example, pNFTs can be programmed to unlock exclusive content or experiences for their holders, creating a sense of exclusivity and scarcity, which can enhance the NFT's value in the market.
Benefits of Programmable NFTs:
Programmable NFTs offer users numerous advantages:
- Flexibility: Programmable NFTs can be programmed to have built-in integrations, such as the ability to execute automatic trades based on certain conditions, generate Chia yields, or access a specific amount of content or technical expertise. These additional features can create new use cases and business models for NFTs, making them more valuable to users.
- Transparency: The operations of programmable NFTs are identified by code that is publicly visible on the blockchain, enhancing transparency and trust compared to traditional NFTs.
- Security: All programmable NFTs are stored on decentralized blockchain networks, making them less susceptible to fraud or hacking compared to NFTs stored on centralized servers.
- Automation: Programmable NFTs can automate certain operations, such as royalty distribution, saving time and reducing the risk of errors.
programmable NFTs are an exciting development in the NFT space, as they address royalty enforcement challenges and provide new levels of interaction and engagement for collectors. By creating customizable and programmable NFTs, this innovation opens up new opportunities for artists and collectors, allowing for greater control and unique experiences within the NFT ecosystem.
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