How On-Chain NFT Royalties Are Enforced - A Practical Guide

When a creator mints a digital collectible, the goal is to keep earning a slice every time it flips hands. NFT royalties are a set of rules baked into the token’s smart contract that tell the blockchain how much of each secondary‑sale price should be sent back to the creator. The magic happens on‑chain: once the royalty percentage is stored in the contract, every compliant marketplace or wallet can execute the payment automatically, without a middleman.

Key Takeaways

• EIP‑2981 is the de‑facto royalty standard for ERC‑721 and ERC‑1155 NFTs.
• Blocklists prevent non‑compliant contracts from transferring an NFT; allowlists restrict trading to approved platforms.
• Cross‑chain moves often strip royalty data unless a bridge or royalty‑aware chain is used.
• Emerging blockchains (Enjin, RARI‑Foundation testnet) embed royalty enforcement at the protocol layer.
• Creators must balance strict enforcement with composability - the more you lock down transfers, the less flexible the NFT becomes.

What On‑Chain NFT Royalties Actually Are

On‑chain royalties are just a piece of code that runs every time an NFT changes owner. The code reads two values from the contract: the royalty % (or a fixed amount) and the beneficiary address(es). Then it splits the sale price and sends the share directly to those addresses. Because the logic lives in the smart contract, it can’t be altered by a rogue marketplace - the blockchain itself guarantees the payout.

Why EIP‑2981 Became the Standard

EIP‑2981 is a simple interface that any ERC‑721 or ERC‑1155 contract can implement to expose royalty information. The interface defines a single function, royaltyInfo(uint256 tokenId, uint256 salePrice), that returns the address that should receive the royalty and the exact amount owed. Because the function is part of the ERC‑721/1155 spec, any marketplace that reads the interface can automatically deduct the royalty before completing the transfer.

Key attributes of EIP‑2981:

• Percentage‑based or fixed‑amount royalties.
• Multiple beneficiaries via custom logic (many contracts split the payout internally).
• Read‑only - the royalty data can’t be changed after mint unless the contract explicitly allows it.

How Blocklists and Allowlists Enforce Royalties

Even with EIP‑2981, a marketplace could simply ignore the function and let the sale go through. To stop that, developers add transfer‑gate checks inside the NFT contract.

Blocklist Approach

A blocklist works like a firewall. The NFT contract stores a list of addresses (usually other contracts) that are not allowed to call transferFrom or safeTransferFrom. If a buyer tries to trade on a non‑compliant platform, the transaction reverts.

Pros:

• Creators keep flexibility - they can add new bad actors to the list as they appear.
• Doesn’t require prior approval of every marketplace.

Cons:

• New rogue marketplaces appear all the time; keeping the list up‑to‑date is a full‑time job.
• Blocklists can be bypassed by proxy contracts or by using a “trade‑off‑chain” settlement.

Allowlist Approach

An allowlist is the opposite: the contract only accepts transfers from a whitelist of known, royalty‑honoring platforms. Anything else fails.

Pros:

• Guarantees that any successful trade respects royalties.
• Reduces monitoring overhead - you only add trusted platforms.

Cons:

• Limits composability; users cannot sell on emerging marketplaces without a contract upgrade.
• May deter collectors who prefer open‑source, permissionless trading.

Blocklist vs. Allowlists - At a Glance

Cross‑Chain Royalty Challenges

Moving an NFT from Ethereum to another chain (e.g., Polygon, Solana) usually involves a bridge that locks the original token and mints a wrapped version on the destination chain. If the bridge doesn’t understand EIP‑2981, the wrapped token loses its royalty metadata, meaning the new chain can’t enforce the original creator’s cut.

Solutions are emerging:

• Royalty‑aware bridges that copy the royaltyInfo payload to the wrapped token.
• Standardized royalty fields in cross‑chain token specs (e.g., ERC‑721A on Polygon).
• Native royalty support on newer blockchains, eliminating the need for wrappers.

Until interoperability matures, creators risk losing income when their art jumps across ecosystems.

Royalty‑Embedded Blockchains: A New Direction

Some projects have taken the enforcement problem to the protocol layer. Instead of relying on smart contracts to enforce royalties, they bake the rule into the blockchain itself.

Enjin launched a mainnet in June2023 that includes a native royalty field for every NFT mint. Similarly, the RARI Foundation released a testnet in early2023 and a full‑scale EVM‑compatible mainnet on 24January2024 where the node validates royalty payouts on every transfer.

Benefits of this approach:

• Zero‑trust enforcement - the chain itself rejects a transfer that skips the royalty.
• Universal applicability - any dApp built on the chain automatically respects royalties.
• Reduced monitoring - creators no longer need to manage blocklists or allowlists.

Drawbacks include lower composability with existing Ethereum‑based tooling and the need for users to adopt a new ecosystem.

Real‑World Market Dynamics

Marketplace behavior shows a split. OpenSea announced in 2023 that it would block royalty‑optional platforms like Blur, effectively forcing all sales on its UI to honor on‑chain royalties. Blur, on the other hand, lets sellers set royalty percentages to zero, attracting traders who want to maximize short‑term profit.

Nansen data from July2023 recorded a two‑year low in royalty collections on Ethereum, suggesting creators lost tens of millions of dollars during the optional‑royalty experiment. The trend highlights that enforcement mechanisms matter as much as the technical standard.

Practical Checklist for Creators

1. Implement EIP‑2981 in the NFT contract and set an appropriate royalty % (commonly 5‑10%).
2. Decide on a transfer‑gate strategy: blocklist if you value openness, allowlist if you need certainty.
3. Monitor major marketplaces regularly - tools like Royalty Watch can flag new contracts that bypass royalties.
4. If you plan cross‑chain sales, choose bridges that support royalty metadata or mint directly on a royalty‑aware chain.
5. Consider launching on a royalty‑embedded blockchain for maximum security, especially for high‑value series.

Future Outlook

Industry consensus points toward two complementary paths: improved cross‑chain standards (e.g., a future EIP‑xxxx that adds royalty fields to token bridges) and the rise of royalty‑native blockchains. Regulatory clarity could also push platforms to honor creator fees, as some jurisdictions begin treating royalty agreements as enforceable contracts.

For creators, the safest bet today is a mixed approach: use EIP‑2981, adopt an allowlist for core marketplaces, and keep an eye on emerging royalty‑embedded chains. The ecosystem is still evolving, but the tools to protect your income are becoming more robust.