What is ERC721-C and can it solve Web3’s royalty problems?

Creator royalties have become a major bone of contention in the NFT space. This shouldn’t be news to anyone who claims Web3 is their go-to place. But what should be surprising is that the debate over the need for royalties hasn’t made any real significant headway since its inception.

Certainly, most of the NFT space’s most prominent marketplaces have taken a stand on the matter. Yet innovations such as Manifold’s Royalty Registry have generally failed to ensure that creators receive their rights. However, that’s not to say there aren’t builders actively trying to remedy the situation. There certainly are, and the recently announced ERC721-C standard is undoubtedly proof of such efforts.

What is ERC721-C?

ERC721-C is a new type of token standard created to make on-chain royalties effectively enforceable. Unlike ERC-721 and ERC1155 – the most commonly created and traded type of NFTs – this new standard makes royalties programmable, allowing creators to block free exchanges once and for all to platform their works.

Created by blockchain gaming company Limit break, ERC721-C (and ERC1155-C) enables creators to set new rules for their on-chain royalties. In simple terms, this new standard means that artists and developers can create a kind of consent smart contract that dictates where and how royalties are transferred.

Essentially, this new type of customizable royalty contract allows makers to choose where their NFTs are sold and allows them to filter interactions from only the contracts and applications of their choice. Traders will no longer be able to bypass royalties by using zero-fee platforms because any collection created with ERC721-C can simply forego trading on such marketplaces.

How can ERC721-C be used?

The new arrival of Limit Break can also be applied to a variety of usage scenarios other than simple end-to-end royalty transactions. If noticed by strategist and writer Hunter Solar in his tweets below, users of this new standard could easily find dynamic ways to adjust their royalties for the benefit of themselves and their supporters.

ERC721-C could potentially even be used for community-building initiatives, as royalties from sales could be automatically split among members of a DAO or contest winners, for example. But instead of kickbacks happening forever, creators can allocate what percentages are handed out, when and how often.

In addition, ERC721-C is built to be fully backward compatible, which means it will function without problems with existing chain and market standards. About this specific functionality, the CEO of Limit Break, Gabriel Leydonexpressed his excitement during a Twitter space saying, “You can really block exchanges right now, and they can’t do anything about it.”

“The standard everyone is using now cannot defend royalties,” added Leydon. “This is the real deal. This is a true royalty chain solution. This is going to work, it’s going to work and in my opinion it’s going to change the internet.”

When does ERC721-C come into action?

An important consideration to make with ERC721-C and ERC1155-C (or other new standards like ERC-6551 or BRC-20, for that matter) is that they are not adopted overnight. While interest has steadily spread throughout the NFT space, the standard is new and relatively complex and could be further exacerbated as more features are added.

Likewise, the customization features brought in by ERC721-C will likely mean that marketplaces will need to update their platforms to accommodate them. But, of course, even this step can’t be reached until Web3 sees proof of the new standard’s viability in the form of a successful collection implementing the new standard.

All in all, however, those in favor of creator royalties should keep their focus on this new standard rather than the combativeness that is emerging between marketplaces. Because, as Leydon put it during his Twitter Space, “Ultimately it’s the creator that drives the volume, not the exchange.”