About NFT Auctions

Royalty Exchange has launched a trial program to sell royalty assets as NFTs. Here's how it works...
June 3, 2021

Royalty Exchange has launched a trial program to sell royalty assets as NFTs. 

NFT is short for “non-fungible token.” NFTs are created (or “minted”) on the Ethereum blockchain as a digital collectible, and typically bought and sold using Ether (which is the native currency of Ethereum). That means each NFT is a unique token that acts as a digital certificate of ownership that cannot be replicated or altered. (You can read more about NFTs here.) 

Under this new program, Royalty Exchange will mint its own NFTs (named “RXT”) through which we will make available music catalogs or songs with their own unique token ID.

But unlike most NFT transactions, the NFTs sold on Royalty Exchange are not merely digital collectibles whose value is tied to speculation and scarcity. Royalty Exchange NFTs are tied to a stream of royalty income which the owner of the NFT will collect. 

Here’s how you can buy and sell NFTs on Royalty Exchange. 

Rightsholders who wish to sell royalties in the NFT format need only request that option when contacting us. Royalty Exchange will create the NFT and conduct the auction, just like any other transaction on the marketplace. 

The auction starting price, bidding, and closing funds transfer will all be in Ether, the native cryptocurrency of the Ethereum blockchain.  

Bidding increments will follow the same format used currently, which is roughly 5% of the asset’s last 12 months of earnings. The auction listing will show the current bid in both Ether, and the US Dollar value, updated every 10 seconds to account for the current exchange rate. 

At the close of the auction, buyers must submit the closing balance in Ether. Buyers will have two days to transfer Ether from their crypto account to the Royalty Exchange crypto wallet. Account details will be shared with the closing documents. The proceeds of the sale will then be transferred to the seller’s crypto account. 

Given that the value of Ether may fluctuate during the course of the auction and the closing process, both buyers and sellers will agree to accept the current value of Ether at all stages of the process. 

Royalty Exchange will then administer royalty payments to the buyer just like it does for all other royalty sales. The only difference is that royalty payments will be made in Ether and paid to the buyer’s crypto wallet. We will convert the royalty payments into Ether just before we pay out the royalties to the NFT owner. Royalty Exchange has 30 days from receipt of royalty payments to pay the NFT owner. 

If the buyer decides to sell the asset in the future, the original seller will receive 5% of the sale price, as long as the sale takes place on a marketplace that adheres to the EIP-2981 NFT Royalty Standard (for instance… Royalty Exchange). 

A Note About Cryptocurrency Accounts and Wallets

Both buyers and sellers will need to establish their own cryptocurrency account and crypto wallet to participate in the NFT process, as all transactions will take place in Ether. Here are the steps required: 

1. Establish an account with a crypto exchange (like Coinbase, or Gemini, etc.).  

  • Buyers: Convert funds to Ethereum to cover the expected closing cost. 

2. Create a crypto wallet to hold NFTs and accept funds. 

  • Buyers: Buyers: Use this wallet to collect royalties earned going forward. You will need a wallet that supports NFTs. We recommend using a hardware wallet like Ledger, combined with a software wallet like Metamask to hold your NFTs. 
  • Sellers: Use this wallet to collect the proceeds of the sale. 

For more details on crypto-wallet best practices, please refer to these helpful guides. 

We will use Etherscan to display the Ethereum blockchain smart contract attached to the token, and OpenSea to show the token itself. 

If you have any other questions, please visit our FAQ created for NFT auctions on the listing page.

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