[TEP-66] Implementing Royalties in TON's NFT Ecosystem: A Standardized Approach

The TON Enhancement Proposal (TEP) 66, also known as the NFTRoyalty Standard Extension, is a pivotal development in the Telegram Open Network (TON) blockchain, providing a standardized method for handling royalty payments for Non-Fungible Tokens (NFTs). This extension, active since February 12, 2022, builds upon the foundational NFT Standard outlined in TEP-62, offering creators a consistent way to receive royalties from their digital works across various marketplaces within the TON ecosystem.

Overview of TEP-66

TEP-66 aims to enhance the NFT landscape in TON by introducing a uniform protocol for the calculation and distribution of royalties. Authored by EmelyanenkoK and Tolya, this proposal outlines the necessary contract interfaces and internal messaging protocols required to support royalty payments, ensuring creators are fairly compensated for the ongoing use and sale of their NFTs.

Key Components of the NFTRoyalty Standard

The NFTRoyalty Standard incorporates several critical elements designed to facilitate the easy retrieval and payment of royalties:

  • Royalty Parameters: Defined by a numerator, denominator, and destination address, these parameters determine the royalty’s percentage and the recipient.
  • Royalty Calculation: Marketplaces are encouraged to calculate the royalty payment as a percentage of the sale price, using the formula muldiv(price, numerator, denominator) to determine the amount sent to the destination address.
  • Implementation Requirements: NFT collections, or individual NFT items without collections, must implement specific get-methods and internal message handlers to support royalty functionality.

Comparative Analysis with EIP-2981

Feature TEP-66 (TON) EIP-2981 (Ethereum)
Royalty Calculation Percentage-based Percentage-based
Implementation Required for NFT collections/items Optional for ERC-721 and ERC-1155 tokens
Flexibility Fixed percentage calculation Allows for both fixed and percentage-based royalties
Currency Agnosticism Supports any sale currency Primarily designed for ETH and ERC-20 tokens
Enforceability Advisory, relies on marketplace cooperation Similar, with compliance varying by platform

Advantages and Challenges

Advantages:

  • Creator Support: TEP-66 ensures creators continuously benefit from their work, encouraging innovation and participation in the TON NFT ecosystem.
  • Standardization: By providing a clear framework for royalties, the proposal facilitates interoperability among different marketplaces and NFT platforms.

Challenges:

  • Enforceability: As with other blockchain-based royalty standards, enforcing royalty payments relies on marketplace compliance, which cannot be guaranteed.
  • Fixed Percentage: While simplifying calculations, a fixed percentage may not suit all types of transactions or agreements between creators and platforms.

Conclusion

TEP-66 represents a significant advancement in the TON blockchain’s NFT framework, offering a standardized approach to royalty management that benefits creators and ensures their contributions are recognized and rewarded. As the TON ecosystem continues to evolve, the adoption of such standards will play a crucial role in fostering a fair, transparent, and thriving digital asset marketplace.

The TEP-66 proposal introduces a significant extension to the NFT standard, focusing on establishing a universal and standardized method for handling royalty payments for NFT creators across various platforms and marketplaces. This move is a critical step towards ensuring creators are fairly compensated for their work and incentivizes the continued production of high-quality digital assets within the TON ecosystem.

Professional Insight:

The introduction of a royalty standard is a pivotal development for digital creators, offering them a consistent revenue stream from the secondary market sales of their works. By providing a clear framework for royalty payments, TEP-66 addresses a significant gap in the digital art and collectibles market, potentially increasing the attractiveness of the TON platform for artists and creators. However, the effectiveness of this standard hinges on widespread adoption by marketplaces and compliance with royalty payments, underscoring the importance of community and ecosystem-wide support for the initiative.

Technical Considerations:

  1. Royalty Calculation Method:

    • The choice to use a percentage-based royalty calculation is pragmatic and adaptable, allowing for flexibility across different sale conditions and currencies. However, it necessitates clear guidelines and potentially standardized tools or libraries to assist marketplaces in accurately calculating and distributing royalties to avoid discrepancies or errors.
  2. Destination Address for Royalties:

    • Specifying a destination address for royalty payments simplifies the process for marketplaces to transfer funds. However, this raises questions about the management of these addresses, especially in scenarios where an NFT creator might want to change the destination address for future payments, suggesting the need for a secure and user-friendly method to update this information.
  3. Marketplace Compliance:

    • While the standard outlines how royalties should be handled, enforcing this compliance remains a challenge. The reliance on marketplaces to honor royalty payments suggests a need for mechanisms that can enhance transparency and accountability, such as public logs of royalty transactions or integration with smart contract mechanisms that can automate these payments.

Professional Questions:

  1. Enforcement of Royalty Payments:

    • How does TEP-66 propose to ensure marketplaces comply with royalty payments? Are there mechanisms or incentives in place to encourage adherence to this standard?
  2. Handling of Multiple Creators:

    • In cases where an NFT has multiple creators or contributors, how does the standard propose to handle the distribution of royalties? Is there support for splitting royalties among multiple addresses, and if so, how is this configured and managed?
  3. Updates to Royalty Parameters:

    • What provisions does TEP-66 offer for updating royalty parameters, such as the percentage or destination address, after an NFT has been minted and sold? How can these updates be made securely to protect against unauthorized changes?
  4. Cross-Platform Sales and Royalties:

    • How does TEP-66 address royalty payments for NFTs sold across different platforms or marketplaces? Is there a mechanism to track and enforce royalty payments when an NFT is transferred or sold outside of the original marketplace?

In summary, TEP-66’s proposal for a standardized royalty system represents a significant advancement for the NFT ecosystem on TON, promoting fairness and sustainability for creators. Addressing the outlined technical considerations and questions will be crucial in ensuring the robustness, fairness, and widespread adoption of this standard across the TON ecosystem.