(Bloomberg) -- The creators of digital collectibles are starting to boycott the dominant exchanges for nonfungible tokens as a protest against sinking royalties.

Yuga Labs Inc., producer of the Bored Ape Yacht Club and CryptoPunks NFTs, and Pudgy Penguins maker LSLTTT Holdings Inc. are among those withholding some collections from top platforms Blur and OpenSea or threatening to do so.

The two exchanges this year chopped the royalty rates payable when a token changes hands, seeking to resuscitate buying and selling after a pandemic-era run-up in NFT prices and trading activity gave way to a steep reversal.

Royalties of $2.4 million in September compare with a peak of $269 million in January 2022, according to Nansen data. Monthly trading volumes have all but evaporated from a record $17 billion back then, Token Terminal figures show. 

Yuga Labs has blocked trading of its latest project Mara on Blur and OpenSea, telling Bloomberg only exchanges that “respect” royalties will be allowed to list the NFTs. The firm announced layoffs this month in the face of challenging conditions.

“There’s a coup going on in the marketplace business,” Pudgy Penguins Chief Executive Officer Luca Netz said in an interview. His firm will start its own exchange or partner with platforms that offer proper royalties, he added.

The acrimony between NFT developers and the dominant trading platforms is fueling arguments that the market’s heyday — exemplified by the famed $69.3 million sale of Beeple’s Everydays NFT in 2021 — is long gone.

Low Fees

Blur launched a year ago with a low-fee model that incentivized trading and curbed artist income, quickly overtaking OpenSea and forcing it to follow suit. Blur’s minimum royalty rate is 0.5%, while OpenSea has moved toward optional creator fees. The platforms together account for about 70% of NFT volumes, Token Terminal data indicate.

NFT designers must deliver good collections, but from a “marketplace standpoint somebody needs to come in with a vision,” Netz said, adding he’ll follow “Yuga Labs in their footsteps and so will every major project.”

Pudgy Penguins has branched out into merchandising: Product sales have reached $7 million this year compared with NFT royalties of just $300,000, according to Netz.

The main collections from Yuga Labs and Pudgy Penguins represent 71% of NFT trading volumes this year, DappRadar data shows.

Blur didn’t respond to requests for comment about the criticisms over fees. An OpenSea spokesperson said royalties can “still be one of several valuable” income sources and that the platform is “focused on building scaling solutions, tools, and revenue streams that can be reliably enforced for all creators.”

Whether boycotts — or other moves like creating their own marketplaces — are realistic strategies for NFT projects is an open question, given that Blur and OpenSea have a tight grip on trading and liquidity.

Resistance to Royalties

“Users are increasingly resistant to paying royalties, and fees in general,” said Ally Zach, a research analyst at Messari. “While some collections may try to replicate this boycott strategy, its long-term viability remains uncertain.”

For the foreseeable future, Blur and OpenSea will continue to face pressure to keep trading costs down. Their critical role jars with the ethos of decentralization that is supposed to characterize applications of digital ledgers.

“We’re kind of failing in a core area of blockchain, because blockchains were meant to democratize these things,” said Jake Brukhman, chief executive officer of web3 venture capital firm Coinfund LLC.

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