How Do OpenSea Royalties Work? (And How to Calculate NFT Flips)

How Do OpenSea Royalties Work? (And How to Calculate NFT Flips)

NFTs
by Sebastián Villafuerte
79
Artists, creators, and developers are all selling NFTs on OpenSea. And two of their main concerns are OpenSea royalties and service fees since it’s something to consider when selling.
OpenSea logo giving money to painter

If you’re interested in selling NFTs or flipping them for profit, OpenSea royalties are an unfortunate part of the process. Selling your art and projects as NFTs can be super easy, but you must understand the whole system to make the most of this model. 

Sometimes it’s confusing, but quickly explained, OpenSea charges 2.5% of the selling price of your NFT as royalties. There are a few details to fully understand OpenSea’s model, so please stay with me to get the whole picture.

What are service and creator fees?

The service and creator fees are a percentage of the NFT price that people pay to OpenSea to cover creator royalties and the services OpenSea is providing. So it’s like a tax for using the platform and a fee to creators.

Service fees

As I’ve said before, OpenSea charges 2.5% of the sale price of your NFT every time it’s sold on OpenSea. That’s the service fee they charge for providing you with the platform to buy and sell NFTs.

Creator fees

On the other hand, creators can also set a fee for a selling collection of up to 10% of the NFT sale price. Meaning that, just like OpenSea, creators get to charge an amount of their choice every time their NFT is sold using OpenSea.

How do creator fees work on OpenSea?

If you are the creator of an NFT collection, you are entitled to royalties any time your NFTs are sold on OpenSea. Every time an NFT moves from one wallet to another, the creator gets paid a percentage of the selling price.

I mentioned that creators can set their fees up to 10% of the sale price. As a creator, you can only set the price for a whole collection, not for a specific NFT, while being able to change your fee percentage anytime you want.

When the sale occurs, the royalties and service fees are subtracted from the NFT price, and OpenSea holds the creator fees before paying them. Then the seller receives the price minus the fees.

How often does OpenSea pay royalties?

You get paid creator fees every time your NFT is sold on OpenSea. They hold your royalties for about 2 to 4 weeks after the NFT is sold. After that, they send the fee to your wallet address.

Many people complain about this because OpenSea doesn’t explain how it works or why it takes so long.

How to set OpenSea creator royalties?

Setting up your creator earnings percentage is super easy; you just have to follow these simple steps:

  1. Go to the OpenSea website and click on the profile icon in the top right corner
  2. Click on ‘My Collections’ to check your NFTs
  3. Select the collection you want and click on Edit
  4. Paste your wallet address with the percentage you want to charge
  5. Click on submit changes

It’s helpful to know that you can set more than one wallet address to receive your OpenSea royalties and specify the earnings per wallet. However, it’s also helpful to know that gas fees will vary depending on your preferred blockchain, and adding more than one address can increase the cost.

How much should you charge for royalties?

It depends on the type of project you are creating, the business model you’re using, and your sales strategy. 

Usually, new artists charge 5% or less for their first projects since higher fees are associated with collections that offer a higher utility. So, lower fees should be considered if you’re starting a simple project. 

In most cases, artists reinvest the money they earn for their creator fees to provide greater utility in their collections. This is done by many developers using NFTs as a funding strategy.

What is NFT flipping?

NFT flipping is, basically, buying low and selling high in a short period for a profit. It isn’t considered flipping to hold an NFT over time and sell it for profit.

A lot of people research upcoming collections and undervalued projects to earn money trading NFTs. It is a risky strategy that involves a lot of experience and knowledge, not just about NFTs but also about business strategy and finance.

You can study the supply and demand of any project by learning about the developer’s and artists’ backgrounds, the products and/or services they offer with that collection, how they are being financed, the fees they charge, and how many NFTs are in a collection.

How to calculate your NFT flip price

If you’re flipping NFTs, you should first know that the moment you’re buying combined with the project you choose deeply affects your profitability. 

You should buy at a moment when there is a high volume of transactions. And you should pick a credible project before you buy—to truly understand if the project is worth the investment, previous research is required.

If you’re looking for an easy way to calculate your NFT flipping price, please follow this advice first:

  1. Find and pick a credible collection at the right time
  2. Study the supply of the NFT collection
  3. Define its value determined by your research and compare it to the offering price
  4. If the offering price is lower, you should buy
  5. Calculate how much you’ll have to pay in OpenSea royalties and add that to your final price 

When calculating your flipping price, you should always consider price marketing strategies and basic economic knowledge about supply and demand.

Summary

OpenSea charges 2.5% of the NFT sale price as a service fee every time an NFT is sold. Creator fees are paid to creators every time an NFT is sold in OpenSea. This means that every time an NFT moves from wallet to wallet, creators get paid their percentage of OpenSea royalties.

Many creators and investors use OpenSea to publish and sell NFT collections. Artists and developers have to deal with these fees to define the value and utility of their collections. And investors have to be aware of the fees to calculate their profits and decide their financial strategy.