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Dynamic Royalty

1 min read
Pronunciation
[dahy-nam-ik roi-uhl-tee]
Analogy
Like a sliding-scale commission fee that changes depending on how many times an artwork is resold or its sale price.
Definition
A programmable royalty mechanism for NFTs or digital assets where royalty rates can adjust over time or based on criteria such as resale price, volume, or holder actions.
Key Points Intro
Dynamic royalties provide flexible compensation models for creators in secondary markets.
Key Points

Variable rate: Royalty percentage can increase or decrease per sale.

Condition triggers: Rate adjustments based on time, price tiers, or holder traits.

On‑chain enforcement: Smart contracts deduct royalties automatically.

Transparency: All rate changes and payments recorded on‑chain.

Example
An NFT contract charges 10% royalty on first resale, 5% on subsequent sales, and reduces to 2% after three transfers.
Technical Deep Dive
Royalty contract implements ERC‑2981 with `royaltyInfo(tokenId, salePrice)` computing rate via on‑chain state machine. State variables track sale count and adjust `royaltyFraction` dynamically.
Security Warning
Complex royalty logic can be gamed; test edge cases and enforce minimums.
Caveat
Marketplaces must support dynamic royalty standards to enforce correctly.
Related Terms
Smart Contract

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