Documentation
Complete technical and legal documentation for the Royalties.fun platform.
Fee Structure
Primary Sale Fee
When a creator sells royalties for the first time, the platform takes a percentage of the sale as a fee. This fee funds platform operations and triggers token buybacks.
5%
Secondary Resale Fee
When royalty tokens are resold on the secondary market, fees are collected from both the platform and optionally the original creator.
2.5%
0-10%
Set by creator
Buyback Trigger
Fees are collected in USDC and held in the platform treasury. A backend server monitors all transactions and calculates platform revenue in real-time.
Process:
- Transaction completes on-chain
- Server listener detects fee collection
- Revenue is calculated (platform cut only)
- 3× the revenue is used to buy tokens
- Purchased tokens are sent to Sol Incinerator
Trading Mechanics
Royalty Token Minting
When a creator lists royalties for sale, a token (NFT or SFT) is minted representing ownership of those royalty rights. The token contains metadata linking to the legal contract.
// Token metadata structure
{
"name": "ROYALTY-[CREATOR]-[ID]",
"symbol": "ROYAL",
"uri": "ipfs://[CONTRACT_PDF_HASH]",
"attributes": [...]
}
Buy and Sell Orders
All trades are executed through smart contracts that ensure proper fee distribution:
- Seller lists token with asking price
- Buyer submits purchase transaction
- Smart contract splits payment: seller, platform fee, creator royalty
- Token transfers to buyer atomically
Price Discovery
Prices are set by sellers on the secondary market. The platform displays historical price data, trading volume, and comparable sales to help buyers make informed decisions. No automated market making is used—all trades are peer-to-peer.
NFT Mechanics
Token Representation
Each royalty contract is represented by an NFT (or SFT for fractional ownership). The token metadata includes an IPFS link to the legally binding PDF contract.
Token = Ownership
Holding the NFT means you own the royalty rights defined in the contract. The blockchain provides immutable proof of ownership and transfer history.
Transferability
By default, tokens can be freely transferred or sold on the secondary market. Creators can optionally disable resale, locking the token to the initial buyer.
Resale Enabled
Token can be listed and sold on secondary market
Resale Disabled
Token is soulbound to initial buyer
Payout Identification
The payout smart contract queries on-chain ownership to determine who receives royalty distributions. Current holder at time of payout receives the funds—no manual updates required.
Contract Legality
Digital Signature
Creators sign the contract by signing a transaction with their wallet. This cryptographic signature serves as a legally binding electronic signature under electronic signature laws in most jurisdictions.
Contract Contents
The PDF contract includes:
- Creator legal name or publicly known alias
- Identifiable X/Twitter account
- Wallet address used for signing
- Revenue source and percentage being sold
- Duration and payment terms
Wallet Signature + Published PDF = Legally Binding
The combination of cryptographic wallet signature and the immutable PDF stored on IPFS creates an enforceable agreement in most jurisdictions under electronic signature laws (ESIGN Act, eIDAS, etc.).
Transfer of Rights
Buyers own royalty rights as long as they hold the NFT. Transfer of the NFT equals transfer of the legal royalty rights defined in the contract. Blockchain ownership serves as proof of assignment.
Key Points
- • The agreement is enforceable in traditional courts
- • Blockchain ownership acts as proof of assignment
- • Transfer of NFT = Transfer of legal royalty rights
Payout Mechanics
Revenue Reporting (v1)
In the initial version, creators manually report and submit revenue. Automated integrations with platforms like YouTube, Spotify, and Patreon are planned for future versions.
Payout Process
Creator Deposits
Creator deposits USDC into the payout contract
Holder Identification
Contract queries current NFT holders
Pro-Rata Distribution
Smart contract distributes funds proportionally to all holders
Distribution Example
Creator sold 10% of royalties split into 10 tokens (1% each)
Creator reports $1,000 monthly revenue
Each token holder receives: $10/month
Buyer Protection
Platform-Sponsored Enforcement
Royalties.fun actively protects buyers. If discrepancies arise between reported revenue and actual earnings, the platform sponsors enforcement actions on behalf of token holders.
This means you don't have to pursue legal action alone—the platform handles disputes and enforcement at no additional cost to buyers.
Verified Revenue Reporting
Creators are required to provide proof of revenue with each payout submission:
- Platform dashboard screenshots (YouTube Studio, Spotify for Artists, etc.)
- Payment receipts and bank statements
- API integrations where available
Dispute Resolution
If you believe a creator is underreporting revenue:
Submit a Dispute
Flag the contract through your dashboard with evidence
Platform Review
Our team investigates and requests documentation from the creator
Resolution & Enforcement
Platform-sponsored legal action if necessary, at no cost to buyers
Creator Accountability
Every creator on the platform is verified through:
- Linked and verified social accounts (X/Twitter required)
- Wallet signature on legally binding contract
- Public reputation tied to their royalty performance
- Leaderboard ranking based on payout history
Your Investment is Protected
We require proof of revenue, actively monitor for discrepancies, and sponsor enforcement when needed. Creators who fail to meet their obligations are publicly flagged and permanently banned from the platform.