How NFT royalties work: Designs, challenges, and new ideas

NFT royalties were never actually enforced onchain, because NFT smart contracts cannot tell whether a transfer is a sale that should pay a royalty. Existing designs restrict transfers to enforce payment: blocklists block known royalty-circumventing applications and stay freely composable but can only react after circumvention, while allowlists permit only approved applications, enforcing royalties more strictly at the cost of composability. Both designs trade strict enforcement against open composability, and two new approaches that use incentive mechanisms to encourage respect for royalties are introduced without advocating either one.