NFT royalties refer to a critical aspect of the world of Non-Fungible Tokens (NFTs), which are digital assets representing ownership of unique items or content, typically on a blockchain, often Ethereum. NFTs have gained immense popularity for their ability to authenticate digital ownership, particularly for artworks, music, collectibles, and more.

Royalties in the context of NFTs are essentially a form of ongoing compensation paid to the original creator or rights holder of an NFT each time the NFT is resold or changes hands in the secondary market. This is an innovative feature that sets NFTs apart from traditional physical art sales or digital content distribution.

When an artist or creator mint an NFT, they can encode a royalty percentage, which is a portion of the resale price, directly into the NFT's smart contract. This smart contract ensures that every time the NFT is sold, a fraction of the sale, usually ranging from 5% to 20%, is automatically transferred back to the original creator's wallet. This arrangement ensures that creators can continue to benefit from the appreciation of their work, even as it changes hands multiple times.

NFT royalties play a significant role in empowering creators, making their work more lucrative and protecting their interests in the long term. This concept has been particularly valuable for digital artists who historically struggled to earn ongoing income from their art once it was initially sold. Royalties incentivize artists to create high-quality and popular content, as their financial gain is directly tied to the success of their work in the secondary market.

As the NFT ecosystem continues to evolve, the concept of royalties remains a crucial element, ensuring a fair and sustainable relationship between creators and collectors in the digital realm.