DRAFT: How much money have creators earned using Ethereum this year?
By Bruno Lulinski, Miguel Pereira, Nazim Rizvic, and Josh Stark
* We estimate that creators earned in total $3.5 billion using Ethereum in 2021. This is an estimate and feedback on this document or new data sources might meaningfully change it.
* This estimate is based on data we were able to obtain directly from the Ethereum blockchain (via tools like Dune analytics) and data from marketplaces & NFT platforms who report data publicly.
* All data used in the estimate & sources are in a google sheet here.
* We are open-sourcing our analysis in the hopes that the Ethereum & NFT community can share feedback on how to improve our estimate. Are there flaws in our reasoning? Data sources that we are missing? Let us know in a comment!
The goal of this project is to reach an accurate estimate of how much money creators earned using Ethereum in 2021.
* By “creator” we mean individuals and groups involved in creating art or other “creative” products. This includes: artists, musicians, 3D modelers, photographers, filmmakers, and other similar activities
* Creators used Ethereum to earn revenue in several ways. The vast majority comes from the sale (and royalties earned through re-sale) of NFTs, but could also include streaming revenue (for musicians) or publishing written content
To come to a specific estimate, we had to make several assumptions and decisions in order to limit our scope:
* We did not include revenue from gaming NFTs. Game NFTs (e.g. Axie Infinity) are of course an important and exciting development of the overall NFT marketplace.
* However, part of the motivation for our analysis is being able to compare creator revenues on Ethereum to platforms like YouTube, Spotify, Patreon, and others.
* Including revenue earned by players in a pay-to-earn game would make this comparison less direct, since these web2 platforms are not used for an analogous purpose.
* Collecting data on how much gamers have earned using Ethereum is a large topic of itself, deserving of a follow-up report. Let us know in the comments if you would be interested in this research!
* For NFT data, we measured both ERC-721 and ERC-1155 data. However, for ERC-1155, we only counted activity that takes place within NFT marketplaces like OpenSea. ERC-1155 trading outside of the main marketplaces is only a small part of the overall market and is difficult to track using existing data sources.
* We are not trying to estimate how much creators might make using Ethereum for activities separate from their specific “creative” work. For instance, we are not trying to answer “how much money did artists make speculating on the ETH they earned” or “how much money did artists make trading other people’s NFTs”
* We’re only trying to measure revenues, not profits. That means we aren’t trying to deduct out the costs that different creators must pay in order to engage in their creative industry. Things like art supplies, film, software subscriptions, gas fees, or other costs of production.
To explain our methodology, we should first explain three key components of the NFT market and discuss how we can use them to determine what amount of revenue creators earn from them:
NFTs are, in practice, ownership over entries recorded within an individual smart-contract on Ethereum. These contracts conform to various standards, the most common of which is known as ERC-721. Sometimes an individual ERC-721 contract can represent one single NFT, or it could be used to record ownership of many thousands of NFTs that are part of that one contract’s set or edition.
Minting an NFT is the process of “creating” an individual NFT managed by that contract. Sometimes minting is done at the moment of creation of the contract, in other cases it may be done afterwards by anyone who wants to interact with that contract. Typically minting will involve a cost that is paid to the ERC-721 contract.
Using a tool like Dune, we can scan the Ethereum blockchain for every NFT that was minted in the whole year. We created a query that pulled every ERC-721 mint event on Ethereum in 2021. Then we can measure the total amount of ETH that was sent to each ERC-721 contract in order to mint individual NFTs from it, multiplied by the price of ETH on that day. We then manually removed 70+ ERC-721 projects we knew to be excluded by our methodology, such as Uniswap v3 (where NFTs are used to represent LP positions), ENS, Axie Infinity, and several other contracts (see documentation in Dune query for full list)
This process gives us a result of approximately $2.659 billion (google sheets).
However, this will not be a complete measure of total creator revenue. First, because we may not have excluded every ERC-721 contract that does not meet our definition of “creator revenue” and therefore are slightly over-counting the total.
Second, because minting is not the end of the NFT sale process where creators earn revenue.
In some cases (which we will call Scenario 1), an artist or creator mints the NFTs themselves, and then later sells them to a collector or fan on a marketplace. These “Primary sales” - the first time an NFT is sold after it is minted - are not captured by the above method. We need to find this data separately (see next section).
But in other cases (which we will call Scenario 2), the creator of an NFT series will release an NFT contract on Ethereum that allows anyone to interact with it and “mint” an NFT on their own.
This is often the case with NFT releases where there is a set number (say 10,000) NFTs available to be created by this contract.
In these cases, the act of “minting” the NFT in the first place represents an exchange between the collector (who does the minting) and the creator (who created the contract and, presumably, collects all or a portion of the fee paid to the contract). Revenue from this type of scenario will be captured by the dune query shared above.
2. Primary sales
A primary sale is the first sale of an NFT on a marketplace, after the NFT has been minted.
In some cases, the primary sale of an NFT will be a sale between the artist - who minted the NFT - and a collector (Scenario 1). Therefore this sale will represent creator revenue.
In other cases, the primary sale of an NFT will be done by a collector who minted the NFT themselves (Scenario 2). In that case, the primary sale represents revenue to a collector, not the artist.
In order to accurately capture creator revenue, we must be able to distinguish between these cases in the data.
We were not able to accomplish this with OpenSea, SuperRare, or Zora. This means that we are very likely significantly under-counting creator revenue in this step of the process, possibly in amounts of hundreds of millions. We would greatly appreciate input or feedback on how we can properly capture this data.
For creator platforms that are not marketplaces (i.e. do not facilitate buying and selling) but are focused on enabling creators to mint and sell NFTs, this calculation is easier. For instance, we can assume that all “primary sales” on Mirror go directly to a creator. We have included primary sales figures from several such platforms in the totals below.
3. Royalties from secondary sales
Creators can choose to embed a royalty with their content at the time of minting. Then, if the NFT is transacted in the secondary markets after the initial sale, that royalty will be deducted from the sales amount and sent directly to the creator.
We calculated how much creators made from secondary sale royalties on OpenSea using this Dune query. As before, we have manually excluded many known ERC-721 contracts that do not fit our definition of “creator revenue” for the purpose of this analysis.
This query tells us that in total, creators on OpenSea earned about $648 million in secondary royalties in 2021. Looking at other NFT marketplaces, we were also able to estimate that creators have earned about $8.4 million in royalties on SuperRare and $482,222 on Zora.
Considering the analysis above, here is how we can estimate creator revenues in 2021:
* (1) First, take the revenue from all ERC-721 minting on Ethereum in 2021 (dune query)
* This dune query excludes NFTs that do not fit our definition of “creator” revenue above (e.g. games, ERC used for purposes like memberships or ownership of LP positions in Uniswap). See full list in the Dune query.
* Because there may be other NFTs that we have not yet excluded, this figure might be a slight over-estimate.
* (2) Second, we add up all the primary sale data that we have from different platforms.
* We have only included data here if we are able to confirm that it will not have already been counted by (1) above, and where we are able to distinguish between “primary sale revenue that goes to artists” and “primary sales revenue that goes to a collector”
* As a result, we are not including any primary sale revenue from OpenSea, SuperRare, or Zora. This means we are very likely undercounting total creator revenue in this step.
* (3) Last, we add up all known royalty revenue (i.e. revenue earned by creators from secondary trading).
* We have this data from OpenSea, SuperRare and Zora.
In total, this calculation produces an estimate of $3,505,718,500 (see spreadsheet for full calculation).
Thank you to Richard Chen, Gigamesh, and Jackson Dame for their input & feedback on this estimate![a]
[a]Just wanted to thank you guys for this excellent and important work. Back in the day my band earned millions for gatekeeper honcho's with a mere 10% flowing downstream to us. This is one revolution I've been waiting a long time