Splitting the proceeds from sales or fundraising is by no means a new concept. Many charities, NGOs, corporations, and private citizens raise money and sell goods with the promise of contributing a portion of the proceeds to a well-intentioned cause. Aside from charity, many people might be more inclined to support a project if they were assured that 20% of revenues would go directly to the developers or original artists.
In most cases, revenues are split as promised, but there is always the risk of bad apples just taking the money and running. The fact is, once you’ve given your money to anyone, you can’t be sure that they’ll do what they said they would with it.
The revenue splitting mechanism is implemented transparently, on-chain, hard-coded within a smart contract. And that’s exactly what split contracts are for.
What is a split contract?
Revenues from NFT collections can be split between the project creators, developers, artists, charities, or any other third party using an executable program on the blockchain called a “smart contract.” Smart contracts with built-in revenue splitting functionality are known as “split contracts.”
Revenues from sales and royalties of the NFT collection are directly sent to the split contract and sent to the respective addresses predefined within the contract. For example, the project creators could receive 40%, the artist 40%, and the remaining 20% could be sent directly to the blockchain address of a charity.
The main advantage of split contracts is that blockchain technology allows for the split to be transparent, verifiable, and hard-coded into the smart contract itself.
Transparent & verifiable
Since the ledgers of blockchains like Ethereum are publicly viewable by anyone, it’s possible to quickly and accurately verify what funds are being sent where from any given smart contract. There is no way to transfer funds invisibly, no way to skim off the top, and no way to underpay anyone their fair share. This level of transparency is almost completely impossible without a public ledger like a blockchain.
Once a smart contract is deployed, it cannot be modified. So when a split contract is deployed with predefined addresses and proportions to be sent to each address, these addresses and proportions cannot be changed or tampered with at any point in the future. This ensures that the proceeds from sales and royalties of the collection will always be split the way they were announced, and it is impossible for any of the project’s team members or external actors to change the split.
How do I launch an NFT collection with a split contract?
As with anything smart-contract-related, it takes a bit of development knowledge. For Ethereum, or any EVM-compatible blockchain, you’ll need to learn a programming language called Solidity. As we’ve mentioned, once it’s deployed, you cannot change anything, so you’ll have to get it right the first time, or pay gas fees again to deploy another smart contract.
If you’re not already a Solidity developer, then Artiffine can help. Our web3 team is well-versed in Solidity and has already deployed numerous custom contracts, including gas optimized contracts and NFT reveal functionality. We can implement a number of other custom features into your smart contract, so get in touch, and we’ll figure out what would best suit your requirements.