ERC-2981 is an Ethereum standard that defines a universal interface for retrieving royalty payment information for non-fungible tokens (NFTs). The standard introduces a single royaltyInfo(uint256 tokenId, uint256 salePrice) function that returns the royalty recipient address and the royalty amount for a given sale price. This allows marketplaces and other contracts to query royalty requirements in a standardized way across all compliant NFT collections.

How ERC-2981 works

The standard operates as a signaling mechanism rather than an enforcement layer. When a marketplace sells an NFT, it calls royaltyInfo to determine who should receive royalties and how much. However, the standard cannot force the marketplace to actually send the payment—compliance is voluntary. This distinction between signaling and enforcement is a critical limitation for applications like intellectual property tokenization, where guaranteed royalty flows are essential.

Most implementations hardcode a fixed royalty percentage (e.g., 5% of every sale). While this works for simple NFT collections, real-world use cases like music rights, publishing deals, or patent licensing require dynamic rates that change based on cumulative revenue, time elapsed, or legal status changes.

Limitations for IP tokenization

ERC-2981 was designed for simple NFT royalties, not for the complex lifecycle of intellectual property. Key limitations include:

• No enforcement: Marketplaces can ignore the royalty signal entirely, which has led to a "race to zero" in marketplace royalty compliance.
• Static rates: The standard doesn't natively support tiered royalties, revenue waterfalls, or time-dependent rate changes.
• Single recipient: The function returns one address, making multi-party splits (common in music and film IP) require additional infrastructure like payment splitter contracts.
• No expiration: There is no built-in mechanism for copyright expiration or public domain transition, meaning royalties could be signaled in perpetuity beyond legal enforceability.

Extending ERC-2981 for advanced use cases

Developers working with IP tokenization typically override the royaltyInfo function to implement state-dependent logic. This can include querying on-chain accumulators for tiered rates, checking copyright expiration timestamps, or routing payments through splitter contracts that handle multi-party distribution. These extensions maintain backward compatibility with any marketplace that supports ERC-2981 while adding the programmable rights layer that IP requires.