Overview
Payment Processor is a peer-to-peer NFT trading protocol. It is designed to serve as the blockchain execution layer for one or more off-chain order books and exchanges.
In the simplest terms, an NFT orderbook can be thought of as an off-chain system with a minimum of two components:
- Data store(s) for NFT order data and order maker signatures.
- API(s) that provides secure read/write access to NFT order data.
An NFT exchange is a user-facing interface where buyers and sellers can conduct NFT trading. An NFT exchange typically integrates with one or more NFT orderbook APIs to allow for order creation and order discoverability. NFT exchanges may be scoped to a single NFT collection, a single community consisting of related NFT collections, or a completely open platform for trading of all NFT collections. NFT exchanges run the gamut between a simple trading interface and a professional, feature-rich trading interface.
Together, orderbooks and exchanges allow market makers to create liquidity in the form of listings and offers for NFTs. Market takers, then, may instantly execute and fill trades against order book liquidity in order to buy and sell.
Limit Break's Position on Royalties
Unlike other NFT trading protocols, NFT royalty enforcement is built directly into Payment Processor. Payment Processor will NEVER withhold creator royalties when they are configured on-chain. There are two ways creators can configure on-chain royalties on their collections that will be honored by Payment Processor.
- Program royalties into the NFT smart contract using EIP-2981
- Backfill royalties on Payment Processor for collections that lack EIP-2981 support
By building NFTs using Limit Break's novel ERC721-C standard, creators have the power to guarantee that trades execute in the safety of the Payment Processor trading protocol where the creator, not the exchange, sets the rules for trading.
Note: To configure backfill royalties for collections that do not support EIP-2981 the collection must either be Ownable with the call to set royalties made by the owner or implement AccessControl with the call to set royalties made by an account with the default admin role.
Note: If a collection does not implement EIP-2981, does not have an owner and does not have access control, royalties may still be set through an off-chain agreement with a marketplace with the marketplace using the fallback royalty recipient to deliver royalty payments to the creator.
Unparalleled Control For Creators
Payment Processor protects the interests of creators, offering them choices no other exchange protocol has ever provided.
Control Over Payment Methods and Pricing
Historically, marketplaces have dictated the accepted payment methods for NFT trades. Payment Processor flips control to creators, putting them in the driver’s seat to set what methods of payment are permitted for trades on their collections. The spectrum of choices are:
- Default Payment Method Whitelist — Rather than allow any payment method by default, all collections are automatically protected from trading in meme coin or other undesirable coins unless otherwise specified by the collection’s creator. This protects creators from trades where royalties are paid in worthless, undesirable coins. The defaults include: Native Currency (ETH or Equivalent), Wrapped Native Coin, Wrapped ETH (when applicable), USDC (Native), USDC (Bridged).
- Allow Any Payment Method — For creators that wish to accept trades and royalties in any currency, the option to remove all restrictions is available.
- Custom Payment Method Whitelist — Creators may define their own shared list of coins that may be used to trade their collections. This works great for Web3 games that have their own in-game currencies, as they can allow trading only in their game’s coin(s).
- Pricing Constraints — Creators may choose a single payment method and apply a minimum floor or maximum ceiling price at the individual token id or collection level. This is great for Web3 games with special ultra-rare items as it offers some control over the economic balance of a game.
Royalty Bounties
Creators may choose to offer a royalty bounty. This is a percentage of royalties creators may choose to share with marketplaces. Royalty bounties are completely voluntary and set by a collection’s creator if they wish. Consider this simple scenario: An NFT trades for 1E where the creator royalty is 10%, royalty bounty is 20%, and marketplace fee = 1%. The creator receives 0.08E, the marketplace receives 0.03E (0.01E standard fee + 0.02E royalty bounty), and the seller receives 0.89E.
Why would a creator volunteer to share royalties with a marketplace? Royalty bounties offer an incentive to align the interests of exchanges and creators. By offering a share of enforceable creator royalties to exchanges, or perhaps an exclusive partner exchange, it offers a new way to incentivize exchanges to cross-promote or boost the visibility of a collection for a period of time.
Royalty Backfill
Many older collections may not implement EIP-2981 royaltyInfo. Some of these collections have exchange blocking features, while others do not. Regardless of whether or not a collection can block exchanges and guarantee trades occur within Payment Processor, if a creator designates a backfilled royalty receiver and percentage for their collections it is guaranteed to be honored and enforced on all trades flowing through the Payment Processor.
When combined with the power of ERC721-C NFTs with whitelisted transfers, the on-chain rules selected by creators cannot be circumvented!!!
Trusted Channels
Trusted channels allow exchanges to gain attribution for Payment Processor trades, where every exchange can create their own optional channel. Additionally, creators can choose whether or not to allow all channels or create an allow list of trusted channels. By using an allowlist of trusted channels, creators get access to controls to block undesirable Web2 applications from trading their work, which will be a popular feature for games.
Continued Reading
If you are a creator, configure your collection's Payment Processor trading settings by heading over to https://developers.apptokens.com!
If you are an exchange, continue on to the Exchange Integration Guide.