April 28, 2022
X.LA Team
min read

Why Should Companies and Creators Consider Smart Contracts For Revenue Sharing

Revenue distribution in the coming days would be more than an agreement between a project developer and a handful of contributors.

Why Should Companies and Creators Consider Smart Contracts For Revenue Sharing

The concept of revenue sharing is pretty old. Industries like media, sports, entertainment, hospitality, even governments, have been using a revenue sharing system for stakeholders, investors, and contributors for a long time. Earlier, a revenue sharing model would be restricted within the company and its limited number of partners. But today we see companies, especially small and mid-sized, adopting a more distributed approach towards disseminating profits among their affiliates. Yes, affiliate marketing is the buzzword that has brought concepts of revenue sharing to the masses.

Influencer marketing is nothing but another name given to distributing revenue shares between the companies and its promoters whose influence brings about more sales. Most of these contracts, deals and agreements happen manually, involving expensive legal representatives, and third-parties are engaged to process payments. Even then, payments are not processed in real-time. For those who are at the receiving end, the contract may not be the be all and end all, because they are at the whims of the companies they are affiliated with. Plus, handling a complex or multi-layered revenue distribution model that addresses multiple levels of contribution at various stages is difficult, without automation. This is where blockchain-based smart contracts come handy.

Blockchain-supported smart contracts can be developed to streamline, speed up and securitize revenue sharing and are, therefore, indispensable assets for creators and companies today. Revenue distribution in the coming days would be more than an agreement between a project developer and a handful of contributors. It would be more complex as the next phase of the internet, Web3, will see more and more users participating and leading product success and rightfully demanding their shares of the overall revenue. Smart contracts are going to be the solution for addressing a large-scale and complex revenue distribution model.

How Will Revenue Sharing Smart Contracts Work?

Smart Contracts are agreements between two or more parties written with the help of programmable codes instead by lawyers. They exist on the blockchain and are decentralized, public and immutable. Decentralized exchanges, DAOs, DeFi protocols already use smart contracts to pay out stakeholders, project developers, traders, token holders etc. They can be further used to support a revenue distribution agreement between associated parties. Smart contracts are far more advanced than regular contracts as they are self-executing and implement themselves immediately once the pre-agreed terms are met. This makes them accurate, fast and transparent.

A revenue sharing smart contract exists on-chain. Therefore, it cannot be altered. In a legacy revenue sharing system, the receiving party trusts a business to honor the terms of an agreement. But with blockchain, there’s no scope for trust. The reimbursement is bound to take place no matter what, by courtesy of the technology that supports smart contracts.

Revenue sharing could be similar to a complex business logic which smart contracts can help simplify and execute. Take for example, a music production house that wants to share percentages of the profit between music artists ( allocating a fraction for each composition), referrals, coupon code providers, merchandise vendors, advertisement/marketing agencies, influencers, affiliates etc. Then there must be conditions that each of these members must fulfill to receive a share of the revenue. Companies can populate a revenue sharing smart contract with all the necessary terms, conditions, penalties, logistics and commercials at one go and let it auto-execute till the given time. Imagine the amount of time, effort and resources it saves.

Another advantage of blockchain-based smart contracts is speed. A revenue sharing smart contract can be programmed to disburse weekly or monthly yields without the need of a third-party payment processor, or costly administrative interventions.

X.LA Foundation’s Vision of Revenue Share Blockchain Protocol

X.LA Foundation is building an ecosystem of products which will enable people to participate in the creation of multiple items in the metaverse and receive a fair share for it. Imagine a game metaverse that only comes to fruition when a diverse set of talents including software developers, 3D artists, UI designers, script writers, sound engineers and so on combine their inputs. Just like a contributor gets credits and royalties for playing a crucial role in movie making, all these talents who participate in creating a metaverse gets a royalty fee for their work throughout its lifetime.

In order to sign deals with all the people with various degrees of contribution we need to have a transparent and efficient blockchain system which can guarantee revenue distribution as it implies a highly intricate network of revenue share. Thanks to blockchain, contributors will have the trust and comfort and be assured of the fact that in the end they will be fairly paid. Projects will get comfortable signing up for these complex deals with an eclectic mix of contributors which will result in tons of opportunities in the metaverse for people all over the world. And that’s one of the things X.LA is focused on.

X.LA Foundation proposes –

“An array of new standards for revenue share contracts on a blockchain with an $X.LA token to enable automatic split proceeds for partners. Minting tools for ecosystem marketplaces and no-code smart contracts will allow the community to form various partnerships and create a new set of economic opportunities.”

Source: X.LA Foundation White Paper

X.LA Foundation’s smart contracts can be used for general purposes whereby it splits proceeds between an organization and all its partners positioned at multiple levels based on their contributions.

Its user acquisition smart contracts are curated towards partners that help an organization acquire new users. This includes referral links providers, coupon codes providers, digital item providers, etc.

Content creators and participating users can make use of X.LA Foundation’s revenue share contract designed for user-generated content creators to establish their terms and quotations for their contribution towards an organization. No coding knowledge is required here.

Finally, X.LA offers a Revenue Share Governance protocol to organizations which can be deployed if any modifications to the contract need to be executed and if the company and its partners unanimously agree to such changes.

X.LA Foundation’s 360-degree Smart Contract Revenue Sharing Protocol would benefit:

  • Platform developers
  • Ecosystem developers
  • Consumers
  • Producers
  • Creators and contributors
  • Promoters
  • Investors

In Conclusion

Blockchain is decentralized with all records existing on a public database. Therefore, records on-chain are immutable. Smart contracts are developed using the blockchain infrastructure which make them far more secure. These smart contracts automate the execution of complex rules taking cues from the content of the contract. In short, smart contracts offer a viable option for fair revenue distribution and can be a respite from the unfair and self-serving means that centralized platforms adopt and end up depriving key contributors.

Creators should consider smart contracts to secure their remunerations and royalties without the need for investing in costly legal representatives. Companies and organizations can leverage smart contracts for revenue sharing to not only streamline profit distribution, but to also advocate integrity and fairness as their core values.

Learn more about X.LA here. Join X.LA on Telegram, Discord and Twitter and stay tuned to platform updates and ongoing competitions.

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