Art + Blockchain = ? - Can Blockchain Create a New Future Path For The Art Industry?
The Topic
Artwork purchase through blockchain (specifically on HIVE), this led me to think about how can blockchain technology can really help in the art industry. This is a brainstorming exercise that I want to do and welcome people who are interested in this topic to share their point of view as well. I am currently involved in the space between art and education where I started an online creative art learning platform for people to learn and practice art. Having said that, the platform can easily evolve into an art marketplace where the instructors and students can share their artwork and sell them. Whether or not blockchain technology can help and improve the process, I would need to dive deeper. This will be a two parts brainstorm on this topic and I look forward to writing about the next part.
The Learning Points
Pain points in the art market
When we talk about pain points in the art market, there are two points that first come to my mind, which are infringement and market awareness about art itself. Blockchain has the capability to trace and record the source, yet it requires intensive Capex infrastructure to achieve that. From physical labelling to detection and record into the blockchain, progress work recording, packaging, transportation and also the receiving end access to all the information. Therefore, the art industry needs to have a certain amount of transactional value to attract serious investors and start building the infrastructure. From a read up about latest art market from McKinsey, the global market as of 2019 is standing at around 63 billion USD and China had contributed around 21% for the market. In comparison to the giant industry like the foodservice industry which now stands at 1.77 trillion USD as of 2019, the market may not be as lucrative and scalable enough to have serious money invested for blockchain technology integration.
Next up is the awareness and accessibility to art. Asia in overall is a booming region for art market where we see China is picking up in speed. Singapore, Japan, South Korea and Taiwan have been the 4 main powerhouses in Asia when it comes to art, yet the potential of the whole Asia region has yet to unleash as the majority of the nations are still in the "developing phase". One way to identify whether the people are ready to be invested in the art and culture is through the figure of GDP per capita, from the World Bank Data, we can see that Singapore is leading the crowd with Singapore (65k USD per capita), Japan (40k USD per capita), South Korea (31k USD per capita) and Taiwan (25k USD per capita). Of course, we do have Hong Kong standing at 48k USD per capita which also had been playing the bridging role between the Western world and China. As for Malaysia, we are approximately at 11k USD per capita (GDP) which is still two-fold shy from Taiwan. Despite ASEAN being a strong culture hub, our GDP level (except for Singapore and Brunei) are still far behind a decent level of above 20k USD per capita. In other words, people will have less appetite to know and involve with art as they are keen to learn more about skills that could directly improve their livelihood.
Another point worth of taking note is that, in Asia, we are still having a perception where art itself cannot bring much value to the table. In my personal opinion, people having such perception is not the fault about how the person see or perceive art, but it is the duty and obligation of the art industry to stand out and be seen in the public. Art itself has a wide range of the spectrum, from fine arts to commercial advertisement, everything involved art. Even product design and websites like HIVE, it requires a certain level of artistic skill to design and build a usable and comfortable interface. Without art, everything will be very dull and rigid like how computers communicate with each other with just codes. We are living in a world that is filled with art, a house without art will be like a military bunker or prison where everything is minimal and boring. Surprisingly, a school has a lot to catch up when it comes to art as schools are usually built by the government and to reduce cost, all schools are built with a standard, modular design. In other words, all schools look alike without many characteristics. This will raise other problem like lack of sense of belonging due to no landmark or a representative object that people can relate to.
Identity & Trademark
This brings us to the topic of identity and trademark. When an artist built his or her own identity through a certain signature stroke, style or expression, such identity will become a way to proves that the work is done by the artist. Thus, such identity will require certain protection like copyright and trademark where legal actions can be taken if any person tries to conduct infringement and use the artist's name to conduct an illicit act.
Yet, we see that there is forgery happening since decades ago as we see expert forger can even sell their artwork in auctions and successfully fool the house for believing it as the real deal. Of course, such an act would require extensive understanding about the artwork, materials, style and even deals with the auction house. Moreover, with the advent of social media technology, artworks are easily shared around the internet and it is too easy to copy and paste something just by hitting CTRL C and CTRL V. We also see cases where designers use artworks from Pinterest and Behance to use it as their own "solution" and charge the client for design fees. This is one way inappropriate and unethical. However, I would personally say that this is a very grey area where we need to be firm and clear between innovation and blind copying.
From the book Steal Like An Artist, I will agree that we are all learning by copying and mimic the masters' works. There are a lot of available artworks that are good and I personally love it too. Thus, taking them as reference and train with all the artworks has nothing to do with infringement. In fact, it is very beneficial to beginners as we are lack of understanding about the basics. Nevertheless, when it comes to the pros or when we label ourselves as the expert and provide charged services, this is where it becomes different. We no longer can refer and work directly from the work we referred to. It is important that we deconstruct the work to the fundamental, pick the essence, combine with the context and recreate the artwork from the different pieces derived from the design process. It is a very fun but tedious process as we may not get a direct answer, it may come by in an instant or it may need some time to manifest. Hence, this goes back to whether we should be charged on referring to the artworks of others when we are indeed referring but not using it without modification. Derivative works is the word to describe a direct expression by separating out certain element in a very obvious way from the original piece. In most cases, we are using derivative works and label it as our very own innovation which is questionable. Personally, I am still learning and digging more about copyright and trademark study which I think will benefit me in the long run as I am into the art industry.
The supply chain
After understanding the trademark and copyright issues, we then proceed to understand the supply chain and have an overview of who are the stakeholders involved. In order to improve the industry, especially with blockchain technology, understanding the supply chain is fundamental as we can identify the weakest point and strengthen it with technology.
An example case of how an artwork is created and sold to the end-user like how a member in HIVE had a deal with an artist.
- Customer approaches artist with an offer for a commissioned art.
- Artist and customer negotiate on terms and conditions for the commission with an agreed fee.
- Artist accepts the offer and an agreement is signed with certain deposit paid as per the agreed payment terms.
- Artist works on the commission piece and updates the customer according to the agreement. Modification may happen if it is not fine arts (especially for commercial purposes).
- Final work is done, artist to inform the customer about the status and show the final artwork with background inputs (like stories, materials use, etc.).
- Depending on the value of the artwork, the packaging and logistic of the artwork may be different. It may also include insurance as well depending on the value of the work.
- Artwork arrived at the customer doorstep and the customer may install the artwork themselves or there will be professional to do the job.
- Artwork can even be auctioned after a certain period of time and gain the appreciation value (depending on the nature of purchase).
In all of these 8 phases, there are different underlying issues that may obstruct the progress and even jeopardizing the whole deal. Thus, if the value is justifiable, blockchain technology can definitely facilitate the process by providing value like:
- Genuine proof of artist and their work with an identity creator mark from the artist.
- Transfer of value (in this case art piece) and proof of record that such transaction occurs and cannot be altered.
- Escrow facility with minimal or even free of charges by utilizing smart contract, safety for both customer and artist to have payment guarantee.
- Proof of offer and accept with a smart contract, this way things are formalized between both parties in terms of the engagement of service and promised deliverables.
- Integration of insurance, packaging and transport services for high-value items with blockchain technology. In one way, it reduces the risk of even the logistic company to supplant the artwork and replace with fake (too many drama series)
- Resale of artwork can be done virtually with a ready proof record of all the transaction happened under this piece of artwork.
- Instant transfer of ownership (depending on the blockchain transaction speed).
Centralized vs Decentralized
Looking through blockchain projects that are centralized and decentralized, all of them have their very own pros and cons. For decentralization, we get this transparent and a no-trust issue event as there is no presence of a centralized entity with just blockchain technology working for us. As for centralization, it would be more appropriate for an application that connects the physical world to the virtual realm. There is still a need for a reputable and trustable "agent" that could enable the connection of the art in the physical world to be uploaded. Without the agent, there will be still a lack of inclusiveness for the art industry whereby only digital art can only be integrated with blockchain technology. Thus, my take is to build a lean and close to community kind of agent to facilitate the "upload" of art into the virtual world.
Case studies
- The NFTs
- Non-fungible token (NFT) artwork is used to create verifiable digital scarcity, as well as digital ownership and to be able to interact with different platforms. The very first used case is the infamous Cryptokitties which at one point the "Dragon" Cryptokitties was sold at 600 ETH (worth 210,000USD as of now). The amazing part of digital art is how fluid it can be like how a game behaves. The artwork can grow into an ecosystem with more than 1 million versions of kitties that are available in the market for collection. This reminds me about how Pokemon cards and all other play cards work. When I was young, I did not see that getting the rare cards are going to be worth something in the long run, with the condition that the "culture" did not go sideways. Pokemon cards like the Charizard-Holo can fetch up to 12,000 USD as of 2017. The card was published in 1999 and in near to 20 years time, it appreciated around 600% per year. The most important element for which the items can have such appreciation in value is the rarity and stories. Without the scarcity and the right storyline that connects with the people who collect and willing to pay, then it is just an ordinary piece of card. It is the same as how NFT works.
- All Public Art Platform
- This is a centralized art platform where artists can sell their artwork and provide services like courses or commission art service for interested parties. They are issuing APA token which is based on ERC-20 token and APArt token which is built on ERC-721 token. With that being said, it is clear that both tokens are issued under the smart contract of Ethereum blockchain which can have certain shortcomings like congestion and high gas fee. A great idea that all the activities are facilitated through the built blockchain infrastructure. Yet, I see there are some issues where it might be a good consideration point for new projects:
- The tokens are not listed in any exchange, in other words, these token can only be exchanged with goods from the platform itself. This is convenient for the consumers but artists would have some issue about it as they would need to exchange their earning from APA token to fiat currency. In other words, this token is just like any points or coins that are issued by the company and only can be circulated within their ecosystem.
- Another issue is the scalability of the organization where the flow of getting an art piece to be on the platform, the public can capture and send details about the artwork to APA Platform. Then, there will be personals from the organization that will pay a visit to the art piece and verify its authenticity. This will be quite daunting but I think it is inevitable as getting art authenticated may get tricky and tedious. To me, the process is right as it ensures that all listed arts are genuine and authenticated by the experts from APA Platform, yet for the business side, it is going to be a heavy OPEX to cover (unless each art pieces carry a good price). Thus, the business model has to be smart enough to filter through and only get the most promised submissions to be authenticated.
- This is a centralized art platform where artists can sell their artwork and provide services like courses or commission art service for interested parties. They are issuing APA token which is based on ERC-20 token and APArt token which is built on ERC-721 token. With that being said, it is clear that both tokens are issued under the smart contract of Ethereum blockchain which can have certain shortcomings like congestion and high gas fee. A great idea that all the activities are facilitated through the built blockchain infrastructure. Yet, I see there are some issues where it might be a good consideration point for new projects:
- Christie's Auction House
- Even prominent auction house like Christie's had piloted the launch of a blockchain-based encryption and registration service for pieces of art. Such pilot test was done on the Barney Ebsworth collection whereby the tech partner, Artory(in charge for the registration service) prepared digital certificate for the sale of 300 million USD worth of art to be sold. Such an amount would justify the need for implementing a safe and trustworthy tracking and identification system. From this application, it also leads me to think about how about the rising artist which the artwork had yet to achieve so much value. How about them? Will their works be inclusive into the integration of blockchain technology?
- Parisian Bitcoin puzzle mural
- Another interesting case of mural art created by a French cryptographer and graffiti artist Pascal Boyart. They had collaborated and hid 1,000 USD worth of BTC in the drawing. Due to the nature of the artwork it a political statement that was interpreted as "freedom leading the people" to depict the French protest group Le Mouvement Des Gilets Jaunes in a reinterpretation of Eugene Delacroix's work. The artwork was then being censored by authority with grey paint flushing. Yet, with the help of blockchain technology, the artist then moved the art piece in the virtual world of Cryptovoxels, based on Ethereum smart contract.
Fractionalized ownership
Conventionally, the ownership of a piece of art is under a single entity. Yet, now it has changed with the advent of blockchain technology. A piece of art can be breakdown into shares of the art piece and salable to people all around the world. This is just like how a company share works. When the company decided to raise fund through an initial public offering where there are a specific amount of shares being broken down and offered to the public. With that, even the public can have a share of the profit of the company.
In my opinion, fractionalized ownership could drive the development and growth of the art industry as not only people can participate in the works of their favourite artists which may not be accessible before since it is very much exclusive to the art professional and rich circle. From the perspective of investment, art pieces can be a good investment vehicle which can be way more lucrative than stock. Yet, it is very dependent on how the artist plus the curators work hand in hand to build the brand.
On the other hand, as more people are accessible to art which includes being able to own a piece of art from the convenience of their own devices. Then, this will change the game entirely as people can easily access and read about any artwork. When the artwork is interactive or it may mean something to the audience, then naturally it will form a bond between the art piece and the audience. From that bond, the audience will be willing to spend some bucks to have a piece of it as it meant something to them. This would create a positive cycle loop that can both benefit the artists as well as the public.
The challenges of blockchain integration for art
- Getting artists to participate - this will be one of the challenges where artists would question how blockchain would actually help with their career. If the process is too complicated and redundant, then it would not be practical for them to adopt the technology. Another point of concern is whether it is having to adopt such technology, how much value will it generate for the artists themselves. These are real questions that we need to deliver in order to get the artists on board.
- Flow of digitization of physical artwork - in order to authenticate that the artwork is genuine and not forged, there is much due diligence that are needed to be done. Thus, this would complicate the process of getting physical artwork onto the blockchain. Even for digital art, there would be a need for an infringement countermeasure that can cross-check whether such work is done originally by the artist. To be honest, it may be very subjective when it comes to originality and it needs documentation of the whole production process to determine whether it is indeed a genuine work. Such a tedious process would need to be streamlined and recorded as well in order to justify the uniqueness of the work. As for the current application, we see any artwork can be easily minted on the blockchain and become an NFT almost instantly. That would raise a question of trademark and copyright that the conventional artists are concern about, specifically the artists that had already made it and is earning through the brand that they had built.
- Public awareness - another side of the story that we also need the consumer side to be aware and participate in the process. In my region, I observed that not many of us are in the arts. The involvement is purely on entertainment like movies and music but for visual art, it may not be as stimulating as the previous both. When it is hard to communicate with the audience, naturally the art piece would be harder to reach out to more audience that is intended to have. In fact, even the schools that we been to had not been focusing much on the education about art and the subject itself is an optional subject that seldom gets chosen by the students. So when art is accessible through blockchain, even though it is accessible, yet the awareness may not be there to benefit from the accessibility.
Note: a very interesting infographic that discussed about art & blockchain.
Inspiration
Understanding the industry and trying to hack the way through to improve the current flaw is something exciting to do. Problem-solving would be always the key skill for all of us to uphold and keep improving especially for those who want to survive in the 21st century. Blockchain technology is a blessing to us but it is important that we really understand what problem we are actually solving and see whether the technology is the right fit to solve the problem. From this brainstorm, I understand that not everything can be solved by technology, it has a multi-diverse level of consideration and interaction happening throughout every unique supply chain. Hence, we need to understand from that point of view rather forcing the technology as the antidote for the industry.
Reference
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