By Yan Ji | PhD Student in Computer Science, Cornell Tech
Blockchain technology helps enable processes of automation in the sale of artworks, but reconsidering the value of contracts as systems of relations, what differs between historical contract technologies and smart contracts? Lauren van Haaften-Schick, DLI Doctoral Fellow, raised this question and presented a comparative view in a legal sense in her talk entitled “‘The Artist’s Contract’ (1971) to Smart Contracts: Remedies for Inequity in the Art Market in Historical Perspective” at the Digital Life Seminar on February 28, 2019.
van Haaften-Schick traced the influence and after-effects of “The Artist’s Reserved Rights Transfer and Sale Agreement,” also known as the Artist’s Contract. The Contract was created by curator, dealer, and publisher of conceptual art Seth Siegalaub with lawyer Robert Projansky in 1971. It aims to protect the rights and interests of artists in their resold art work. Inequities have existed in the art world for centuries, such as artists' lack of control over the use of their work and participation in its economics after they no longer own it. Artists such as Carl Andre and Sol LeWitt asked for the rights to attach binding conditions to the sale of their work and to be consulted when their work is displayed, reproduced, or used in any way. If the conditions were not met, the museum, collector, or publication would compensate the artist for use of his art. The Contract is designed to remedy these generally acknowledged inequities and provide resale royalty, transparent provenance, exhibition approval, rental/loan income and all reproduction rights to artists. It is expected to be the standard form for the transfer and sale of all contemporary art.
However, the publishing of the Artist's Contract didn't end the story of inequities in the art world. In fact, the Contract is seldom used in practice. In addition, California's 1977 Resale Royalties Act, a law requiring that visual artists receive 5% of the sale price when their work is resold, was struck down in 2018 by an appellate court. One reason for the failure in those attempts to protect the interests and rights of artists is the difficulty of enforcing them in reality. They tend to favor those artists who are able to sell their works at high prices to make a living. Compared to the litigation cost, the resale royalties is too low for the artists, who can only sell their work for a pittance but actually constitute the majority of artists, to bother with and to enforce the contract or the law. Moreover, with continuous controversy and court challenges, the law has often set artists against dealers and split the art community.
The Contract is nevertheless an important step to bring a greater sense of fairness to the art world, and the emergence of blockchain technology seems to bring new hope towards the utopian. Blockchain is a public distributed ledger and smart contracts are programs whose appropriate execution are enforced on a blockchain. In other words, smart contracts are digital enforcement of traditional contracts. Transactions can take place automatically at no cost when specific conditions are met, not relying on any trusted institutions or transacting parties. And all the transaction history is public, available and reliable on the blockchain. There have already been attempts in combining art market with blockchain technology. Christie’s starts to record its art auction on the blockchain. Artory is a blockchain-based registry of art and collections that tracks provenance of art and collectibles. Maecenas is a blockchain-based art investment platform. UppstArt and SuperRare pay resale royalties to emerging artists with blockchain technology.
Though most artists may hope that adoption of blockchain technologies in the sector would lead to a more balanced, transparent, and equitable market for all, there is another competing view of such technological innovation that blockchains will extract even more severe economic rents from artists, leaving them disenfranchised. Such reverse on blockchains have been observed for many times. For example, although Bitcoin was promoted as a new payment scheme involving no necessary fee in its early days, people have to pay incredibly high transaction fees to motivate miners to include their transactions in blocks due to blockchain's fundamental scalability issue; decentralized exchanges are supposed to be more secure than traditional centralized exchange, but it is found to be vulnerable to frontrunning attacks at low costs; decentralized autonomous organization (DAO) enforces decision making electronically, but it is even easier for adversaries to bribe and harder for the public to detect. We can foresee a future where the bulk of art sales values are driven by the dealers and auction houses on blockchains that guarantee absolute anonymity, such as Zcash, due to their enormous potential for tax savings and confidential record keeping, just like how free ports have become the parking lot of choice for high-net-worth buyers.
Overall, although blockchain technologies provide a lot of juicy properties for art market such as automation and transparency, the real-world enforceability remains an open question. There are fundamentally human problems underlying the technological layer. The relations between artists and dealers are always worth exploring.