This week on ArtEvolve, we discussed smart contracts and the impact they can make across the art world.
Our guests were Bernadine Bröcker Wieder, CEO of Arcual, a blockchain ecosystem purpose-built for the art community, and Vandana Taxali, an art-tech entrepreneur and intellectual property lawyer practicing in entertainment, art, technology, blockchain and NFTs.
We also had video contributions from Alana Kushnir, founder of Guest Work Agency, which provides innovative legal solutions to art world clients in Australia and beyond.
What is a smart contract?
A smart contract is a computer program or code that, when certain pre-determined conditions are met, executes a formula, i.e. “if this then that”. Many of us are already familiar with this type of action in software programs that help us automate workflows and save time.
Smart contracts can also run on the blockchain.
The different parties using a smart contract can be immediately sure of the outcome without needing to take manual action or waste time checking conditions have been met.
Smart contracts on the blockchain
Blockchains, such as Ethereum and OpenSea, are already being used to buy and sell NFTs but, as Bernadine mentioned, there’s much more to art than just trading it.
Unlike Arcual, these blockchains were not built with the art industry in mind and don’t include functionalities for broader art world applications. That could be more information included in the metadata in the fields of a transaction or linking files (like a condition report) to a smart contract.
Are smart contracts legal agreements?
Smart contracts are not legal contracts but they can assist with legal contracts by ensuring certain obligations are met using computer code.
Legally binding contracts can be difficult and expensive to enforce, and judicial systems are relied on to re-actively enforce agreements. Smart contracts can help parties pro-actively ensure the conditions of a contract are met.
Aside from enforcement, written contracts are often not used at all in the art world, meaning proving the terms of an agreement can be near impossible. Embedding a smart contract not only speeds up existing processes, it also brings clarity and security.
Do I still need a legal contract?
Smart contracts still need legal contracts to cover issues such as governing law jurisdiction and other terms. Ensuring that a smart contract is subject to a legal agreement will ensure that you are protected fully.
How do you amend or modify a smart contract?
What are the advantages of smart contracts over legal contracts?
So, what are some of the potential benefits for the art world?
- For the art market – increased efficiency, which means a decrease in the costs associated with buying and selling. A less fractured, more transparent marketplace.
- For artists – immediate royalty payments from sales and resales.
- For galleries – a streamlined sales process means less admin, allowing staff time to be directed to where it’s most valuable. A digital certificate of authenticity reassures buyers.
- For collectors – enhanced documentation, such as proof of purchase and verification of provenance. Opportunity to directly support artists via royalties.
- For museums – timestamped, archived, and verified information – about authenticity or history, for example – can better inform decisions and processes.