What’s wrong with today’s art market?
That’s a question to which there are answers aplenty. Artists are largely unable to benefit from the skyrocketing prices of their work after an initial sale, while flippers can make out like bandits. Galleries that support artists early on in their careers can be left high and dry after they hit it big. A true chain of ownership is difficult to trace. The list goes on.
A new company, Arcual, leverages blockchain technology to address these issues and wants to change the way business as usual is done in the art market.
Cofounded by Art Basel and the Luma Foundation—two Swiss institutions with different interests (the former is a commercial enterprise, the latter a nonprofit)—the company defines itself as a “blockchain ecosystem built for the art community, by the art community.”
It is, to put a finer point on it, a custom digital ledger that hosts smart contracts designed for artists and dealers.
Those contracts offer art-specific features that standard agreements often don’t: they can define payment terms, verify provenance, and ensure that creators are paid royalties each time their artworks are sold. Artists can even use these agreements to stipulate how their work is installed or stored and how it can be translated into the metaverse. They can request work for an exhibition quickly and easily, without having to do elaborate detective work.
“If you sell a Dan Flavin without a certificate of authenticity, it’s just a bunch of light bulbs,” explained Bernadine Bröcker Wieder, Arcual’s CEO. “That’s kind of the idea. If you sell something without the artist’s digital certificate of authenticity that they minted with the gallery, then you lose the essence of the artwork. You lose the voice of the artist.”
What Arcual is building, Bröcker Wieder went on, is “this digital voice of the artist that continues to go along with the artwork for its lifetime.”
The success of Arcual will depend on how much buy-in it gets from the art world—not only from artists and galleries, but from collectors, too. A beta version is now being offered to galleries in the Art Basel network, but the real rollout will begin in December when the company plans to introduce its technology at Art Basel Miami Beach.
In a future where transactions take place within the Arcual universe, an artist could conceivably disown a piece with the click of a button if the collector violates conditions agreed to at the point of sale, like not flipping it for a certain period. (Disowning a work—the nuclear option—is certainly unlikely, but it’s possible.)
A similar value proposition stands before dealers, who can also build royalty agreements into contracts and split proceeds with their artists. Doing so incentivizes them to support young creators, Bröcker Wieder points out. It also helps them benefit from the still-booming market for ultra-contemporary art: Katya Kazakina notes in the latest edition of the Artnet Intelligence Report that, in 2021, artworks created the year prior generated $139 million at auction, 10 times more than a decade earlier.
For its part, Arcual will take a cut of less than five percent on all initial transactions, then a larger cut—five to fifteen percent—anytime an artwork is resold.
Unlike Ethereum, Polygon, and other blockchain infrastructures, wherein information is recorded—by design—on a public database, Arcual prioritizes privacy. What an artwork costs, who it was sold to, where it lives—that information remains encrypted; it’s accessible to only the parties privy to the contract, unless specified otherwise.
The company’s database is also purpose-built for real—that is, physical—art. “This is not an NFT platform, and it’s not a marketplace,” Bröcker Wieder stressed. (Before joining Arcual, she founded Vastari Group, an online marketplace for private collectors and exhibition producers.) The company is headquartered in Zurich and currently boasts around 20 employees.
The platform, which was incubated by BCG Digital Ventures, an arm of the Boston Consulting Group, is not the first to apply smart contracts to the art industry. Predecessors that use blockchain technology to register the sale of an artwork include Fairchain, Artory, and Verisart. (Some take a flat fee on sales, others take a percentage.)
Max Kendrick, the founder of Fairchain, said he hopes Arcual “reveals itself to truly be artist-first. We also look forward to learning more about the extent of their commitment to protecting user data and how they navigate the inherent vulnerabilities of smart contract architecture.”
Representatives declined to state how Luma, Art Basel, and other investors will share proceeds.
“Arcual’s technology allows us to make possible what was much-needed before, yet impossible to enforce,” Marc Spiegler, global director of Art Basel, said in a statement. “Within Art Basel, the inspiration for Arcual came from a longstanding frustration around the fact that in today’s art world, artists often don’t benefit from the growth of their own market—and neither does the gallery that supported them.”
Maja Hoffmann, the mega-collector behind Luma, said in a statement that the initiative is “about placing the artists in the center, which is also the mission of the LUMA Foundation.”
“The blockchain makes sense here,” added Bröcker Wieder. “It’s something that, in the long term, will benefit the entire system.”
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