Better Assets for a Better (Art) World — Whitepaper / Manifesto

How to build more socially valuable capital marketplaces using public blockchain securities of collectible artworks. A project to refocus the blockchain revolution on building a better future.

Bitcoin is a better asset. Bitcoin is the first global, open, on-demand and securely traded capital asset. The primary blockchain innovation is redundancy of agency for issuance, security and trade of Bitcoins. We will use blockchains to coordinate all global resources. The resources we coordinate best will determine the pursuits, people and places that future societies value most.

Open trade attracts hyper-liquidity to retail assets both physical and virtual — whether existing or newly imagined. Cryptographically secured assets can rapidly attract maximum interest and price speculation. Blockchains are an intuitively larger opportunity than the internet’s coordination of all data and services.

Better Assets for a Better World is a project to apply Bitcoin’s lessons to the art market’s enduring value(s). It’s a solution for the art market that can grow it in every metric. It’s a solution for blockchain projects to focus on both better assets and a better world.

Art makes us better. Aesthetically, art changes what we see. Philosophically, art changes how we see. Economically, art rewards individual creativity and collective taste. Productively, art is atomised to the most anti-fragile extreme — a light source, an artist, a stone and a cave wall are art’s basic inputs — extended to music and poetry, all that ‘art’ requires is a single voice. When all other industrious pursuits fail, we will make art. There is no more sustainable industry.

The Bitcoin currency is a digital asset with a single speculative attribute, namely its future price. Speculation and global demand combine to assign today’s value to a Bitcoin. Colloquially, we call this global 24/7 hyper-demand “FOMO” (for Fear Of Missing Out). We had under-rated Bitcoin’s potential for FOMO and now we may over-estimate its ability to sustain speculation. The productive lesson in Bitcoin’s highs and lows is:

A blockchain asset that sustains speculation infinitely will also store and grow capital value infinitely.

Art is the only asset class that has sustained its value primarily through sustained speculation. Even gold’s valuation has gone from primarily speculative to commoditised while art becomes more speculative with time. The art market cannot find its intrinsic value. It trades only $50Bn annually but art assets store tens of times that value — possibly $1,5Tn (i.e. 6X BTC or more.) Like Bitcoin, we likely underestimate art’s potential demand in a global, secure and liquid marketplace.

XA-XA-XA by William Kentridge Ed. 12/40

Art’s rebel spirit is mirrored in Bitcoin. We speak of an ‘art-world’ that does not exist. A ‘world’ is a realm with constant rules — art has no coordination (central or decentralised). Governments do not regulate art assets. Art hasn’t been commonly organised by artists, brokers or collectors. Global trade in art is the only open opportunity for blockchains in traditional asset management. Creating better assets for the art market will not require disintermediation.

The art market will have to adopt a paradox to secure its better future. As with Bitcoin, art’s rebel nature mutes its potential. For the most part, rebellion is where art finds creativity but the cost of art’s creative freedoms have been extreme. The art market has compromised three values to remain rebellious:

1Authenticity is traded for art’s freedoms.

Relying on 3rd parties for authenticating art is costly to the market’s total value. Functionally, it is a failed strategy. Forgeries hang in our galleries. The art agent’s incentive to offer authentication as a service has entrenched a bifurcated marketplace.

Creative arts will be a more profitable pursuit when artwork is securitised. The authenticity of art should not be up for debate. Trust in the identity of the $1,5Tn (estimated) art market assets is fragile. Excessive arbitrage margins erode value in a manual authentication process that restricts and controls art trade. This market’s capital liquidity and value is a fraction of its potential. Only a net asset increase, resulting from unstoppable creative production, sustains the market’s season-on-season growth.

Blockchains can secure valuable assets without intermediaries. Art assets require commoditisation of security to find the true value in authentic artworks.

In a securitised art-world, expert authentication is still required — in exception cases only. This remains part of art’s speculative charm. An initial mass-securitisation effort of existing artworks is obviously needed. It can begin with a single piece — or 3. The art featured in this essay is to be securitised as the first 3 assets on the art blockchain, for sale via twitter auction to kickstart project development. It’s a start.

Less need for authentication will refocus art agents’ efforts on promoting art and artists. Innovation is enabled when authentication is trustworthy — new entrants will pioneer art’s next business models and create new interest in art. More distributed and liquid art marketplaces — operating online with trust and without friction — could easily grow art sales tenfold.

2 Art’s historical record is traded for art’s freedoms.

Without agreed protocols for administration, art’s historical records (called ‘provenance’) are poorly kept. With increasing reliance on 3rd parties for access to art’s provenance, this valuable attribute is widely exploited. Information asymmetry fuels speculative markets. More and better provenance yields increased speculation and more value in art. A lack of transparency and accuracy in art’s provenance is paradoxically costly to trust and ultimately, value, in art. As with authenticity, accurately and openly preserving art’s provenance should not be up for debate.

Like security of authenticity, security of provenance is a byproduct of licensing art on a public blockchain.

Often described as a ‘living ledger’, art’s blockchain will natively record historical ownership of artworks (whether private or public) and historical valuations of art trades. With smart contract functionality for licensing art, the blockchain will also record valuable events (creation, edition, restoration, exhibitions, media mentions, etc). Aggregating this information will yield our first perfectly consolidated view of the pursuit of an artist, the rise and fall of art movements and the peculiarities of our tastes.

When history records blockchain efforts, art will be recognised as the only asset class that derives additional capital value from all of the data points in its growing ledger. Every trade recorded compounds the value of the next art asset. Art’s provenance problem is elegantly solved by the blockchain’s compounding data problem. This asset class has uniquely been waiting for this specific technology — this essay writes itself.

3 License is traded for art’s freedoms.

Security of title and fidelity of provenance are art’s two tickets to the global liquid asset game. Art licensing is how we will reward and attract art’s greatest players.

Obscura Revision Series #1 by Lionel Smit — Ed. 1/6

Artists are the only creative class that do not enjoy license royalties on secondary market trade. Licensing artworks in the way that music, movies and books are, is virtually impossible in art. While art’s greatest value is traded in its secondary market, two thirds of living artists cannot earn a living wage and dead artist’s legacies accrue no value to their estates. Let’s paint a picture of a better art-world.

The invention of programmable blockchains solves for the unimaginably large opportunity in the licensing of artworks; both digital and physical. The 3rd piece of art’s better future is a library of agreed art transactions. These protocols, attached to blockchain securities of artwork, programmatically enforce license rules as art is traded in the open market.

The applications for smart contracts to innovate and stimulate global art trade are both obvious and unimaginable:

• Artists will earn license revenues on secondary market sales (if they choose). New promoters of investment art will offer artists liquidity of trade in stark contradiction to today’s strategy of targeting a much smaller “buy-but-never-sell” art market. With artists’ involvement in the secondary market rewarded, we can blur of the line between the divided markets for contemporary art and will see far more vigorous art trade.
• Artists and owners will earn license revenues on asset placements in exhibitions and media. We will see more art. Pop-up art exhibitions will curate hidden gems. Ads and movies will feature actual art. Digital media has benefited greatly from art’s visual enjoyment and vice versa. License is a tool for better meeting that growing interest and rewarding art owners and artists.
• Art securities will be atomised to offer share investments in high value artwork. We will solve the problem of museums not paying rent while masterpieces hang on their walls. Screens on our walls at home rotate views of our fine art investments alongside the more speculative contemporary works we can afford to own entirely. Art asset listings will bring the world’s most valuable artworks out of hiding in castles and vaults.
• Art share derivatives will help us make sense of it all. Bundles of art shares will teach Wall Street to love symmetry, pop-art, Warhol, the colour yellow and any other attribute of art that we can consolidate into art funds and speculate over.

It is my hope that art’s true rebellion will be found in this project. That embracing paradox and choosing order without governance is art’s boldest expression of its independent and rebellious spirit. If you’ve read this far, you’re the rebel we need — pass this on — your challenge is to be the dreamer who explains to your friends how art can create a more valuable future.

On that high note, we are back to money. Today, the value in currency captivates the collective productivity in countries. Industry, finance, natural resources, creative pursuits and international relations combine in an economic mashup that we label with a three letter acronym — USD/GBP/ZAR. Good companies’ valuations are subject to weak governments’ decisions (or, the other way around.) In art, identical prints of collectible artwork vary in value depending on the currency in which they are held and traded. A global world will demand — is demanding — global currencies. How they are coordinated, more specifically, which assets they back, will determine where we pay our attention.

There is no need to add an art-backed cryptocurrency to solve art’s problems as discussed above. This project will succeed without an ‘art-coin’. It is optional and as such, it’s the harder argument to write — but not to make. Thus far, we have saved art from itself — we now get to offer a better solution to the world at large. A better world is simply one that uses a better currency. Once securitised, art is a better asset for backing a global currency for 3 fundamental reasons:

1.Art guarantees sustainable value growth.

Art’s unique combination of infinitely sustainable speculation with infinitely sustainable production puts art in an asset class of its own. No other asset can more simply or fundamentally guarantee sustained future value growth. Once equally secure and globally liquid on a blockchain, art assets could provide a sustainably valuable backing for a currency.

To initiate demand for pure cryptocurrency, supply must be stimulated. The full impact of this digital redistribution of wealth is yet to be calculated. In the absence of better assets, we devalue those that we had — at least, relatively. This cycle of new cryptocurrency contenders will continue until we ultimately identify the fundamentally ‘best’ assets to back global cryptocurrencies — whether they be real or virtual.

It is a diverse world — we will see great diversity in virtual and physical assets backing cryptocurrencies. Whether consolidation will happen is currently speculative to the benefit of the valuations of all contenders. Art can now enter this race for our future attention.

2. Art guarantees distribution of control.

Valuations of pure cryptocurrencies like Bitcoin are ultimately controlled by consolidation of wealth. Bitcoin’s biggest asset owners can also easily control asset production (i.e. mining). In an art-backed currency, the nexus of control is guaranteed to be distributed — unless art investors can also learn to make great art. It is unlikely. If the random vagaries of art’s changing interests trouble you, then they should give you equal solace in art’s ability to secure distribution of control in an uncontrollable growing global currency.

Re-form VII by Lehlogonolo Mashaba.

3. UBI meets UBP in art.

The challenge in (UBI) Universal Basic Income initiatives is that supply is limited to a socially conscious wealthy minority. These projects now seek global liquidity in blockchains. Their audience remains a relatively small slice of capital but it is now a global slice. Universal Basic Production (UBP) is the obvious but missing solution to expanding this audience dramatically by incentivising both productivity and demand.

As a social strategy, UBI is a push mechanism — it redistributes wealth deliberately. History has proven us more successful when we pull people out of poverty by offering them opportunity to be productive. Art is humankind’s most sustainable creative pursuit. When we can tell any child anywhere that they can secure their future through their creativity alone, UBI is solved. Global adoption of an art-backed cryptocurrency may make this dream a reality. It can’t hurt.

I am as excited to hit ‘publish’ on this essay as I hope you are to hit ‘share’. Thank you for reading.

Next steps:

1. This document is in its 1st draft. Edits / suggestions / volunteers are welcome. Iron sharpens iron. We’re going to need an army. Artists, bankers and techies — if this was a startup, it would be a strange launch party. Comments below or on twitter: @davidgibbons
2. The fundraising effort kicks off with twitter auction of the artwork featured in this essay. The “founders series” will be the first artworks securitised when we have a pilot. I hope this adds to their provenance but guarantee you will enjoy them regardless — this is from my art collection. It’s a start. Donations of artwork and ETH are going to be needed — details will be posted and linked here soon. This is a non-profit effort. Sorry, no ICO — we‘re building an open art-world. Once that’s done, we can build valuable marketplaces — for art — and yes, ICO if you’d like.
3. Organisation and governance of this project is next to be decided. All ideas are welcome. With the goal to license only art assets and have the currency purely art-backed, there can be no profit in the platform project. A foundation is required to lead and evangelise what we do — as is a coalition of interested 3rd parties. If you think about open governance and have an idea that can be simply implemented, please comment.
4. Proposals are needed for platform architecture. A programmable blockchain is obviously required for smart contracts. If capital value is to accrue primarily to the art assets then it should be as abstracted from network value (i.e. mining etc.) as possible. Further, the ‘art-coin’ cryptocurrency requires a proposal that makes long term sense. While it should be well integrated to the art securities blockchain, it is again optional and may benefit from being on a discrete network.
5. Evangelism is my final focus for now. Better Assets for a Better World needs to find its tribe. I am looking to reach influential artists, technologists, investors and media. If you know someone I should be speaking to, please say so in the comments.

Finally — on a personal note: THANK YOU to Pia for tolerating my obsession with this project. Your support and love are my most valuable assets.