Emerging Tech Blog
If adopted, the proposed ERC-1190 Ethereum standard could have important applications for creative rights and digital assets.
A Non-Fungible Token for the Art World
ERC-1190 is a non-fungible token for royalty payments. Non-fungible means that each token represents something unique, such as an image or a song. (See the codeon Github).
Imagine creating a sculpture or a gaming object, which you now want to share with the world. The proposed token would allow you to share the artwork and to profit from it by easily keeping track of any revenues generated from it. Specifically, an ERC-1190 token would allow you to sell the art’s creative license, sell its ownership license, or to rent it to a third-party for a fixed period of time.
This article will outline how the proposed ERC-1190 token standard can help artists focus on creating art, while reaping the financial benefits of their artwork passively.
Tamper-Proof Records of Art Transactions and Revenue Owed to the Artist
Put yourself in the shoes of an emerging painter. You can showcase your work at some of the thousands of art shows around the world each year. With talent and some luck, your paintings could be exhibited at an exclusive art fair, such as the privately-owned Art Basel, which maintains an excellent regional and global profile and showcases works for sale by both established and emerging artists. You would like to sell one of your paintings to the highest bidder.
In ERC-1190 terms, you own both the asset’s creative license and its ownership license, and you would like to sell its ownership license while retaining the creative license. The buyer of the ownership license would be entitled to possession of the painting and most of the revenues from any future sales. However, the creative license you retain will ensure that you receive a fixed percentage of any revenues from future sales (for the example at hand, let’s say the creative license entitles you to 10% of revenues from any future sales).
Using an ERC-1190 transaction would not necessarily bypass the traditional method of selling artwork. For an emerging artist, a buyer would likely want to see a work of art before buying it. A more established artist may be able to conduct an auction on the blockchain alone.
Let’s say you sold your painting to the highest bidder at a traditional art fair, but recorded the sale by transferring an ERC-1190 token representing the artwork. Recordkeeping for the sale and for any future movements of this work of art and any revenues received from them is now easily accessible to you on the blockchain.
Now, let’s say the buyer of your painting sells it to an international marketing agency at a markup. As the creative license holder, you are entitled to 10% of the revenues. If the sale to the marketing agency is conducted on the blockchain, you would receive the funds seamlessly (without even knowing about the sale). If the sale is conducted in a traditional setting but recorded on the blockchain, you will be notified on the blockchain and will have a right to claim 10% of the revenues from the recipient. Use of the ERC-1190 would therefore remove information asymmetry and contracting friction, benefiting artists.
The international marketing agency now rents your painting to an event company for a week. The event company will display it at a multilateral political event. The rental license associated with the ERC-1190 token will show this rental, its time period, and its price. The holder of the ownership title will receive the majority of the rental income. However, as the holder of the creative license, you will get a percentage of this rental revenue as well.
For Established Artists, Sales Could Be Conducted Entirely on the Blockchain
An established artist’s work often appreciates in financial value over time. Art collectors and art investment companies commonly hold artwork as an investment. This art is not placed on walls or displayed. Rather, it is stored in a secure location. Sometimes, even when the art is sold, the only thing that changes hands is the ownership documentation, and the art remains stored in the same location.
In these cases, using an ERC-1190 could open up this market to anybody by conducting sales entirely on the blockchain, reducing the roles of private auction houses and word-of-mouth sales. This would benefit art collectors (by giving them a more liquid market for sales), art enthusiasts (by allowing them to buy art more easily) and artists (if they hold on the creative license, they would be entitled to revenues from future sales).
What about Selling, Gifting or Bequeathing the Creative License?
Until now, this article has only considered situations in which the artist holds on to the creative license. The artist also has the option of selling the creative license. Once the creative license is sold, the new holder of the creative license would receive a cut of all future sale or rental revenue.
Due to the fragmented nature of the art world, it often takes decades for talented artists to become known. Indeed, several of the best known artists today were not appreciated in their time. For example, Vincent van Gogh was poor and virtually unknown when he was alive. His work was not widely viewed or appreciated until after his death. It wasn’t until after his death when people started to view and appreciate his work. Last year, a single van Gogh painting sold for $81.3 million.
Using an ERC-1190 token, an artist can bequeath their creative license to future generations even if they have sold the ownership license (and therefore no longer own the underlying work of art). If someone in van Gogh’s family or town held the creative license to one of his paintings today, they would receive significant revenues every time that painting was sold or rented.
Transforming the Art Market
ERC-1190 could allow artists to focus on creating art while knowing their financial interests are protected. Those who collect, trade, market, display or appreciate art could also focus on what they do best, and benefit from secure transaction records and more accessible, liquid markets.
Click here to check out the code.
Click here for another explainer article.
Click here for a brief, simple explainer video.
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