Art & The Blockchain Is A Reality: One Third Of Small And Medium Sized Businesses Now Take Cryptocurrency As Payment. What You Need To Know!

Blockchain is affecting the art industry, small business, and our lives in general. How will it change the way artists, galleries, and art buyers do business?  Here’s what artists and art buyers should know about this evolving technology. The Rickie Report shares an informative article about Art & Blockchain, written by Carolyn Edlund of Artsyshark.

 

 

 

 

 

 

 

 

 

 

ART     &     THE      BLOCKCHAIN

 

 

Art as NFTs and the rise of the crypto art market have been all over the news lately. Headlines scream about artists earning veritable fortunes overnight, while others warn about energy usage. Some artists are clamoring to get involved with this hot new market. Others are vehemently opposed.  What is the future of NFTs and the blockchain technology behind them? I spoke with two experts to get answers and dive into big changes coming to the industry.

 

 

Why Blockchain Matters

 

 

Blockchain is a “trustless” protocol that records transactions through a transparent, verifiable ledger system which cannot be altered. The entire cryptocurrency market and a myriad of virtual tools and projects are built on blockchain platforms that provide fast, accurate and safe functionality.

 

Importantly, blockchain is a decentralized system which is disrupting the status quo. It tends to increase fairness and stability, and take power out of the hands of a small group of decision makers. In this way, blockchain mirrors the art industry itself, which has fractured and placed more control in the hands of self-determining individual artists.

 

To get to the heart of the enormous impact this will have in our everyday lives, I spoke with Shidan Gouran. He is an early blockchain investor and a serial technology entrepreneur holding degrees in Pure Mathematics and Theoretical Physics from the University of Western Ontario. Gouran is the founder of Gulf Pearl, a Canadian merchant bank focused on “financing both private and junior public companies in the information, communications and media sectors.

“Blockchain is now mainstream,” Gouran says. “Technologies come and go, and better technologies will come. The concept of universal databases that anybody can read and write to and that cannot be manipulated are very useful. Digital assets are here to stay. It just makes sense that things would move from paper to the digital world. Tracking and provenance of real world objects on the internet will become more and more common. Those are the realities.”

 

How prevalent is blockchain in our society? One-third of small and medium-sized businesses now take cryptocurrency as payment. Bitcoin can be purchased using Paypal. Mastercard, Visa, and American Express are all embracing blockchain technology. It is transforming the banking and “financial industries, and is the “digital DNA” of the internet 3.0.

 

 

The Question of Energy Consumption

 

 

Blockchain is undergoing rapid evolution and improvement. Detractors cite as a major concern the high energy usage in the “mining” process that drives transactions. Bitcoin is often held up as a major example of this excess.  “Bitcoin was the “first prototype; it is not the last system in existence,” explains Gouran. “Right now it consumes more energy than the Netherlands. Each transaction burns more than 700,000 Visa transactions as far as energy goes. When you consider these things, Bitcoin is not a great system. In my opinion, if it became the world’s currency it would be highly immoral, because of the energy consumption.”

 

 

How will this problem be overcome? Bitcoin operates on a Proof of Work mechanism which is energy ineficient. The Ethereum blockchain (which powers NFTs) and other platforms are moving to Proof of Stake, which is much less energy consumptive.  Gouran adds, “There are systems like Stellar and Ripple and when released,Facebook’s Diem blockchain, which would use even less energy than Ethereum’s Proof of Stake. A transaction on the Diem blockchain doesn’t cost more than a Visa transaction.”

 

 

Think of super efficient systems underlying the technology of finance and business that remove the need for offices full of workers using energy to validate and push through transactions. What are the energy savings when you don’t have to power 100,000 square foot buildings using light and heat and computers for hundreds of workers because they aren’t needed, all due to blockchain efficiency? We could end up with an actual decrease in energy usage.

 

 

 

 

 

Art as NFTs

 

 

NFTs (art sold as non-fungible tokens) have captured the imagination of the world and produced record-breaking sales. I asked art advisor, curator and crypto expert Georg Bak about this phenomenon. He says, “NFTs are certainly not just a trend. I believe that this market has a huge growth potential, not only for art but also for any kind of collectibles in the game, fashion and sport industry. At the moment the market is a bit overheated and many buyers are only buying NFTs in order to flip them instantaneously and make profits. I believe we will see a correction towards a more consolidated and matured market. There are so many historical digital artworks which never had a market and can be discovered by a wider public.”

 

 

What does this mean for the individual artist?  Selling platforms are cropping up like wildfire, offering an opportunity to artists who want to enter the crypto art market. Over time it will shake out and mature, and providers will address some of the existing technical limitations. Right now the sky is the limit. Once we have some history in the rearview mirror, the road will become clearer.

 

Benefits of New Tech

 

 

New technologies built on blockchain and the “smart contracts” they enforce and offer a level of transparency to an often opaque art world. This is good news for artists who create both digital and physical artworks, which can be embedded and tracked.

 

Bak says, “Blockchain technology will certainly not solve the authenticity and provenance issues of the past, but it can have a strong impact on future transactions. Nevertheless the data on the blockchain is only valuable if the physical artwork can be identified and assigned clearly to the data. There are different methods to apply identifiers such as for example RFID chips or surface scanning technologies.”

 

Once embraced, chips and scanning methods can assure the authenticity, scarcity and provenance of an individual piece of art. Artists will also use blockchain technology to track inventories, collectors, shipping and sales transactions. Another huge benefit of smart contracts is automatic payment of royalties to artists when secondary sales of their work are made.

 

 

Power to the Artists

 

As decentralization continues to put more control into the hands of individual artists, they are no longer in thrall to gatekeepers or third parties. How will our industry evolve as the power centers change?

 

 

“Galleries are certainly losing their monopoly over the market as artists can reach out to collectors directly,” says Bak. “The new gatekeepers are online marketplaces, and power is shifting from galleries to platforms. Even though platforms provide an interesting new revenue stream for artists, they don’t necessarily provide the same extent of curatorial exposure and content for artists as gallerists did in the past. Quite often platforms select artists according to purely mathematical measures, such as the number of followers on Instagram. Therefore, I think that galleries or artist managers are still playing an important role in promoting the artist’s career but probably they have to reinvent their business model.”

 

 

 

Want to stay current on cutting edge business articles from Artsy Shark, plus artist features, and an invitation to the next Call for Artists? Subscribe to twice-monthly Updates, and get a free e-book on Where to Sell Art Online right now!

Carolyn Edlund:  410.977.2915

Carolyn@ArtsyShark.com

www.ArtsyShark.com

 

 

 

For coverage of your events, to place an advertisement, or speak to Rickie about appearing in The Rickie Report, contact:

Rickie Leiter, Publisher

Rickie@therickiereport.com   561-537-0291

17019 SW Sapri Way   Port St. Lucie, FL 34986

 

 

Good Business Practices: Protecting Your Artwork On The Internet

With today’s technology, artists are no longer constrained to showing their work in galleries. Exhibiting your art on the Internet literally opens up a whole world of potential clients. But at what risk? The Rickie Report welcomes Attorney Matthew Harrison, as he writes this Guest Column about protecting your artwork on the Internet.  Matthew Harrison is a leading expert on the legal issues regarding photography and other visual arts. His specialties include copyright and trademark matters, release forms, and the potential legal pitfalls of using the Internet for self promotion. While he maintains a practice in Massachusetts, all of the topics written about either apply nationally or are specifically written for the Florida artist.  

 

 

THE INTERNET AS A DOUBLE EDGED SWORD:

Protect yourself while getting the most out of the promotional opportunities

By Matthew B. Harrison, esq.

 

How many of you display your work on your own website? Facebook? Tumblr? Pinterest? Twitter? Instagram?

 

 

 

The Internet can be an amazingly inexpensive way for you, as a artist, to 1) be able to showcase your work and 2) hopefully bring in potential business through these self-promotional efforts. However, before you run out and post your work everywhere, I would like you to think about protecting yourself and your property, so that you do not end up falling into the group that answers affirmatively to the next question.

 

 

 

Of those who do display their work online – how many of you have had the pleasant experience of surfing the web and seeing your artwork somewhere without your permission? It may not happen for all artists… but it happens to visual artists more than any of us would like to admit. You need to be aware of this phenomenon so that you can adequately protect yourself.

 

 

As a point of reference, this article is about non-commercial use of the image by an unauthorized party as opposed to a commercial use. Unauthorized commercial use is an entirely different animal and may be outlined in future articles.

Here’s one example… shifting point of view to the viewer.

 

Pretend for a minute that you are not the intelligent and informed reader of The Rickie Report that you are, but instead are “my cousin Vinny.” While he may think he is of sound legal mind, he is not a lawyer. He’s just a normal guy who doesn’t really know much about anything – and even less about technology. He may know what a computer is – but his main purpose for using it is the access to free adult material.

 

 

So while I can write about copyright protection until the cows come home, and declare by edict that materials on the Internet cannot be used without permission – do you think that “my cousin Vinny” is going to listen to what I am talking about – let alone follow by my words? Not a chance – even if I had a scantily clad model holding up a giant sign.

 

 

But Vinny! You are committing a copyright violation by taking that image off someone else’s website and posting it on your page – or sending it out via email to your buddies – or even using it on your desktop as a background image. His actual response: (after the shut up kid… you bother me) “Hey… I got it for free on the Internet… If they didn’t want me to have it, why would they put it out there?”

 

What Vinny is trying to get at is a fair use argument. Does his justification have merit? Perhaps. That’s a simplistic look. It gets complicated. What about the budding photographer who shoots a wedding inexpensively thinking that some of the cost will be made up in print sales, and the bride and groom don’t order prints and take the web sized proof images that they feel they paid for and put them all over Facebook.

 

Is it appropriate to put online / social network usage as a separate line item in an invoice?

What is fair use?

 

 

Fair use is a copyright principle based on the belief that the public is entitled to freely use portions of copyrighted materials for purposes of commentary and criticism. For example, if you wish to criticize a novelist, you should have the freedom to quote a portion of the novelist’s work without asking permission. Absent this freedom, copyright owners could stifle any negative comments about their work.

 

 

So what is Fair Use? The only guidance is provided by a set of fair use factors outlined in the copyright law. These factors are weighed in each case to determine whether or not a specific use qualifies as a fair use. For example, one important factor is whether the potentially infringing use will deprive the copyright owner of income. It seems straight forward, but unfortunately, weighing the fair use factors is often quite subjective. For this reason, the fair use road map is often tricky to navigate.

 

 

The Fair Use statute: The doctrine of fair use developed over the years as courts tried to balance the rights of copyright owners with society’s interest in allowing copying in certain, limited circumstances. This doctrine has at its core a fundamental belief that not all copying should be banned, particularly in socially important endeavors such as criticism, news reporting, teaching, and research. Under the Act, four factors are to be considered in order to determine whether a specific action is to be considered a “fair use.”

 

 

These factors are as follows:

• The purpose and character of the use, including whether such use is of commercial nature or is for nonprofit educational purposes;
• The nature of the copyrighted work;
• The amount and substantiality of the portion used in relation to the copyrighted work as a whole; and
• The effect of the use upon the potential market for or value of the copyrighted work.

 

 

So getting back to Vinny – if a work is freely available on the internet – making a copy will have little or no effect on its market simply because no commercial market for the work has been established or claimed… and that is not good for the photographer or artist who gets ripped off from someone like Vinny. It means that as long as you were not selling the particular image copied (in the form that was copied) whoever did the copying has a pretty strong argument for a fair use defense.

 

 

Getting back to the Facebook example – if a person’s usage is only on their Facebook profile, and it’s the same web sized image that had been presented to them as a proof, it would be hard to argue that the intent was copyright protection. So how do you protect yourself from falling into the trap of a fair use argument?

 

 

While I hate to say this because as an artist myself the following advice pains me…

An artist NEEDS to identify their work and claim the value of it on their website. One way to identify the owner of the work is to watermark the image; and if you really want to protect yourself at the cost of devaluing the overall aesthetic of the image – the watermark should be towards the center of the image so that it cannot be cropped off. By doing this – it is painfully obvious that the work belongs to someone.

 

By offering licensing to use the image, or making the image for sale in the form of a print on your website, you are evidencing actual financial value to the image on the site – and to any reproduction made by the image. This will, in the least, provide you with an argument against a proposed fair use defense that an infringer may have.

 

 

Matthew B. Harrison, an entertainment and media attorney, is a senior partner with the Harrison Legal Group based in Springfield, Massachusetts.

He can be reached by phone at 413-565-5413 or e-mailed at matthew@matthewharrison.com.

You can also see some of his adventures and explorations with fine art photography at filmandvinyl.com   

He can be reached via the web @photosandthelaw.com

 

 

For coverage of your events, to place an advertisement, or speak to Rickie about appearing in The Rickie Report, contact:

Rickie Leiter, Publisher

The Rickie Report

P.O.Box 33423

Palm Beach Gardens, FL 33420

Rickie@therickiereport.com

561-537-0291