H ow has Blockhain been a benefit for digital artists, and an exciting new channel for collectors?
It's no wonder blockchain technology was hailed as a seismic disruptor to the art market when it first erupted on the scene. Its potential to enable life-time compensation for artists from their own creations, represented a fundamental shift in the way art is traded. This concept was enshrined in a manifesto laid down in 1971, the Artist's Reserved Rights Transfer and Sale Agreement, devised by conceptual art curator, dealer, and publisher Seth Siegelaub and lawyer Robert Projansky. An open-source, legal contract, the Agreement specified the rights, royalties and responsibilities of the collector and helped shape a framework for digital art, when it emerged decades later. And with the arrival of blockchain, it is not only artists but the wider ecosystem that is poised to flourish.
What exactly is a royalty?
A royalty is a compensation paid to an asset’s original creator upon sale of that asset. With smart contracts, these payments have been enabled through blockchain technology. Indeed, it was blockchain’s ability to grant artists ongoing equity in their work that was heralded as game-changing, by creators and collectors alike.
It follows that a feature of the recent blockchain-based art boom has been the possibility of embedded creator fees, which enable digital artists to benefit from secondary sales in perpetuity. NFT marketplaces were immediately differentiated by this possibility. However, it has never been a legal requirement upon any platform to offer this option - in other words, no means of legally enforcing the principle.
So, now what’s the problem?
There was alarm among digital creatives late last year, when some web3 marketplaces began to talk about taking mandatory royalties off the table. In October 2022, blur.io launched offering a zero-fee marketplace to incentivise collectors. Following this decision, they quickly began to dominate trading volume. As a result, others followed suit and in early 2023, OpenSea – formerly a staunch advocate for royalties – introduced optional creator fees. These decisions have been widely criticised as being detrimental to the market.
What does Art Blocks CEO Eric Calderon think?
Speaking at CoinDesk’s annual conference, CEO of Art Blocks Eric Calderon said that it was short-sighted for collectors to consider royalties as a “transfer tax” and instead, emphasised that this practice feeds into the wider ecosystem, benefiting artists, collectors and platforms.
And what does digital artist Tyler Hobbs say?
Tyler Hobbs, a leading contemporary generative artist, says that royalties have provided him “breathing room” between projects, so he can focus on “making great work, instead of feeling financial pressure to rush on to the next”. Importantly, in the long-term, maintaining a royalty system helps collectors too - when artists can be earning from past work, new art can thrive, driving overall quality upwards.
But while other marketplaces have placed the royalty system in peril, Sotheby’s have upheld their commitment to creator fees. “It’s so refreshing to see a historically traditional player, like Sotheby’s, honour royalties on secondary [digital art] sales,” says Hobbs. “This concept was widely supported in the NFT movement for its democratic ideals, yet some web3 markets are the ones to have faltered on their promises.”
“It’s so refreshing to see a historically traditional player, like Sotheby’s, honour royalties on secondary [digital art] sales”
Hobbs was part of the first roster of artists on Sotheby’s Metaverse, which rotates every few months - that initial crop also included Claire Silver, Sofia Crespo, Refik Anadol, Pindar van Arman, Hackatao, IX Shells, and XCOPY. And as far as Sotheby's is concerned, resale royalties are, and will remain, a core component.
So, what’s Sotheby’s position on the situation?
“Honouring artist royalties was a foundational component of Sotheby’s Metaverse that we implemented from the start,” says Michael Bouhanna, Sotheby’s Head of Digital Art & NFTs. “One of the hallmarks of blockchain-based art is its decentralised nature, creating a unique culture since the outset that distinguishes it from traditional art. Part of that ethos has been about empowering artists and creators, as the traditional artist-gallery relationship is not how most artists share their work with collectors. Our commitment to honouring artist royalties is a testament to that ethos and one that we will continue to support and ensure that artists are the core of our digital art platform."
While some players in the blockchain market are gambling on withholding royalties, in the hope of greater profits in the short term, it is worth considering the bigger picture. If our artists are empowered to continue creating, their art will flourish and our collections will benefit. And in the long run, everyone will reap the rewards.