Art Basel and its parent MCH Group have announced the launch of Arcual, “a new blockchain ecosystem offering smart contract solutions for the art community”. Arcual’s raison d‘être is a digital ledger which offers artists, galleries, institutions, and collectors a standardised way of logging sales agreements and provenance on the blockchain.
It’s actually a separate business to Art Basel, co-founded by MCH with the Zurich-based LUMA Foundation, a non-profit founded by the collector and entrepreneur Maja Hoffman, and incubated by BCG Digital Ventures (”we help the most influential organisations invent, launch, and scale the visionary businesses, products, and platforms that will propel them towards a better future”). It’s not clear how much of Arcual is owned by who, and how costs and profits are distributed; certainly Art Basel is retaining its existing Web3 relationships, notably with Tezos – an open-source blockchain that can execute peer-to-peer transactions and serve as a platform for deploying smart contracts.
The art market can be a strange and unfriendly place for buyers, sellers and artists. In total sales were worth $65 billion in 2021 according to the Art Basel Art Market Report earlier this year; that’s a best guess, since most players aren’t under any obligation to report sales accurately, and auction houses famously have ways of fudging the numbers. But at the sharp end, there are two big issues – royalties and provenance.
Royalties are virtually non existent; resales are said to represent something around 40 percent of the total market, but at that point the artwork has become merely a commodity or an asset class for speculation. The artist rarely gets sees any of the sell-on price, let alone the (hopefully) increased value.
A related issue that gets less coverage outside the circuit is the impact on galleries that take the risk of supporting artists early in their careers. They don’t usually see any benefit from all that work after the artist’s reputation (and the value of their work) increases.
And provenance research can often be difficult, both for contemporary artists – several of whom aren’t great at keeping records: they just want to create – and for old masters, where the chain of ownership is frequently open to abuse to distort value or obscure title.
In theory it should be possible to use a Web3 approach to fix some of the issues, and that’s what Arcual seeks to do – by going a bit further than Tezos and others. “This new initiative was born out of a shared mission to put artists at the centre of the art ecosystem, offering them greater ownership, transparency, and participation in their careers” declares the press release.
Marc Spiegler, Global Director of Art Basel for now (he’s leaving his full-time role at the end of this year, but staying on to advise the fair group for the following six months) said Arcual aims to correct what he termed “imbalances” in the art market. “The inspiration for Arcual came from a long-standing 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 provided early support for their careers.”
Or, as the press release puts it: “Arcual’s blockchain applications will create a trusted space for information, partnerships, and transactions within the art world … Arcual has been purpose-built to address the unique needs of … artists, galleries, institutions, and collectors”.
In terms of actual product, Arcual offers smart contracts that are permanently tied to an individual artwork with customisable resale royalties included as part of the deal along with the usual terms and conditions. Automated payments go to all parties after each sale, and the record provides a verified ownership history. When transactions take place on Arcual, artists can even stipulate in the agreements how their works should be installed or stored, and how physical works can be translated into the metaverse.
Arcual also generates a unique digital Certificate of Authenticity for every artwork that is registered on the blockchain. This cannot be lost or damaged, and is automatically transferred to the new owner after each sale.
A variety of built-in automated payment options are provided through an arrangement with Stripe, with interest-free credit through ArtMoney as an alternative.
All this information remains encrypted, and unless specified otherwise it will be accessible only to the parties involved in the contract.
Arcual will make its money from a small fee (“less than five percent”) on all initial transactions, with a larger take of five to 15 percent every time an artwork is resold.
There are other blockchain approaches to digital contracts in the art industry, the likes of Fairchain, Artory, and Verisart; there will probably be more to come, though the Art Basel imprimatur definitely gives Arcual a leg up. Arcual also believes it has a has a significant USP: when a sale is made, Arcual requires two parties — typical the artist and the gallery — to create the contract and the certificate of authenticity. This gets over the problem of a contract created by a single party; there the buyer has to trust the probity of the creator (who would typically be a gallery) to ensure that the information in the contract is authentic.
Arcual is being run as independent company with offices in Zurich, Berlin and London. It’s headed by Bernadine Bröcker Wieder (right), who founded art-tech platform Vastari (a service that allows private collectors to upload details of their holdings anonymously to a secure online database which registered museums can search looking for works for exhibitions). She says Arcual can solve long-standing challenges and create new opportunities: “we want Arcual to be a trusted space for information, partnerships, and transactions, from which new forms of collaboration will be possible”.
Arcual might need a couple of years to find its feet; there will be a lot of issues around blockchain registrations to be resolved. But it does look promising, and the eminence of its backers – one embedded in the commercial art business, the other a non-profit with a good track record of supporting artists in practical ways – does add lustre to the project.
Arcual is currently being offered in beta phase to galleries but is due to make its first public appearance at Art Basel Miami Beach early in December.
Incidentally, you were probably wondering what ‘arcual’ means. It’s “of or pertaining to an arc”. A branding agency probably got paid a lot of money for that.