Can NFTs and Smart Contracts Allow First Nations Artists to Better Protect and Monetise Their Work?
Our next Lex Automagica project is “Putting First Nations Artists First” a collaboration between the ANU School of Law and the ANU First Nations Innovation Hub. It aims to determine whether NFTs and Smart Contracts can be a viable way for First Nations artists to better protect and monetise their works.
The Problem
Despite the artistic and cultural value of their art, Indigenous artists face several hurdles in being justly rewarded for their art, including sharing in future sales, ensuring provenance and guarding against fraud, retaining sovereignty over their work and reputation, and properly securing and monetising all the intellectual property associated with their works.
Can Smart Contracts Solve It?
We think we can provide a solution to these problems using blockchain, smart contracts and non-fungible tokens. We aim to demonstrate this through a working proof of concept. Non-Fungible Tokens should provide the basis for a low-cost/high trust system for tracking the provenance of indigenous art and associated copyrights, while smart contracts should provide a similarly low-cost/high-trust mechanism for distributing proceeds from secondary sales. The system should deliver a near-instant and near-costless buying and selling ownership and copyrights to indigenous art 24/7/365.
Such a system, if sufficiently practical and technically feasible, would overcome most, if not all, of the identified problems with the existing system. The obvious caveat is that the dominant beneficiaries of such a system would be indigenous artists on outback Australian communities that tend to lack access to appropriate technological infrastructure and know-how. To be viable, any blockchain-based solution must work in such a way as to deliver its full benefits despite this obvious bottleneck.
Potential Solution
The vision works something like this:
- Backbone: The network is maintained by participating Galleries and First Nations Custodians. They run and maintain the nodes that make up the network.
- Artist’s Wallets: These bodies are also the gateway to the system. They verify artists, issue their accounts, and keep safe the master private keys, ensuring that artists can never permanently lose access to their digital wallets and the assets they contain.
- Minting NFTs: Using a mobile phone, Artists can in concert with a participating Gallery or Custodian issue NFTs that verify the provenance of their art and associated copyright tokens.
- Optout: At the time of minting the NFT the artist will also automatically opt out of the Resale Royalty for Visual Artists Act 2009 and rely exclusively on the new network for ongoing royalties.
- NFT Rights: Instead of outright ownership rights, the NFTs would represent something more akin to a custodian or bailor/bailee arrangement along the following right and obligations:
- Rights of Use and Possession: The right to exclusive use and physical possession of the artwork in return for a royalty paid to the artist.
- Mandated Use of Network: An obligation to use the network in all future dealings with the specified individual artwork (and so ensure provenance remains authentic and the artist receives their royalty).
- Comprehensive Coverage: Regardless of whether a person acquires possession of an artwork privately or from an art market professional, good title to the artwork cannot be transferred except by acquiring its associated NFT using the network.
- Repossession: If a person sells, or purports to sell an artwork other than through the network – thus compromising provenance and avoiding the artists royalty – all ownership rights immediately revert to the original Artist who may repossess the artwork without compensation, either personally or through any of the participating Galleries.
- Disputes: The participating Galleries and Custodians would be empowered to provide full, final, and binding decision to resolve any disputes arising within the system.
The Technology
We will develop our Proof-of-Concept on a combination of the XRP Ledger and the Evernode Smart Contract Network.
The XRP Ledger
The XRP Ledger is a public, permissionless, decentralised network that uses a Unique Node List (UNL) consensus mechanism instead of Proof of Work or Proof of Stake. It has several benefits:
- Fast: transactions on the XRP Ledger take ~3 seconds.
- Cheap: transactions on the XRP Ledger cost ~0.0003 XRP which equates to ~$0.0001 at current market prices of $0.32 USD.
- Secure: the XRP Ledger has been operating since June 2012 and closed more than 72 million ledgers without incident.
- Native DEX: the XRP Ledger is the first blockchain to contain a native decentralised exchange, which means it has a native capacity to facilitate trading between assets without needing a third-party exchange to provide the service.
- Sustainability: the XRPL is one of the most efficient and greenhouse friendly blockchains networks Since it doesn’t involve the energy-intensive element of mining.
The XRPL TestNet
In addition, the XRP Ledger is currently testing two new features that would enhance its usefulness for our project. They are:
- NFTs: the XRP Ledger is in the latter stages of adopting a native structure for Non-Fungible Tokens. The implementation has several useful features, including the capacity for token issuers to specify a royalty that is always paid on every sale of the NFT.
- Hooks: Hooks are small pieces of code that automate transactions on XRP Ledger accounts. They are a form of smart contract. Hooks expands the types of transactions that can be automated on the XRP Ledger, a very useful feature
These two additional features are available on a robust TestNet (the XRPL TestNet). Our proof of concept will be built on this XRPL TestNet.
The Evernode Smart Contract Network
The Evernode network is a smart contract technology developed by the ANU. It piggybacks off the XRP Ledger and is currently also under beta development on the XRPL TestNet. Evernode dApps don’t run on blockchains, they are blockchains. Each dApp is its own blockchain with its own chain history and dedicated nodes, making them incredibly flexible. DApps may be public or private. DApps may call external services, read, and write data directly to disk and the web, and generally perform any task a regular program can, without centralisation or trusted third parties and without requiring the programmer to implement their own consensus mechanisms
This flexibility solves many problems that limit mass adoption of dApps including:
- Privacy Compliance: dApps can encrypt data, run only on hosts in a chosen jurisdiction, or only on hosts that have agreed to meet privacy regulations.
- Scale & Flexibility: dApps can run on as few or as many hosts as the dApp developer desires from a cost and security perspective.
- On-Demand Oracles: dApps can elect a sub-set or jury of their own nodes to get data from off-chain, agree on the truth, and report to the rest of the chain as a bespoke, on-demand oracle.
- Enhanced Security: dApps can detect when a host has become compromised or untrustworthy, shut down that instance of the dApp, and reload it on another, more trusted node selected from the Registry.
This combination of features is ideal for building our proposed PoC. It gives us the best chance being able to develop a dApp that solves the identified problems within the identified technical and practical constraints.
Indigenous Dev Team
One benefit of the Evernode network is that contracts can be programmed in almost any language, making it accessible to all experienced app developers. There is no need to understand C++ or Solidity. We will leverage this feature so that the dev team for the proof of concept will be experienced indigenous app developers associated with the ANU First Nations Innovation Hub, supported by mentors from the ANU School of Law who understand the Evernode technology.
Next Steps
Work on the proof of concept has begun. We should have something to demonstrate within the next 4-6 months. If a 24/7/365 blockchain-based Indigenous art market is of interest to you, get in touch.