The Lexon ART CHAIN case study.
This book presents an open blockchain concept for the fine arts, based on human-readable smart contracts created with Lexon. It details the rational for the chain, its features, economic model, governance, architecture, and technical implementation. It explores changes coming to the fine art world, as well as business models and attractive opportunities for third-party application builders.
The following are excerpts from the book LEXON ART CHAIN.
Get It >FOREWORD
The art world could benefit from digitalization. But the world of machines is so anathema to the spirit of fine art – it’s difficult.
Lexon is a natural language that machines can understand. It makes it easy. It is itself more art and craft than bits and bytes; at heart, linguistics, rather than software. It’s making machines understand us.
The whole idea behind this book is to imagine how much better the art business could work if contracts were on the one hand readable like normal English, and on the other hand ... un-breakable.
It sounds like magic. Like art, it is.
This book is focused on what really hurts artists and on what technology can really help with. The proposed solutions will be applied one day, one way or another. Just like everyone uses time-pieces today. Even us artists.
INTRODUCTION
The fine art world faces a perfect storm of major challenges. It must increase fairness, transparency, safety, compliance, and embrace the changes that digitalization brings. A long-standing friction lies in safe and timely cross–border payments. And then, the definition of art itself is evolving, flirting with something more fleeting, more inter-active – and more digital – where it’s unclear how to best support it and how to capture its value.
Blockchain technology can solve every single point on this list – and not by co-incidence.
Because blockchains were invented for safe and transparent transactions to overcome exactly the challenges that the art market faces.
But what’s more, smart contracts were inspired by the question specifically of how to record art ownership on blockchains. It’s not like, smart contracts are being repurposed to protect the rights of creators now. They were invented for it.
But until now, and despite a decade of research, there was something amiss. Things worked in theory but never in practice. What was missing was a bridge to make this new technology so easy to use and accessible that it could overcome the strong reservations of the art world.
This bridge is now provided by a new approach to smart contracts – Lexon – that makes them readable like plain English. This means that the unbreakable contracts that run on blockchains can now be read by anyone and be legally enforceable agreements.
With this, all puzzle pieces are finally in place to perform a meaningful and urgent upgrade of the art market’s ‘operating system.’ One that is future-proof and addresses acute woes as well as the needs of the next generation of fine artists, who grow up as digital natives.
As we will elaborate in the following, the Lexon Art Chain concept provides everything to address the pressing challenges of the art world in the most amendable way: inviting the community to a quantum leap, to leave a chock-full of troubles behind and be more creative, productive, and financially fair and successful than ever before.
. . .
THE CHALLENGES
There are at least seven, seemingly diverse challenges that all participants in the art market are facing today. Collectively, they prevent the industry from being as vibrant as it could be. Specifically, new entries – be it artists, collectors, or galleries – are bogged down and discouraged. It’s difficult to measure how big the loss might be but there is consensus that things have to improve.
For artists without star power, as well as the small galleries that nurture them, financial participation in the success of their artwork remains elusive today, despite laws to this effect, which in practice are often ignored. Many countries have made it mandatory that artists participate in secondary sales. But in practice this is simply not happening and can rarely be economically litigated. It is of interest in this context, that guaranteed participation in secondary sales – thanks to blockchain smart contracts – was a major driver of the NFT boom. How did that work?
For fine art, even though all market participants would like to see more overall commercial fairness, as the status quo is draining the production pipeline. In too many cases, new galleries and artists simply can’t make a living and their potential is lost, which loses future business also for the more established market participants. But the industry can’t bring itself to organize itself in a less predatory way, giving small galleries and artists of a more modest profile a bigger share. That’s exactly where blockchain technology can level the playing field for a better outcome for all.
The lack of fairness is one detrimental effect of the inhibitive lack of transparency of the entire market that makes navigating it unpleasant – and at times outright dangerous – which in turn limits its size. Art collectors don’t enjoy the part where one has to double check whether an offer is legit, or where they have to worry whether a transfer will arrive at the intended receiver’s account. The problem is that you can never be sure who you are talking to. With blockchains and digital contracts, you can.
Outright fraud makes life harder for artists, collectors, and gallerists alike, making security, a common cause for all. Security is inevitably weak and unreliable though as long as it rests on trust into more or less unknown third parties. That’s exactly the premise and magic of blockchains: that you do not have to trust any party in a transaction – neither the other side, nor a third party – and transactions are perfectly secure. That’s why the technology is called ‘trustless’ (granted, a pretty unhelpful, nerdy term).
Governments are pushing to reduce tax evasion and money laundering by increasing the KYC and AML requirements, as well as trying to help artists with a patchwork of participatory rights. This has the potential to slow down the entire industry as it swells administrative overhead of compliance beyond what many market participants are capable to handle. Again blockchains can help, because as a side effect of how blockchains work, they provide perfect documentation of regulatory compliance.
Digitalization could help but has an alien appeal to fine art. It can be experienced as lifeless as online presentations or online trade. With NFTs, simple forms of online art have been thriving in unexpected ways. And certainly, a new and fascinating world of creative opportunity awaits in the virtual world. But many are uncertain how to approach the change, which makes the entire art world vulnerable to outside challengers like NFT platforms. And when many galleries say they are disinterested in new forms of art it often betrays that they are not comfortable with it and don’t feel they have the means to support it. This is where Lexon’s digital contracts come in that are fully readable for humans and make the digital look familiar.
Finally, the definition, perception and utilization of art is changing. With new generations of artists, digitalization is itself becoming both means and subject of artistic work. The line between fine art and performative art are blurred and a work of art is not necessarily regarded as ‘complete’ at any point but may evolve by interaction with and based on feedback from the audience. A digital infrastructure is not only the more appropriate way to monetize this new type of art but it can offer unparalleled opportunity of organization and communication to the artists. These avenues are actively searched for and explored by the vanguard of artists who don’t think in traditional categories and will transform the way that we think about fine art, relegating current definitions and demarcations to the past. Because crypto technology emerged from a strong sense of responsibility and common grassroots effort, it is also the right toolset to help with this transition and provide where commercial and artistic aims overlap.
THE ANSWER
The answer to all the different challenges is one. A unified and accessible approach is needed that accounts for the full breadth of forces in play and leverages them to strengthen the industry. It must be simple, and easy to use, and reflect the realities of the industry as they are, rather than an idealized or overcomplicated fantasy.
At its heart – to increase fairness, transparency, safety, and compliance – it must provide a single source of truth as a public service, open to all, that is easy to access in every way and flexibly included in day-to-day operations.
This truth is foremost ‘who owns what.’ But it includes many more interesting aspects: it will allow to tap into the history of an artwork; to establish safe communication between audience and artist; and to have unbreakable financial basics – like secondary sales participation – built into its fabric.
This truth isn’t static: it changes and requires secure transactions in a standardized, economic way.
On top of this focused and powerful foundation – custom-made for fine art – healthy competition will ensue to provide the most useful and user-friendly applications to support, empower and safeguard artists, collectors, and gallerists.
Blockchain technology can provide all this as a reliable, shared utility for the entire industry. It was made for that as it is the result of research that was kicked-off in the late 1980s, precisely with the goal to find a method that can support perfectly reliable transactions in volatile environments, and to deal with circumstances where participants may know little to nothing about each other, wherefor enforcement of law could be hampered or impossible due to weak or overly expensive jurisdictions.
Few people know that the art world was the pivotal driver that led to the invention of smart contracts and the evolution of blockchain technology from Bitcoin to Ethereum. The concept of Ethereum smart contracts was in fact invented during the concrete quest to find a better way to record intellectual property.
Therefore, the Lexon Art Chain is not repurposing smart contracts for fine art. Rather, smart contracts were invented for fine art.
Even the name ‘smart contracts’ reflects this. Smart contracts could instead have been called ‘decentralized triggers’ or ‘blockchain scripts.’ Vitalik Buterin publicly rued to have proposed the marketing savvy ‘smart’ moniker instead. But it was the intention from the start that smart contracts would be used for ownership transactions like the Lexon Art Chain provides. They were not called ‘unbreakable programs,’ because they were meant to be more than that and have a legal aspect. The term ‘smart contract’ had been coined before blockchains, to propose a way ‘to program’ contracts to make them safer. Blockchains added the ‘magic’ that these contracts cannot be broken. Lexon adds that judges can read them, which makes them legally enforceable.
This is why blockchain technology is so particularly well suited to tackle all seven challenges that the art industry faces: it was literally made for it.
And this also explains the NFT boom; it was not a random mixing of entertainment and technology. Blockchains had evolved to be the new rails for the art industry. While that was not happening yet, the mechanisms had a test run without the art.
What was missing, however, was a way to elevate smart contracts to legally enforceable agreements. This capstone to smart contract technology is now being provided by the language technology Lexon, which makes it possible to write smart contracts in plain English. This achieves the user friendliness that blockchain technology had been missing. And it provides the interface for smart contracts to the legal system.
Lexon’s digital contracts – i.e., smart contracts that are written in plain English – provide the required transparency, the secure transacting of funds and assets, and the low-cost of rule enforcement enshrined in smart contracts. Every transaction on a blockchain is recorded in a tamper-proof and provable way. Agreements, like the participation of artists in secondary market sale, can be protected by digital contracts such that they cannot be circumvented. If someone makes a payment for the artwork, the share of the artist will be paid. The performance of contractual obligations does not have to be monitored nor enforced, because digital contracts on the blockchain simply can’t be broken. It is, to some extent, as if litigators and judges were built right into the technology. A digital contract performs as agreed, always. A proof of ownership on the blockchain cannot be forged. It does not get fairer or safer than this.
The benefits of trustless technology are also the solution to the increasing regulatory burden. No additional action is needed for legal compliance: a blockchain transaction is auditable always. They even allow to embed laws and regulations, so they can’t accidentally be violated.
WHY NOW
Because of this alignment of challenges and features, attempts to establish a blockchain for fine art have been made for almost a decade. Arguably, the invention of Ethereum was inspired as an improvement over Bitcoin by the concrete task of registering fine art on Bitcoin.
But despite years of research and millions of dollars invested, no notable success has been achieved. Lack of understanding of the art market as well as timidity on the blockchain side have contributed to failures.
Upon inspection, the reasons are obvious:
1. an evolution of blockchain technology had to arrive to give us the means we have today: Ethereum smart contracts had to be invented and lead to Lexon’s human-readable digital contracts.
2. The scope of the problem at hand turned out to be too much for promising projects, which pivoted away to try something easier. Some approaches could not scale to the needed size, some did not look deep enough into the actual realities of the art market.
3. Half-hearted, more centralized attempts missed the chance to create a true public utility, the only viable proposal to the art world. Any attempt to monopolize the new forum of this industry had to fail.
The fine art blockchain presented here is the result of the work of a dedicated, well-funded team that diligently researched the reality on the ground of the art business, backed by far-sighted stakeholders, native to the industry, to create what is really needed for the current challenges of the fine art world. It is the superior technological answer to the complex transformation that the art market faces. Its performance gains and reduction of overhead will enable a long tail of art sales that cannot exist in today’s opaque structure but is demonstrated to be viable by the NFT platforms. The hundred-times faster turnaround of artworks in the digital market is made possible by the very mechanics of smart contracts outlined above. Neither its meteoric growth nor its predictable crash was a coincidence. In NFTs, artists knew they will receive their fair share in every resale, immediately. This was made possible, by the secret source that NFT markets exploited and that blockchains were invented for: the unbreakable unity of title transfer and commission payment that blockchain smart contracts can provide. Nothing else could enforce fairness so reliably and yet economically. And nothing could demonstrate more accurately what blockchains were made for.
This transformation will come to fine art. It was made for it. It is only a matter of when. It will invigorate the art market and must be driven by the original citizens of the fine art world instead of the digiterati of crypto land.
Who are, of course, ready to move it. They have tested the rails. Now they will want content.
But the rails were made for fine art. It’s yours for the taking.