Can Web3 Automate Equity?

Sparrow Read: As I progressed through the NFT space as an artist, I found limitations on all of the platforms, which failed to explore the possibilities of what NFTs could be. Over the last year of the hype cycle, new platforms were coming online that were really just cookie-cutter marketplaces replicating what had been formulated back in 2017 with the likes of Dada and CryptoKitties. 

Matt and I were considering what defined the NFT, and he suggested that the single image isn’t the entire finished piece, but in fact the artwork comprises the layers upon layers of text that is written about it, as well as everything that went into making the work. We concluded that that’s what the NFT should really be. That conclusion then led to a conversation with Judy, who relayed that most NFT books so far have been either PDFs, EPUBs, or else simply text attached to a token. In Web3, anyone can see an image, but a token defines who owns the image. That digital ownership is the true innovation. Applying that to books, we did not want to token-gate them because these stories should be as freely available as artworks are to view. 

‍Matt Kane: I’ve been lucky to have Sparrow to speak to for the past several years, notably after June 2021, when I had work in Sotheby’s first NFT sale, “Natively Digital.” For Meules after Claude Monet (2021), I wanted to create an NFT that was an archive of context for the artwork. So it included all of the layers, including a GLV [low-resolution video] file. I also started a big Twitter thread about what the future of NFTs should be in terms of providing context for everything, not simply artwork. 

One of the issues for me as an artist is that I was never making art for a market. For nearly a decade, I wasn’t bringing art to market, but I was making art. So I’ve always found it important to archive my work. And because I work with code, there’s also always more than a single image. 

I think what Sparrow is building at The Platform is potentially showing us what NFTs are going to become and what the new standard will be.  

I’m glad that Sparrow is here to question things and push forth in this direction because NFTs are more than merely JPEGs. There’s so much more rigorous activity happening in terms of what is being tokenized — it’s infinitely more expansive. 

‍Judy Mam: In the world of fine art, you get some form of artist bio that provides context about the work. But in our digital space, at least at the very beginning, it was all focused on the product. When we started out, people were always asking about what the blockchain meant and how it worked. Now here we are, four years later, and no one cares about how the blockchain works anymore — everyone is focused on NFTs to the exclusion of any kind of information about them. NFTs have become products to transact yet there is no real information or depth of knowledge about the works, artists, or context in which they are created or the culture that they are contributing to. Any digital content can be tokenized, whether it’s a book or a piece of music, but it needs to live in the context of the real world. 

‍SR: You can also see that the same thought patterns have transferred from Web2 to Web3 platforms. So SuperRare as a marketplace has an editorial where they feature NFTs, yet the content written about those NFTs is not linked to those NFTs. If an artwork gets resold on the secondary market, the next buyer won’t be aware that there is also an article written about the artwork that gives context. 

I wanted to make sure that we can link the art to its context and preserve it for future collectors. 

‍AE: How will that function in practice? 

‍SR: There are two possibilities: one is that all of the content becomes the NFT — so the article and the image together make up the NFT. This follows a model similar to Judy’s book, which has a GIF, code, and text — everything is the token. The other model is more like what Matt was describing, where you have a manifest of content, metadata for example, which could then be updatable to account for subsequent articles that might be written about the work in question. The path chosen really depends on the artist or creator. 

‍AE: It sounds like one is a way of freezing a cultural artifact in time and one is a way of preserving a palimpsest, which is to say a layering of contexts?

‍SR: One works like an archive, which is perfect for books and publications. The other is a way of building context over time. The latter might also be applied to existing tokens, so for artists who have tokenized works somewhere else, they could then create a context NFT linking that token with additional assets such as articles or even preparatory sketches. The Platform is going to offer these tools for artists. 

‍AE: Over the past year, there’s been a real explosion of interest in blockchain poetry, which is a case study in how NFTs can open up new markets for old art forms. We’re also witnessing the rise of engineers as artists in Web3. The Platform seems well-suited to this kind of hybrid creator economy. 

‍SR: It is. It’s also based on the premise that, most of the time, people are not creating in isolation. Yet the vast majority of platforms only allow one creator wallet, which doesn’t make any sense. So being able to add collaborators on primary and secondary sales and sharing royalties, as well as primary-sale splits is super important. Before we had artist royalties, Matt brought us all together to approach platforms and say: “Hey, we should be doing royalties; the blockchain is good at splitting payments and keeping track of those kinds of values.” 

We should use the blockchain for what it’s good at and leave the creative space to the creators. Let’s give them the power to define the NFT and let the blockchain take care of the administration.

‍AE: The Platform seeks to split royalty payments in a way that acknowledges the contributions of different cultural laborers to a single digital artifact. To me, this seems like the most revolutionary aspect of the project. Matt, can you explain this element?

‍MK: Let’s say that I’m making a portrait of someone, but because I’m terrible at lighting, I’m going to hire someone to light the subject properly. I’m also hiring a model and maybe even a make-up artist. There are multiple participants in that economy now.

Let’s say I go on to exhibit my portrait in a physical gallery space, I’m going to want to bring everyone involved into the new economy rather than them being paid the minimum wage. Everyone should be participating in the success created by the work, including the person sweeping the floor.

In a smart contract, all of those players can be pulled in, and instead of just earning a one-time fee for something, they can actually take pride in their work to know that the work they do to promote Matt Kane’s portrait is going to echo in history for them. They could potentially see a royalty payment 20 years from now because they were the model or they applied make-up to the model. That’s really transformative, and an opportunity for players who have not been historically represented. These are valuable people who are adding worth to companies, which should echo through time. 

‍SR: It’s also about rejecting the idea of an extractive economy, which is what we see in most cases today. We want to create a system where the people create value rather than the speculators. In Web3, most of the projects that involve profit sharing will create a token which is then taken by speculators who capture most of its value rather than the people who created the value. The Platform is also going to be a cooperative registered in the UK, so that everyone who becomes a member, including creators, collectors, and the team building it, will become a member of a cooperative that shares in its ownership. Everyone has a say in how profits are used on The Platform. 

‍AE: It seems to me that Web2 automated exploitation and extraction, whereas the principle of The Platform is to automate equity. 

‍JM: Dada is doing something like that as we speak. It’s interesting because Dada.nyc was actually the first to code royalties into smart contracts in 2017 with the Creeps & Weirdos. Before OpenSea had become essentially Amazon for NFTs, we talked to its founders Devin and Alex, and told them they had an opportunity to create a standard that allows interoperability for royalties across every platform. They weren’t interested at the time because they didn’t have the funding they have today. 

What shocked me is that everybody replicated the model of the art market. When we moved into digital marketplaces, there were basically no royalties. All these incredible things that you could do to distribute value equally were completely ignored and we at Dada were the only ones doing that.

In terms of secondary sales, 60% would remain in the hands of the collector, 30% would go to the artist, and 10% would go to Dada. [...] Dropping a token is all very well — you are giving some value back to the people who contributed — but acknowledging the monetary value people give is not the same as recognizing the intrinsic value they provide. That’s what Dada has been doing with The Invisible Economy. 

‍SR: The reason we replicated the art market is because that’s what people knew how to do. Doing something different is not easy. It’s taken years for Dada to come up with a different system. And it’s been a really long road. It’s taken a lot of thought and the enormous efforts of dozens of people. The important point is that it is just an alternative — we’re not saying that everybody has to do it this way. You’ve got a system already that works for you. What I’m trying to do with The Platform, what Matt has been trying to do with his whole career, and what Dada is doing with The Invisible Economy is providing an alternative for the people for whom the system doesn’t work. 

‍AE: Can you say something about the technical mechanism through which labor is fractionalized? 

‍SR: On The Platform, on an NFT by NFT basis, the creative team decides on the percentage split that they get. For Judy’s book, for example, Judy, her publisher, and the designer for the book will receive fixed percentages that get split in an 0xsplits contract, which applies to primary and royalty sales. The smart contract honors the different contributors of value. 

The way The Platform works is that, for each NFT sale, a percentage also goes to The Platform DAO. Everyone in the DAO can decide what that revenue is used for in a democratic way just like all cooperatives. However, we’re not using voting. We’ve been using a tool called Polis, which is a way of surfacing consensus that has been used by the Taiwanese democracy movement. We’ve been using that as a way of aligning decisions rather than voting on decisions. 

I’m inherently against voting because, any time you vote on something, some people win and some lose. And especially in a small organization, having winners and losers does not build relationships or trust, instead it just builds divisions. 

‍AE: I’d like to conclude by asking you all about the state of crypto art today, for which Dada is a paradigm. How does The Platform extend and iterate on that project? 

‍MK: I think what The Platform will do is give people a choice when they come into something like crypto art. When I learned about art on the blockchain in 2017 — a week before CryptoPunks was released — I was a little discouraged. I immediately went looking for the gallery system because that was the paradigm I was in at the time. Now in 2022 I feel a little ashamed of the close-minded person I was back then. I believed I needed gatekeepers. Even though I was a technologist and a coder, I didn’t want to figure out how to code my own Solidity contact.

I thought, “well I’m just going to wait around for the galleries to form and for the commercial interest to take off.” 

But the people entering this space in the future are going to have the choice to say, “forget this gatekeeper model. I have my own social media; I have The Platform with its democratized tools; now I can just go off and be the chief stakeholder.”

‍SR: It really is about democratizing the tools. I think there’s a lot to be said for Manifold, which helped artists to understand the value of having your own contract and owning your own tokens. The Platform follows that example. Each artist, creator, or publisher — as we’re terming them — has their own contract and then they decide what gets tokenized on that contract. So The Platform is a collection of contracts, each individually operated by that group of creators or that individual artist. 

What has changed is that we’re no longer a small community of 100 people. In the early community everybody knew everybody else, and now there are thousands and you don’t know everybody, which means that niches are forming. I think people finding their own community is one of the biggest hurdles currently. And so having a way of signaling through technology, contracts, or tokens will help people to find where they belong and the people they resonate with. At The Platform, we have the criteria to verify that we trust a potential new member. In the trustless space of the blockchain, it’s ironic that it actually requires a lot more trust in people. 

‍JM: I’ve never understood why they call the blockchain “trustless,” because it’s absolutely about trust. 

In the end, we’re transitioning from a system that is making billions of dollars out of your data into a system in which you as an owner are also responsible for what you put out into the world. 

The market itself is not conducive to radical inclusivity, nor will it get there through well-meaning intentions, but it can get there through practical tools. And it’s important to make sure the people know that the tools exist. That’s where the inclusivity will come from.