Legal Implications of a Masterpiece & Prime Real Estate Within Your Reach
Have you ever imagined climbing into your grandmother’s attic on a lazy Sunday afternoon and stumbling on a copy of the first print of the U.S. Constitution? Or a long-lost original Van Gough?
In my case, this dream had no chance of being a reality: all my grandparents live in a cramped apartment with no attic. And my family has moved around so much that, to the extent, there has ever been anything of value or historical significance, it has already been discovered and sold by others long ago. And that is how I gave up all hope to ever own the first print of the U.S. Constitution or an original Van Gough.
Eve Sussman runs Snark.art, a Brooklyn laboratory for art and technology that explores the ways that blockchain can unleash creativity in art. One day, Eve, who works with film, video, and installation, wondered what happens when many people own a piece of a work of art. She shot a video piece called 89 Seconds at Alcázar, recreating the famous Las Meninas 1656 masterpiece by Diego Velázqueis that now hangs at the Museo del Prado in Madrid.
She then divided her original Ethereum-based video into 2,304 unique squares to create a new piece of art on the blockchain. She allowed collectors to purchase individual, unique blocks. Now, the 89 Seconds at Alcázar is in the collections of the Whitney Museum, the Museum of Modern Art, and Seoul’s Leeum Samsung Museum, and others. As the white paper put it, “The resulting blockchain-based artwork, 89 seconds Atomized, can be collected by a group of new owners, who are empowered to reassemble the full video at will.” Eve’s experiment is an example of fractional ownership, an intriguing concept enabled by blockchain-based smart contract technology that will challenge many of our existing models of ownership and assets.
In 89 Seconds Atomized, each square is registered on the Ethereum blockchain as a digital token (“atom”). It cannot be duplicated but can be freely traded or sold. It is offered at random for the price of $120. The purchaser receives an atom on the Ethereum blockchain (ERC-721), each of which contains a full ten-minute 20×20 pixel video, that can be viewed at Snark.art and stored in a digital wallet. Collectors can loan out atoms or request a loan from the community for public and private screenings. Individual atoms can also be bought or sold by collectors — each is a piece of art on its own.
This approach allowed many people to own a part of Eve’s work. It is also becoming a social experiment in ownership and collective interaction. Eve’s work of art can be reassembled and screened at will by the community of collectors. So, what happens if some of the purchases don’t want to display their unique block or somehow missed the notice to do so?
At this time, the unique blocks that do not have permission are not displayed and instead, a black square appears. This obviously pushes the boundaries of what it means to own something collectively. What impact should each owner have on how the work is displayed? Should she be able to choose not to display it? Is being able to make that choice part of the dynamic nature of the artwork? Is the ability to experience the same artwork differently each time a central part of the blockchain art experience? Thus, legal issues of governance may become significant soon. This area of law and business will be developing — and these questions could be answered –in our lifetimes.
Why?, you may ask. Well, it’s not because everyone wants to own a piece of history or masterpiece. It is because fractional ownership has real-life uses. For example, blockchain-based smart contract tokenization in real estate allows owners to create partial, or “fractionalized,” unique digital ownership interests in real estate. Specifically, real estate owners can issue fractionalized tokens to investors, disburse profits proportionally to each token holders, and empower token holders with voting power. This, in turn, allows token owners to trade tokens in secondary markets, which significantly increases liquidity within the real estate asset class.
Of course, this method of ownership is novel and will likely be a turbulent one for a while. For years to come, numerous legal and business minds will develop new concepts and frameworks around fractional ownership and governance. Suffice it to say those disruptive technologies won’t make the practice of law obsolete. On the contrary, lawyers will enable many new business models and social changes as they have done in the past.