Page 38 - AC-3-1

Arts & Communication Blockchain and royalties in China’s art market

In sum, addressing the dual challenges of maintaining The incorporation of blockchain technology to connect
blockchain’s integrity for provenance verification while tangible artworks with NFTs presents a nuanced landscape
safeguarding against the increased potential for fraud of opportunities and challenges. This approach facilitates
and managing the speculative nature of the NFT market the digitization and verification of physical assets,
requires a concerted effort. This effort must encompass enhancing their value and authenticity while opening
technological innovation, targeted education, and robust new revenue streams for artists. However, the integration
regulatory oversight to cultivate a secure, fair, and process entails several complexities, especially in balancing
sustainable digital art market. the digital representation with the physical artwork’s
inherent qualities and addressing market dynamics
3.4.2. Technical and market challenges influenced by this hybrid model. 115
The scalability issues of blockchain technology are a One significant aspect of linking tangible art to NFTs is
primary technical challenge, where increased users lead to ensuring the authenticity and uniqueness of the physical piece.
slower transactions and higher fees, thereby affecting the While blockchain technology provides a transparent and
efficiency of processing resale royalties. The absence of verifiable record of ownership, the physical-to-digital linkage
110
standardization in blockchain technology is a critical issue must be robust to prevent issues like double selling, where
that hinders its broader adoption. Without universally a physical piece and its digital representation could be sold
accepted standards, new developers and investors face a separately, potentially leading to disputes or devaluation of
steep learning curve and interoperability challenges, as the artwork. Moreover, the process of digitizing physical art
116
they must navigate a fragmented landscape of varying into NFTs involves careful consideration of quality, blockchain
protocols and platforms. This lack of consistency in the selection, and pricing strategies to effectively capture and
technology not only complicates the process of integrating represent the artwork’s value in the digital domain. 117
blockchain into existing systems but also poses a barrier
to entry for those looking to participate in the blockchain Another critical consideration is the technological and
ecosystem. 111 market readiness to embrace this fusion of physical and
digital art realms. While blockchain offers a platform for
From a legal standpoint, integrating blockchain into transparent and efficient transactions, there are challenges
existing frameworks presents its own set of challenges, in ensuring broad market acceptance, especially among
particularly in jurisdictions like the US, where current traditional stakeholders in the art world. The technology’s
copyright law does not recognize the resale right. This adoption must contend with varying levels of digital
112
limitation could impact the implementation of resale literacy and openness to new transaction models among
royalties within NFTs. In the realm of blockchain-based artists, collectors, and galleries. 118
smart contracts, the typical use of pseudonymous identities
raises intricate legal challenges. These include difficulties In summary, the extension of blockchain technology to
in identifying contractual parties for legal purposes, tangible artworks through NFTs provides a promising avenue
which could lead to complex jurisdictional disputes and for enhancing the value and security of art pieces. However,
uncertainties in legal enforcement. This anonymity aspect it also necessitates a thoughtful approach to ensure the
of blockchain transactions complicates the resolution of seamless integration of physical and digital worlds, maintain
disputes, as it can be unclear which legal jurisdiction’s rules the integrity of artworks, and adapt to the evolving dynamics
apply and how to enforce contractual obligations when of the art market. This endeavor calls for innovative solutions,
parties are not definitively known. 113 informed market strategies, and collaborative efforts among
various stakeholders in the art ecosystem.
The wide-reaching impact of blockchain adoption
touches various stakeholders within the art market. Artists As we conclude Section 3, it is evident that blockchain
could benefit from continual earnings, while buyers presents both opportunities and challenges in the art
might face challenges due to market volatility and the market. Its potential to improve transparency and fairness
complexities of understanding blockchain transactions. is undeniable, yet achieving widespread acceptance
114
Galleries and auction houses may need to adapt their requires addressing its complexities and ensuring it
business models to accommodate blockchain transactions, benefits all participants in the art ecosystem.
facing the dual challenge of increased transparency and 4. The Chinese context of blockchain and
potential resistance to change. Collectors might enjoy
106
the enhanced transparency that blockchain provides; yet, resale royalties
they could also confront increased competition as the Transitioning to Section 4, we shift our focus to the unique
market becomes more accessible. 106 context of China, examining how blockchain technology

Volume 3 Issue 1 (2025) 14 doi: 10.36922/ac.2875