Discover Arcual’s ground-breaking blockchain technology

ArtReview spoke with Arcual CEO Bernadine Bröcker Wieder to unpack how blockchain could enable artists, galleries and collectors to do business – and put artists back at the heart of the art ecosystem

Arcual launched in November 2022 as a “blockchain community by the art community, for the art community”. Founded by art world leaders – Maja Hoffmann’s LUMA Foundation and MCH Group (the parent company of Art Basel) – Arcual’s goal is to make blockchain services the core of how artists, galleries and collectors do business, putting artists back at the heart of the art ecosystem. . Ahead of Art Basel Hong Kong, where several galleries will be sending works to be sold through Arcual, CEO Bernadine Bröcker Wieder sat down with JJ Charlesworth for a (slightly nerdy) deep dive into Arcual’s groundbreaking blockchain technology.

Art Review: Tell us about the original motivations for the Arcual platform and how it came together. Thinking back to around 2017 and 2018, there was an explosion of activity around blockchain development in areas of the art ecosystem that weren’t just related to the art market and NFTs. There have been several attempts to use blockchain to handle things like collection management, authentication of provenance or as a common platform to record sales. But nothing, so far, seems to have put them all together…

Bernadine Bröcker Wieder: Arcual goes back to December 2018, when Maja Hoffmann and the Art Basel team met during Art Basel Miami to discuss the potential of a collaboration. The partners who came together to build Arcual wanted to create infrastructure that benefited everyone in the art ecosystem, and understood that this is not about getting some kind of exclusive access to the art industry, but about creating a trusted space for collaboration and digital innovation. Arcual has been launched with the expertise of leaders in their respective fields: Luma Foundation, MCH Group (parent company of Art Basel) and BCG X (formerly BCG Digital Ventures).

YEAR: There are all kinds of blockchains and smart contracts, but what makes Arcual different?

BBW: Previous blockchain proposals rely on self-reporting. For example, if you wanted to use blockchain to validate an art sale, you would still have to have external parties to validate that the artwork had been sold. And then you couldn’t really trust the system because of the possibility of misinformation. With Arcual, the ambition is big, but we start with a small, focused approach, to ensure that the information we put into the blockchain is correct.

That approach starts with the primary market, with Art Basel galleries, and with the consignment agreements between a gallery and an artist, and the contract between the gallery and the first collector. We start with the primary sale, to ensure that the information is clean and well documented, with the aim of expanding from there.

We then have a waiting list of galleries beyond Art Basel, which we are happy to have with us. Arcual creates digital tools that clearly meet the needs of artists and galleries working today. Our understanding of our target audience is perhaps one of the biggest differences between us and other blockchain proposals. With Arcual, our supporters are putting their heads on the line and saying “This is the future of how we want the art world to work”. We all believe it is important for artists to receive royalties on future sales; we all think it’s important to have digital documents associated with the artwork stored with it, so you’re not just relying on pieces of paper; we all believe it is important that the way international payments are made is simplified. So that’s the gist. And having big names behind us makes it very different.

Our first primary market application is called Salesroom, but underlying it is a blockchain operated by our shareholders, and we will invite others to be part of the operation of that blockchain in the future. Arcual is about collaboration, as opposed to competition.

YEAR: Looking at the user experience – what does Arcual offer as a set of services and how do these work together?

BBW: In essence, we digitize two legal agreements. A legal agreement is the consignment agreement between the artist and the gallery. The second is the sales agreement between the collector and that gallery; both are powered by smart contracts. A lot of these are just plain terms and conditions – these are there for anyone to read, but some of them can be automatically enforced through a smart contract. So for example, in the consignment agreement you have the percentage between the artist and the gallery: it’s programmed into a smart contract, so what they agree on is automated. Then there is no way that the gallery could suddenly change the agreement, or that the artist could either. It is carried out as agreed. Then there is the sales agreement which is sent directly to the collector by the gallery via an invitation link. Smart contract terms such as resale royalties are agreed within the shipment and sales agreement. If the artwork sells in the future, a percentage will automatically go back to the artist and master gallery if certain criteria are met, allowing artists to continue to benefit financially from their work beyond the initial sale, which is very important to many collectors.

YEAR: The whole area of ​​development and innovation around blockchain is incredibly interesting when it comes to the issue of decentralization. How does Arcual handle it? It sounds like the platform, because it has these key partners – LUMA, Art Basel and so on – can still be quite centralizing…

BBW: Arcual has a ‘decentralized approach to centralization’. I have been involved in DAOs [Decentralised Autonomous Organisations], and with blockchain ideas on how to distribute control and trust. Many times, if the blockchain is too decentralized to begin with, you can’t get anywhere. Arcual is one company, but our shareholders form a decentralized governance, and there will be a gradual process of decentralizing the technology and governance in line with blockchain principles. For example, right now most of our users are not familiar with having their own digital wallets, so we use custodial wallets, but that will change over time. At the same time, there is often a lot of mistrust of cryptocurrency, so Arcual works with fiat currency. As you can see, this is a gradual approach to decentralization.

YEAR: So trust is more built in? Arcual seems to be able to eliminate gray areas and possibilities where problems – between artists, gallerists and collectors – can arise…

BBW: Well, that’s why we get a lot of enthusiasm from lawyers who have seen things go wrong! Through these legal agreements underscored by the blockchain, there is immense clarity about what was actually agreed upon. Because when things go wrong in the art world, one of the big problems is often that things were only verbally agreed, or not properly written down. One thing we’ve heard artists get excited about is just having a clear expiration date on shipments – it’s such a small feature, but is something that is often not established with a gallerist. Through Arcual’s system, you have more clarity between the two parties. I don’t think we need to call it revolutionary, but it solidifies how things should work, when they work well.

YEAR: As for trust, I guess that’s also one of the attractions of having these big partners involved…

BBW: The art world is a small place and everyone definitely has their own opinion. Arcual’s supporters are recognized for standing for quality and for championing sustainable growth in the market.

YEAR: Unfortunately, when people hear “blockchain” they often think of NFTs and how it hasn’t lived up to its promises of “cutting out the middleman”, of being a system you can really trust…

BBW: Many conversations around the NFT ecosystem were about disintermediation, and Arcual is not about disintermediation. We believe that mediators have a very important role in the art industry. But it’s true that we got backlash with some people, who asked: “Why don’t you let artists just disintermediate the gallery? Why start with Art Basel galleries? There are clear reasons why the art ecosystem is built the way it is; there is a reason these business models work the way they do. Despite all the talk of disintermediation in the NFT space, you still had smart contracts tied to NFT marketplaces, and those marketplaces started increasing their fees or changing their fees, ignoring the resale royalties they promised. So the talk of disintermediation was not really true at all.

YEAR: This mediation point relates to one of the major issues that have emerged in the NFT space, which is that actually existing blockchains do not often contain the asset that they certify. So how does this work when it comes to physical artwork? How do you guarantee that the thing is really there? Can you say something about how this might work on Arcual?

BBW: We did a lot of research on the link between digital and physical, on how to use RFID tags and 3D scanning, and these types of technologies are definitely the future. However, it is not our role to decide which one works for each piece of art. We want to support the different ways of identifying the artwork, and then people can decide which one works for them.

YEAR: Would you like to tell us about some of the services you are working towards at Arcual, which perhaps extend beyond the primary artist-gallery-collector relationship?

BBW: I am pleased to say that LUMA’s involvement means that we look very closely at institutions, and we have been working with their team on what we can develop for museums, for example. During Art Basel Hong Kong, Arcual will collaborate with Para Site, one of the most important (and oldest) independent non-profit organizations in Asia, for an event to celebrate the opening of their new exhibition, in collaboration with ArtReview. I have worked with institutions for many years and I know that they are not necessarily the earliest adopters. We know that we have to prove that this technology works before a government-funded organization can start using such innovative tools. On the shorter roadmap, we are developing a way to attach more documentation about the artwork. So that the artist can define more information about what that work is, also for future conservation and archiving. It is very exciting.

YEAR: An important last question concerns visibility, transparency and privacy. Apparently one of the paradoxes of the NFT explosion was that you could see what people were doing very easily – transactions were completely visible and public. But in the art world, people value privacy. So I’m curious to hear how you’ve negotiated and developed the relationship between verifiability and privacy.

BBW: The first versions of blockchain applications were much more transparent in a very blunt way; we now come to more sophisticated methods of transparency. The reason we decided to go with our own private blockchain with a focus on privacy is to ensure we could create these privacy models. We build it so that you are private by default, but everything is verified, with the option of having public information available. Everything is possible.

At Art Basel Hong Kong, galleries including Monique Meloche, Commonwealth and Council and Galerie Greta Meert will consign artworks by artists including Layo Bright, Kenneth Tam and Liam Everett, to be sold through Arcual’s blockchain platform. At the same time in Copenhagen, von Bartha will present Measurement of the world, a new solo exhibition by Swiss artist Athene Galiciadis (18 March – 13 May), with all works consigned for sale through Arcual. For more information visit arcual.art