How Blockchain Could Transform Arts Philanthropy
Private philanthropic gifts make up the bulk of the budgets of arts and cultural institutions in the United States. The arts and humanities received $23.5 billion in such funding in 2021, according to Giving USA 2022; by comparison, the National Endowment of the Arts’ annual budget for 2021 was just $167.5 million. It is a useful debate to have about the role of federal versus private giving to the arts, but an even more pressing question is whether charitable giving, public or private, is effective in its current form. Unfortunately, it isn’t: the bulk of art spending doesn’t seem to be getting to the artists it was meant to help.
Consider, for example, hourly wages. Artists, including musicians and singers, have had fairly stagnant real wages in recent years. The Bureau of Labor Statistics’ Occupational Employment Statistics reveal that hourly wages grew from $31.70 per hour to $41.46 per hour between 2011 and 2021. After adjusting for inflation through the Personal Consumption Index (normalized to 2012 prices), it comes to $32 .30 and $35.90 per hour, or a scant 11 percent increase over an entire decade. And those numbers focus primarily on full-time musicians and singers—not on the broader range of freelancers not included in the BLS survey. For example, the NEA finds that artists are 3.6 times more likely to be self-employed than their peers. And our recently released Living Opera whitepaper shows—on a nationally representative sample from the Census Bureau that doesn’t suffer from the problems of the BLS survey—that performers earn much less than their peers and have stagnated over the past decade.
Recently, the NEA received $75 million in stimulus funding as part of the CARES Act, the 2020 Covid-19 relief bill. This money was intended “to preserve jobs and help support organizations forced to close due to the spread of COVID-19.” Anecdotally, all the artists my co-founders and I have researched through our work for Living Opera, our arts and technology startup, say they never received any of these funds. In fact, the vast majority of opera houses terminated the artists they had contracts with – even well-known institutions like the Metropolitan Opera, which laid off artists via email in 2020.
The good news is that there is great potential to disrupt and transform arts philanthropy for the better, especially with new technological tools. Decentralized autonomous organizations, or DAOs, are governed by smart contracts, or self-executing digital agreements, written and voted on by all of an organization’s members rather than by a centralized entity. The organization’s rules and transactions are recorded on a blockchain, thereby adding an important layer of transparency and giving members incentives to carry out agreed initiatives. An additional advantage of the DAO is the elimination of third parties. For example, Global Coin Research is a DAO that provides crowdfunding: members submit proposals, and the community votes on them. Those whose proposals are selected receive funds directly, without bypassing any intermediaries. To the extent that a DAO incorporates these rules through smart contracts, the process is automated and secured; the rules cannot be changed unless the community votes to do so in a public and transparent manner.
DAOs are no panacea for collective governance, but their openness, efficiency, and ability to decentralize decision-making are appealing features that have great potential to coordinate tasks across groups whose members may not know each other or live near each other, but which are nevertheless united by a common purpose.
Motivated by technological advancements with blockchain technologies, I am working, together with my co-founders in Living Opera, to launch the Living Arts DAO, which will provide micro-grants to new artists, starting with performing artists in opera. For example, if an artist needs an additional $500 for voice lessons, the artist can submit a proposal to the DAO and the community will vote on it. Unlike legacy grant processes, which can take as long as a year and usually involve a lot of paperwork and unclear decisions, our vision is to create a community-driven, transparent and value-adding process for members.
In addition to providing a source of liquidity for members, DAOs can alleviate two major pain points for the arts community. First, philanthropists are often skeptical that their donations have a measurable effect on the lives of individual artists and the quality of the resulting work. Even worse, as Heather Mac Donald has pointed out, a significant portion of the funds often go to projects that are not aligned with the donor’s intent.
Performing arts is a challenging profession, and according to our research, most artists struggle with depression and mental health. But just like everyone else, they feel more motivated when they believe they are learning and growing. Members of the Living Arts DAO community who submit proposals gain valuable experience writing and presenting themselves to others—a skill they typically don’t get in college—along with a digital certificate in arts entrepreneurship.
In fact, my ongoing research with Jonathan Kuuskoski at the University of Michigan shows that only about 10 percent of colleges even offer an arts entrepreneurship certificate, even though students who major in art and get some exposure to business plans end up earning higher hourly . payment. In this sense, the DAO is designed not only to meet an immediate need, but also to equip its members with the credentials and knowledge to market themselves in the long term. This also enables DAO to become a community of practice that can simultaneously incubate talent and help art institutions find the right people for performances.
DAOs, like other blockchain technologies, cannot replace good judgment, the right people and good ideas. But they have the potential to promote better governance, return on investment and flourishing in the arts by increasing transparency and accountability. My hope is that the Living Arts DAO serves as an early pilot for a new approach in the world of arts philanthropy that leads to transformational outcomes for artists, philanthropists, and society at large.
