An Artist’s Guide to the Blockchain / Part 1

Explore the potentials of this emerging technology, and become an active participant to help shape what’s to come.

This is the first of a three part series dedicated to creative people interested in the blockchain. It is a collaboration between Jake Fry, of Rkey, and Matt Condon, of XLNT. Looking for Part 2?

What is “Blockchain”?

We’ve had traditional databases for decades: they let people store information like comments, your friends list, Netflix shows, and more — the internet is built upon databases. Generally, in these traditional databases, a single entity has true control over what it stores. For example, nothing stops Twitter from editing your tweets; they own the database.

A blockchain — the technology — is just another type of database, but with a key difference: when it’s combined with distributed computing, no one person is in control over what’s stored in the database. More correctly, everyone has some level of voting power to say what gets stored in this shared database. Before 2008, this sort of thing wasn’t really possible; you had to trust whomever was running your database not to edit it. The release of the Bitcoin whitepaper introduced the world to the concept of a distributed database not owned by anyone in particular — “trustless”.

Bitcoin is actually just a distributed (peer-to-peer) database (built with a blockchain) where that database stores who owns what amount of Bitcoin and a record of transfers. That’s it! The software running on people’s computers — miners — enforces rules like “nobody can spend money they don’t have” and “we can only create 25 more Bitcoins every 10 minutes”. If someone tries to spend Bitcoins they don’t own, the vast majority of the miners will reject their change, since it doesn’t follow the rules.

Like we learned above, nobody fully owns the Bitcoin database, but if they have 51% of the voting power, they can have control over what changes are made to the database — they are the enforcers of the rules and can decide which rules get enforced and how. Decentralized networks generally require that some large number of people in the network are down to follow the rules.

As an aside, to understand how to use this technology, we have to understand the concept of “private keys” and “public keys”.

These names are actually pretty descriptive: a private key is a super secret random number that you can’t share with anyone. Yup, it’s just a random number — but it happens to be absurdly large and very random. The idea is that it’s literally impossible for someone to guess your private key, so if you can email your friend and prove that you own this private key, they can trust that the person who sent the email is actually you.

A public key is derived from the private key. This process uses an algorithm that’s designed in a way that deriving a public key from a private key takes milliseconds, but trying to figure out the private key from a public key takes more time than exists in the universe. This is why it’s safe to send people your public key!

Finally, we can use the private key to “sign” information, much in the same way that public keys are derived. This is how you “prove” that you know the private key. Someone can easily check that the signature of a message matches the public key it’s claiming to be from. This signature is equally impossible to fake — this is what gives us the cryptographic security that the entire Internet is built upon!

Now let’s get back to this whole blockchain thing.

What are “Smart Contracts”?

Now we know that Bitcoin is just a database of users and their balances — it seems a little simplistic, right? What if we took these ideas of the database and the rules deciding how it’s changed to the logical extreme — let’s store any information and allow programmers to write code that enforces the rules for changing that information.

That code that enforces rules about how changes are made is called a “smart contract”. Unfortunately this code is neither smart, nor a contract, but the name has stuck!

What’s cool is that now we can write code that says something like “let’s store information about who owns this artwork” and then write some rules that say “only the owner can transfer the artwork to someone else” and something like “this artwork’s image can be found at this web address” and maybe “automatically sell the rights to this artwork to the person that pays $100 for it”.

You can imagine the possibilities! And people have gotten super creative with these ideas. We’ll explore a bunch down below.

A few different blockchain-based networks have implemented the idea of smart contracts. The most notable is Ethereum, which we’ll cover in more detail. Along with the database containing the information managed by smart contracts, Ethereum also keeps its own database of monetary balances for the native currency called Ether.

What are these fees for? What on earth is gas?

When using one of these distributed networks like Bitcoin or Ethereum, users generally have to pay some sort of fee to use them — unfortunately you don’t get to use other people’s computers for free!

In the case of Bitcoin, these are the “transaction fees”. The miners who do the work to include your transaction get to keep your fee; transactions with higher fees are more enticing to miners, so they’ll prioritize transactions that pay more — it’s simple economics.

In the case of Ethereum, these fees are called “gas cost”. “Gas” is a truly arbitrary word that describes how much computation your transaction requires. A transaction that adds two numbers together won’t cost that much gas, but a transaction that votes on a poll might cost more, depending on which computations it needs to do. How much you’re willing to pay a miner to process your transaction is a different story — this is the “gas price”. Gas price is a multiplier on the amount of gas your transaction requires that tells the miner how much you’re willing to pay. This cost is denoted in “Gwei” — Giga-wei — which is actually a very small amount of Ether.

As a concrete example, I can transfer you some Ether for 21,000 gas. I want this transaction to be reasonable competitive with the market, so I can look at the Ethereum network and see that, over the last few hours, miners are happy with a fee of 2 Gwei. I then end up paying 42,000 Gwei for my transaction, or close to $0.037 at the current Ether price. That’s right, just 4 cents! Your final gas price will cost more depending on how complex your transaction is and how busy the Ethereum network is — if the miners have too many transactions to handle, they’ll process the most expensive ones first!

Having everyone pay-as-they-go to use a shared resource is the simplest way of making sure the shared resource isn’t exploited. In the future, I expect we’ll see situations where services pay on behalf of their users or somehow subsidize the usage of the network to make this less of an annoyance for real people.

Back to Art

The recent explosion of interest in blockchain technology has ignited a fire of ideas around ownership, sovereignty, and distribution of wealth. These ideas have been around for ages, but we’re more equipped than ever to make them real. Blockchain is shaping the discourse around issues such as governance, monetary policy, social networking, markets, and more. Disintermediation — the idea of removing rent-seeking middlemen from markets and allowing direct exchange between consumers and producers — has enormous potential to benefit the art community, helping to address questions like the following:

Why aren’t artists rewarded with the vast majority of the value they produce?

Why is it that publishers and managers — the landlords and gatekeepers of creativity — stand to benefit so significantly from artists’ work?

Why don’t artists have greater control over the ownership and distribution of their work?

Why can’t artists enjoy the appreciation of their work? If a work sells for more money down the road, why don’t artists get a portion of that?

How can patrons, collectors, and artists track provenance, to preserve and build value as artwork changes hands, in an industry accepted way, while maintaining privacy as desired?

How can sellers, in an auction for example, be guaranteed that bidders will follow through?

How can this new technology sponsor art? What about a revival of patronage? Crowdfunding for large scale, collective projects?

Can we use this technology to facilitate peer-to-peer exchange of artwork?

Disintermediation, enabled as technologies emerge, will result in self-sovereignty, the likes of which the art world has never experienced. This will likely shape the way digital and physical art unfold. Artists will have a newfound ability to participate in the upside of their works’ success, enabled by new ownership models, such as having fractional ownership in their own work. Jess Houlgrave talks about this at the RARE Digital Art Festival.

“How the Blockchain Changes the Game for Artists” Panel from rare.af

Additionally, artistic content will likely take new forms as a result of digital scarcity. After all, what does it mean for a system with infinitely reproducible content to now have cryptographically-enforced scarcity? How does the world change when we enable casual consumers to become collectors and curators? Middlemen will need to innovate to find relevancy and be valuable, or become disintermediated. The ways in which art is initiated, funded, created, stored, shared, and exchanged stand to change for the better.

This is the beginnings of the Internet of Art, and it’s a vision for the self-sovereign future of creativity.