Cover Wai Lung Ip (left) and Peter Yu, founders of The Screens Guru (Photo: Kwannam Chu)

The blockchain, which is widely considered the key to authenticating artworks in the digital era, is more problematic than NFT investors would hope, according to art and tech incubator The Screens Guru, which has come up with a new solution

It may be the case that NFTs are being taken seriously in increasingly traditional corners of the art world—whether to join the hype or because the blockchain provides a solution to proving an artwork’s authenticity—but as their credibility increases, so too do their legal and technical problems.

On April 1 this year—possibly in honour of April Fool’s Day—Taiwanese pop star Jay Chou’s US$550,000 Bored Ape Yacht Club NFT was stolen from his OpenSea account in a phishing scam. In January, Hermès sued Los Angeles-based artist Mason Rothschild for his MetaBirkin NFTs, which the French fashion house claimed were an infringement of its trademark. Last June, Roc-A-Fella Records initiated legal action against its co-founder Damon Dash for attempting to mint copies of the Jay-Z album Reasonable Doubt.

Don't miss: Why Isn’t Hong Kong Art Gallery Ora-Ora Afraid of Being Replaced by NFTs?

While cases like these been a wake-up call for NFT investors, they come as no surprise to Peter Yu, the CEO and co-founder of The Screens Guru, one of the earliest art and technology incubators for emerging artists in Asia. “Contrary to popular belief, blockchain is not a completely foolproof solution to the proof of authenticity, as it is dependent on the quality of the data that is input into its ledger,” he says.

His company, which he co-founded with Hong Kong digital artist Wai Lung Ip in March 2021, was set up as an NFT marketplace that works with artists, curators, collectors and gallerists to push the boundaries of art through technology and popularise digital art. The original idea was to work with shopping malls to put spiritual themed digital art on their outdoor displays. But when Covid hit, and as the NFT market began to pick up pace, the two turned to NFTs as a means to celebrate the blooming of digital art instead. Two years in, the team is now on a new, additional mission to identify and address the blockchain’s overlooked legal and technical issues through a smart provenance project.

In case you missed: 7 Ways to Protect Your Trophy NFTs

The blockchain functions as a digital ledger that records all the transactions of an item, from its original to latest owner, which is why it is considered a provenance holy grail. Once deployed, smart contracts—a term that describes a computer program or transaction protocol intended to execute, control or document terms of trade, in particular the digital rights automatically—are undeletable and immutable.

Working nonstop with NFT and digital artists over the past two years, it didn’t take long for Ip and Yu to learn that blockchain technology is fraught with pitfalls. They point out that there are miners—people who create and validate the block—who mint artworks created by other artists without their consent or knowledge to trick buyers into believing that they are the original artists or owners of the works. OpenSea, the largest NFT market, posted on Twitter this January that “over 80 per cent of the items created with this tool were plagiarised works, fake collections and spam”. Yu explains that this would lead to flawed ownership information from the start: “Garbage in, garbage out. If the data on the blockchain is wrong, then the ledger is also flawed, and blockchain ledgers are very hard to correct.”

Another problem that arises is the legal validity of the blockchain, which is still too new for any court to have enough precedent to try a case. “In order [for a case] to stand up in a court, it needs to be a contract, which is signed or endorsed by both the buyer and seller,” Yu says. “But the smart contracts generated online in the blockchain are just records. They [currently] have no standing in court. That’s the fundamental guideline that the lawyers are telling me.” The laws of different jurisdictions can also complicate the regulations on the globally accessible blockchain data, given that transactions are often international.

The greatest challenge relates to cybersecurity. “Most online thefts do not happen on the marketplaces but from the wallet,” Yu says, referring to the digital accounts used to store cryptocurrency and NFTs. “[The Screens Guru] doesn’t own the wallets, so we can hardly do anything to prevent this from happening.”

The Screens Guru brought together a group, including Mike Ang, a cybersecurity expert for two decades, Ian Liu, an IP lawyer from Deacons, and Ronald Yu, the director of Arctic Aurora Advisory Services, to set up Provenio ArTech, a platform used to enable a new type of legally binding contracts. The team will first use it on tokenised physical art later this year. Yu and Ip explain that they are combining information and rights defined in traditional means, like certificates of authenticity, and new means, like smart contracts, into a new type of contract between artists and collectors. “This syncs up all the rights and information about an art piece, and since it is an actual contract, it has standing in court.”

To support the initiative, they also gathered a community of authenticators, including galleries, experts and artists as trusted sources to validate the artworks’ authenticity. Once the experts verify a piece of art, the information found in a traditional certificate of authenticity will be minted as an NFT to be stored on the blockchain. “That way, the authenticity of newly created physical artworks can be guaranteed at the [moment] the NFT enters our system,” Yu says. “For digital works, the digital signature will be the first point of authentication. The Provenio ArTech is able to guarantee the authenticity of the works at the entry point.” Meanwhile, Ang is deploying some of the most advanced technologies and solutions from Asia and Europe for tighter security on its Web3 platform.

The team is also working to reduce the number of scams, including the frequent trading of a certain work. “We’ve talked to so many artists. The first thing they ask us is not the price but the collectors we’re connected to. Basically, they want the right people to appreciate their work,” Ip says. “I don’t want people who are flipping the artworks. We discourage speculation that is not healthy.”

Yu also observes that a lot of NFT transactions are cancelled at the last step. When the buyer has confirmed the purchase on the selling platform, he or she can still cancel the payment through the credit card channel and end up getting the artwork for free. “We’re very careful with who our buyers are. We don’t work with people whom we don’t know,” he says.

With their three-pronged approach—verifying the artwork from the outset, documenting it and selling to the right collectors—the team is working towards building a safer platform for NFT art transactions. This month, the team is organising an exhibition of work by female digital artists. The show is curated by Luba Elliott, a senior research fellow at the UCL Centre for Artificial Intelligence, and features ten digital artists whose exhibited artworks will all be authenticated by the Provenio ArTech method. Commenting on The Screen Guru’s selection criteria for the artists that they work with, Ip and Yu say one of main agendas is to spotlight women who are underrepresented in the digital art scene.

All this effort comes down to the pair’s belief in digital art, especially AI and generative art being the next cultural wave. “When I visited Art Basel last year, there were only a few pieces of digital art among a majority of physical art. A lot of people were still not really taking media art seriously. But we think that’s a mistake,” Yu says.

“There are about seven billion devices out there with screens every single day, and the digital trading platforms for NFTs are easy, globally accessible and becoming more popular in Hong Kong and the rest of the world. We look at research done by Art Basel; almost half of their high-net-worth individuals are interested in buying digital art in the next 12 months. The market and platforms are ready. Why don’t we set the stage for this sort of thing to happen?”

Find out more at screensguru.io.

NOW READ

8 Art Exhibitions Not to be Missed in June 2022

14 Live Performing Arts Events Returning to the Stage This Summer

How Does a Rising Hong Kong Playwright Bridge the Virtual and Physical Theatres?

© 2022 Tatler Asia Limited. All rights reserved.