By Steve Gow.
In this article I explain how the UppstArt resale marketplace DApp works and some of our plans for future development. If you are looking for instructions on how to use our Crypto Art Marketplace DApp then simply skip down to Step 4 below.
UppstArt is in the early stages of development and we are working with technology that did not exist a few years ago, so please let me know if you have any feedback or suggestions. You can contact me at firstname.lastname@example.org.
Alright, on to the nerdy stuff!
What Happens When I Buy Art From an Artist On UppstArt?
UppstArt is an online marketplace where art-lovers can buy art directly from artists and resell it whenever they want. When you buy artwork directly from the original artist on UppstArt you can pay in normal (or “fiat”) currencies like Canadian or US Dollars and receive your artwork via courier just like any other e-commerce site.
After our 7-day return period expires, you will be given a digital certificate of authenticity that immutably and publicly records the information about your artwork on the blockchain so that it can never be changed, altered or deleted. This is an easy way to enjoy some of the benefits that blockchain provides without actually needing to know how to use the technology.
There are no smart contracts or decentralized applications (“DApps”) involved in the initial purchase of art from artists on UppstArt and paying for art with Ether is optional rather than mandatory. We designed UppstArt in this way because we wanted to make it easy to use, democratic and approachable for everyone, regardless of their familiarity with the technology.
If you follow the link to Etherscan (which is like a web browser for the Ethereum blockchain) from the certificate, you can see that there is “input data”. Switch the view of the “input data” to “UTF-8” and you will be able to see the provenance information about the artwork in plain english. “Provenance” is a fancy way of saying “information about the art, the artist, sales history and other notable events in the life of the artwork”. If you switch back to the normal view in Etherscan, copy everything after “FFD8” and paste it into a hex to file converter, then you will see the digital image of the art.
The image is low resolution because high resolution images are extremely costly to “register” on the Ethereum blockchain due to the high transaction fees that accompany large data inputs. However, the hashed image is not intended to be pretty. Its purpose is to give you more comfort that the art provenance information recorded on the blockchain actually relates to the painting you have in your hands.
What Happens When I Want to Resell My Art on UppstArt?
Well, this is where you really enter the world of blockchain technology, smart contracts and DApps. If you’re unfamiliar with this world then it can feel a bit overwhelming. But don’t worry – we’re here to guide you through it.
Step 1 – Obtaining an Ethereum Wallet Address & Downloading Metamask
When you want to resell your artwork on UppstArt’s decentralized resale marketplace, you will first need to obtain an Ethereum wallet address.
“Ethereum” is a general purpose blockchain that DApps are built on and “Ether” is the native currency of the Ethereum blockchain that is required to run these DApps. You can obtain an Ethereum wallet address in multiple ways, but we recommend that you download and install the Metamask browser extension to obtain a wallet address. You will need Metamask to interact with our resale marketplace in any event (Metamask currently only works with the Firefox, Chrome, Opera and Brave browsers – sorry Internet Explorer and Safari…).
OK. Following me so far?
Now that you have an Ethereum wallet address, it is a good idea to read up on best practices for protecting your private key information and storing your Ether.
We use the terms “decentralized”, “peer-to-peer”, “trustless” and other often over-hyped terms quite a bit when we describe our resale marketplace DApp. However, we think it’s important to appropriately caveat how we are using these terms as different people may give different meanings to them. UppstArt’s resale marketplace DApp is constantly under development and we are dedicated to making it more truly decentralized, peer-to-peer and trustless over time as blockchain technology evolves.
- “Decentralized” – This means that UppstArt’s resale marketplace is governed by blockchain smart contracts (we call them “UppsmArt Contracts”) that hold information about artwork and art transactions that is stored on thousands of different computers (or “nodes”) on the Ethereum network instead of a centralized database. This means that our DApp is architecturally and politically decentralized (see Vitalik Buterin’s excellent article about the different types of decentralization here). However, we do store information such as shipping details, email addresses and images of art on our own database and will continue to do so until we find an effective way to decentralize this information without incurring large transaction costs and jeopardizing personal information (plans are in the works). Until then, when we say “decentralized” what we mean is “mostly decentralized”.
- “Trustless” – This means that you can buy and sell art on our resale marketplace without needing to trust the other party or any third party intermediary. In reality, this is not 100% accurate for several reasons. First, you need to trust UppstArt to some extent because we act as the arbitrator in the case of a dispute. Second, art is a physical asset, so you can’t 100% trust that the buyer will ship the art to you or that the art you receive is authentic. However, you can be more assured that this will be the case because the UppsmArt Contracts has fail-safes, a period in which the buyer can raise a dispute and a dispute resolution mechanism to help prevent fraud. UppstArt is working hard to make the transaction of physical goods using blockchain more trustless. Until then, when we say “trustless”, we mean “semi-trustless”.
Step 2 – Notify UppstArt
After you get your Ethereum wallet address and install Metamask, all you need to do is notify us that you would like to list your artwork for sale on our resale marketplace by filling out this form.
Make sure that when you provide us with your Ethereum wallet address it is complete and correct. Once we initialize one of our UppsmArt Contracts representing your art there is no going back to change your wallet address. Blockchain has a ton of great benefits but it’s pretty unforgiving if you lose your wallet address. So make sure you write it down and store it somewhere safe and secure!
When UppstArt approves your request, an “art resale page” is generated on our resale marketplace that shows your artwork, the owner’s Ethereum wallet address, details about the art and the control panels for the seller, buyer and UppstArt to interact with the UppsmArt Contract that represents the art in question.
Click here for an example of an art resale page on our resale marketplace. Everything you need for the sale of your artwork lives on this page.
At this point your artwork will be visible to others on the resale marketplace, but it will not be listed for sale or show a sale price. You could leave it like this if you do not intend to sell your art at the moment or if you simply want to see if anyone will make you an offer by clicking the “Make an Offer” button on your art resale page.
In fact, after purchasing artwork directly from the artist you could list your art on our resale marketplace even if you don’t intend to sell it right away. That way you can enjoy the art while it hangs on your wall while still showing it off to the world and entertaining offers if the right buyer comes along. Its up to you!
When UppstArt initializes an UppsmArt Contract, it includes data in the contract about the owner’s wallet address, the original artist’s wallet address, the artwork information, information about the initial sale including a reference to the digital certificate of authenticity, the percentage commission payable to UppstArt and the original artist and the number of days before the buyer can get a refund (standard is 30) and the number of days a buyer has to raise a dispute after they receive their artwork (standard is 2). We are also able to, upon request, include additional information about gallery showings or other events related to the artwork’s provenance history.
Step 3 – Set Sale Price
Now that you have an art resale page up and running, you can set the sale price of your art in Ether. To do so, go to the “Seller Control Panel” at the bottom of the art resale page and enter the sale price in “Wei”.
Hold up…what the heck is Wei?
“Wei” is Ether, but it’s the smallest denomination of Ether. It’s like how a penny is the smallest denomination of a dollar, but it’s worth way less than a penny. 1 Ether is equal to 1000000000000000000 Wei.
We recommend that you decide how much you want to sell your art for in Ether and then use an Ethereum Unit Calculator to convert the price in Ether to the price in Wei. Then enter the price in Wei into your seller control panel on the art resale page and click “set price”. Metamask will pop up and you can complete the transaction to set the price of your art.
After you set the price of your art, click “Toggle for Sale/Not for Sale” on the seller control panel in order to set your art for sale. Then anyone can come along and buy your art.
If someone buys your art then you will need to fulfill the transaction in accordance with our terms and conditions. So make sure you are ready to sell and capable of packaging and shipping your art to the buyer within 72 hours of the purchase!
A note on cryptocurrency fluctuations
We encourage all of the sellers on our resale marketplace to treat Ether just like you would the “fiat” currency you use in your own country. For example, you wouldn’t necessarily re-price all of the items in your Canadian store just because the US Dollar jumped up by 30 cents compared to the Canadian dollar. However, we recognize that at this time the exchange rate of Ether to fiat currencies fluctuates substantially on a daily basis. UppstArt is not responsible for any losses that you incur due to such fluctuations.
If you are concerned about currency fluctuations then it is your responsibility to periodically check the applicable exchange rate and update the listing price of your artwork. You can adjust the price of your artwork by clicking the “Toggle for Sale/Not for Sale” button on the seller control panel and then setting a new price with the “Set Price” function. You will then need to click the “Toggle for Sale/Not for Sale” button again to re-list your art for sale at the new price.
Step 4 – Buy Art (Sell Art to Buyer)
Buyers can purchase any artwork listed on our DApp that has a price listed and is set for sale.
If a buyer wants to buy art then they can do so by clicking “Buy Now” on the applicable art resale page. Metamask will pop up for the buyer with the details of the transaction and the buyer can then enter the purchase price and buy the artwork. After this is done, the purchase price in Ether is sent from the Buyer’s wallet address to the UppsmArt Contract address that represents the piece of art and the funds are then held in “escrow” in the UppsmArt Contract until certain conditions are met, which we will talk about in more detail below.
It’s very important to note that after you buy a piece of artwork on our resale market you must enter your shipping details on the art resale page so that UppstArt and the seller are notified of the sale and the seller knows where to ship the artwork to.
Step 4 – Ship the Artwork
After the seller has been notified of the purchase of their art, they should verify that it has indeed been purchased by reviewing the status of the contract on Etherscan.
The seller is then required to properly package and ship the artwork within 72 hours of the sale. The common carrier that is used to ship the art must be reputable and have the capability to produce a tracking code for the shipment.
Once the art is shipped, the Seller must return to the art resale page, enter the tracking number in the appropriate field in the seller control panel and click “Confirm Shipping Departure”. The UppsmArt Contract will then “know” that the artwork has been shipped to the buyer and anyone, including the buyer and UppstArt, can see the tracking number and monitor the progress of the shipment.
If for any reason the seller does not ship the artwork or the art is not shipped to the buyer within 30 days of the purchase, then the buyer can return to the art resale page and recover their Ether from escrow by clicking “Get Refund” on the buyer control panel.
A note on smart contracts
Smart contracts are basically lines of code that live on the Ethereum blockchain and automatically execute pre-determined functions if certain conditions are met. For example, the UppsmArt Contract will hold the purchase price in escrow if and only if the contract is set for sale and the exact purchase price is sent to it from an Ethereum wallet address. However, the UppsmArt Contract does not collect your shipping address, email the seller that their work has sold or contractually obligate the seller to package the artwork properly and ship it to you within 72 hours of being notified that a sale has occurred. All of these other things are governed by technology on the UppstArt website and by our terms and conditions.
It’s very important to note that due to the nature of smart contracts and decentralized applications, we do not have control over all stages of the transaction. For example, if the seller never ships your art to you, then we can send them a nasty email telling them that they breached the terms and conditions, but we cannot cause the UppsmArt Contract to refund your Ether because UppstArt does not control the UppsmArt Contract. In order to get a refund in such a situation, you will need to wait until the 30 day refund period has elapsed under the UppsmArt Contract and then you will be able to recover the Ether from escrow.
Step 4 – Confirmation of Arrival
After the artwork is shipped, UppstArt monitors the progress of the shipment using the tracking code provided by the seller. When the tracking code indicates that the package has been delivered then UppstArt will confirm shipping arrival so that the UppsmArt Contract knows that the shipment has been delivered. This starts the clock on the 2-day dispute period that the buyer has under the UppsmArt Contract to raise a dispute.
Step 5 – (optional) Raise Dispute
When the tracking code indicates that the shipment has been delivered, the buyer then has 48 hours to raise a dispute if there are any issues with the artwork. For example, if the buyer receives the package but it has the wrong artwork in it, or they compare it against the original photographs of the artwork from UppstArt and they realize that the art has been faked or forged, then the buyer can visit the art resale page and click “Raise Dispute”, which will lock the funds in escrow indefinitely until the dispute is resolved in accordance with the smart contract’s dispute resolution mechanism (more on that later on).
Step 6 – Finish Transaction
If no dispute is raised within 48 hours of delivery confirmation, then the transaction is complete and the seller must visit the art resale page and click “Finish & Release Ether to Seller”. Once this is done, the seller will receive 80% of the escrowed Ether, UppstArt will receive 16% and the original artist will receive 4%. The Buyer’s wallet address will then be listed as the new owner on the art resale page and the buyer may then resell the artwork if they so desire by starting at Step 1 above.
Step 7 – Re-Sell Art
After you have purchased artwork on our DApp, you can set a new price and re-sell it at any time. If a sale is made, UppstArt will receive a 16% commission and the original artist will receive 4% (20% total commission). The commission is relatively high for an Ethereum DApp but extremely low by industry standards in the art market. It represents our compensation for our efforts in marketing the artwork on our DApp. If you find a buyer for your artwork using your own efforts, then please contact us so that we can discuss reducing or waiving our commission for the sale in question.
Why do our UppsmArt Contracts need to deal with shipping departure, tracking numbers and shipping delivery? Wouldn’t it be easier just to have the buyer simply confirm when they receive the artwork? The answer to these questions is that the shipping departure confirmation helps the buyer ensure that the seller is shipping within the expected time frame, it makes the shipment progress public, adds valuable data to the transaction history and the shipping delivery confirmation kicks off the time frame for the buyer to raise a dispute so transactions don’t carry on with Ether held in escrow indefinitely.
However, the main reason is convenience. 99% of transactions in the e-commerce world happen every day without any issues. Customers don’t want to log onto their computers and positively confirm every time they receive something in the mail. Accordingly, the shipping arrangement in our UppsmArt contracts are designed in such a way that the transaction is completed efficiently and quickly without the buyer needing to confirm anything, while still providing the buyer with the protection of being able to raise a dispute if there is in fact an issue.
What Happens if a Dispute is Raised by the Buyer?
If a dispute is raised by the buyer in Step 5, then the smart contract will enter into dispute resolution mode and the Ether will be locked into escrow until the resolution of the dispute.
To resolve a dispute, two of the three parties to the smart contract (i.e. seller, buyer, arbitrator) must vote on the same dispute outcome. There are two dispute outcomes: (1) the Ether is refunded to the buyer or (2) the Ether is paid 80% to the seller, 16% to UppstArt and 4% to the original artist as if the transaction completed normally.
The arbitrator under our smart contracts is currently set as UppstArt. However, eventually we plan to give the option to the buyer and seller to appoint their own arbitrator of choice.
Example of Dispute #1: Dispute Resolved in Favour of Buyer
In this example the buyer receives the artwork and inspects it. After comparing the artwork to the high resolution pictures of the artwork on UppstArt, the buyer can clearly see that the artwork has been faked.
The placement of certain notable features of the art is in different places than in the photographs and the brush strokes in the close-up photographs of the art on UppstArt do not match the brushstrokes on the art that the buyer received. The buyer raises a dispute an UppstArt begins its investigation and interview of the buyer and seller.
After it’s investigation is complete, UppstArt determines that the seller faked the art in question and attempted to defraud the buyer. UppstArt bans the seller from its website, notifies the relevant authorities of the attempted fraud and resolves the dispute in favour of the buyer. UppstArt votes in favour of the buyer, the buyer votes in favour of themselves and the seller votes in favour of themselves. Two out of three votes are cast in favour of the buyer, so the Ether is released 100% to the buyer.
Example of Dispute #2: Dispute Resolved in Favour of Seller
In this example, the buyer ships the artwork within 72 hours of the purchase and the artwork is delivered to the buyer before the 30 day refund period elapses. The buyer receives the art and inspects it. Everything is good but there’s one problem: the buyer is an unscrupulous character who wants to keep the artwork AND get his Ether back. The buyer raises a dispute within the 48 hour dispute period and claims that the package was never delivered. UppstArt investigates the claims and talks to the buyer and seller. After the investigation UppstArt determines that the art was in fact delivered and signed for upon delivery to the buyer. UppstArt votes in favour of the Seller, the Seller votes in favour of themselves and the buyer votes in favour of themselves. Two out of three votes are cast in favour of the seller, so the Ether is released 80% to the seller, 16% to UppstArt and 4% to the original artist.
But doesn’t UppstArt have a vested interest in always voting in favour of the seller so that it gets it’s 16% commission? No. The value to UppstArt of receiving our 16% commission is nothing in comparison to the reputational risk of resolving a dispute in favour of the wrong party. UppstArt takes its role as arbitrator very seriously
What Plans Does UppstArt Have to Improve it’s Resale Marketplace?
If you;re not familiar with cryptocurrency and blockchain technology then all of this can be a bit confusing. That’s why UppstArt is working hard to make its resale marketplace more approachable and easier to use for everyone, regardless of how tech savvy they are. In the near future we will be adding the following features to the resale marketplace:
- The ability to pay in fiat currency instead of Ether;
- A messenger system to allow you to annonymously make offers to the owners of art listed on our resale marketplace; and
- “Physical Tagging” of artwork on the resale marketplace to help link the digital UppsmArt Contract to the physical work of art.