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Web3 is an online ecosystem based on blockchain technologies, involving peer-to-peer transactions and coordination tools. This report examines the what, why, who and where of Web3 for the cultural and creative industries, using examples from visual art, music and games.

In Part 1, the authors ask 'what is Web3?' They provide a non-technical description of its key components. The underlying infrastructure of Web3 – blockchain – achieves common knowledge (agreement on facts) and reduces reliance on institutions and firms, including Web2.0 platforms. The result is that people can coordinate more easily and build or repurpose innovations that serve their needs. Non-fungible tokens (NFTs) are significant for creative practitioners as they can represent property, make it easy to transfer ownership, and can contain metadata used to trace creative works and define how a work is used. Decentralised Autonomous Organisations (DAOs) assist groups to form and manage their affairs, bringing new capabilities through software tools, such as managing contributions and setting rules around participation (governance). Smart contracts are the software components that drive automation and web3 applications, whereby the program carries out contract-like instructions, such as how royalties are to be paid.

Part 1 also addresses the environmental impact of blockchain technology. Understanding the environmental impact of NFTs means looking not just at computational processes involved in maintaining blockchains (mining and staking), but also how digital files are stored in decentralised storage systems. The good news is that the rise of proof-of-stake blockchains is reducing the carbon footprint of blockchain platforms, with Ethereum’s recent transition estimated to have reduced the world’s energy use by 0.2%.

Part 2 examines why artists are using Web3. The authors show how Web3 is enabling ownership of the creative intention of the artist (as opposed to the material form of the artwork); assisting artist collectives to form via DAOs; incentivising artists to understand and feel empowered through metadata; giving gamers ownership over their assets; and providing new means for musicians to reward their fans. Some artists are finding ways to earn money outside of incumbent industry structures and processes as a result – including artists from underprivileged backgrounds and previously marginalised practices. The authors examine these dynamics using examples of Australians who are producing Web3 projects, among them Jan van Schaik’s Lost Tablets NFT series, Emanate and Moda DAO’s work in music, the AAA game Illuvium, and Mimicus Etheriensis – a project designed to draw attention to some of the weaknesses in NFT standards and markets. They also discuss the importance of metadata for this emerging digital economy via the work of Envoke. 

Part 3 discusses the findings of a research survey, which asked Australian creative practitioners whether they are using blockchain technologies, and if not, why not. The survey results show that Australian creative practitioners are polarised in their views on Web3. Some see it as a site for opportunity and a means to correct the inequities and exclusions of the cultural economy. Others believe Web3 is undermining cultural value and wasting Earth’s resources. Because of these divergent attitudes, Web3 may never result in a wholesale transformation of the creative industries, and it may even dissuade some artists from engaging in creative collaborations. However, those who are using the technology believe it is here to stay. 

Part 4 uses secondary sources to provide an overview of how cultural institutions are responding. Cultural institutions already play a key role in managing records that show the provenance of works and Web3 can extend this role and amplify reputational capital. For instance, the trail of information generated through NFT transfers can provide greater visibility to smaller galleries and collectors as works get picked up by public institutions. However, cultural institutions will also need to learn new skills, including how to manage digital wallets and their associated keys and ensuring ongoing storage of digital works. 

Web3 is also raising a new set of questions in relation to intellectual property and consumer protection. In Part 5, the authors step through a series of scenarios that creative practitioners might encounter when developing Web3 projects, and the associated legal questions. These include situations where a project commissions an artist to create an NFT (or where a DAO does); a musician wanting to release an existing song or album as an NFT; when a project wishes to allow owners to re-use a work, and more. Using recent examples and cases, we show how, in general, existing laws still apply. New and unresolved legal areas include questions about who has authorship when an artwork is created by a non-human entity (e.g., AI and generative art), how or whether licences can be transferred along with a token, and whether a DAO can own intellectual property. Some of the grey areas outlined in Part 5 will only be resolved through the courts and legislature over time, and some may require amendments to existing laws before any certainty can be achieved. In the meantime, the onus is on creators and buyers to assess the risks and seek legal advice where necessary. 

The key conclusion is that Web3 is not replacing the existing cultural economy, but it is providing creative practitioners with new capabilities. Established markets and processes are beginning to be challenged in a serious way. However, those who resist Web3 will be largely unaffected - for now. Those who choose to take up Web3 may experience significant opportunities – not only new business models, but new collaborations, ways of organising, and new ways to connect with audiences.

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