How blockchain technologies can cut out institutional middlemen and directly connect philanthropists and artists
Private philanthropic giving constitutes the bulk of the budgets of arts and cultural institutions in the U.S. 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 a mere $167.5 million. There’s a useful debate to be had about the role of federal versus private giving to the arts, but an even more urgent question is whether charitable giving, public or private, is effective in its current shape. Sadly, it is not: the bulk of arts spending doesn’t seem to get to the artists it was intended to help. Here’s to transforming arts philanthropy with Web3.
Where the money goes
Consider, for instance, 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 the hourly wage grew from $31.70 per hour to $41.46 per hour between 2011 and 2021. After adjusting for inflation through the personal-consumption expenditure index (normalized to 2012 prices), that comes to $32.30 and $35.90 per hour, or a meager 11 percent rise over an entire decade. And these numbers focus primarily on full-time musicians and singers—not on the wider array 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 counterparts. And our recently released whitepaper in Living Opera shows—on a nationally representative sample from the Census Bureau that does not suffer from the issues in the BLS survey—that artists earn much less than their counterparts and have stagnated over the past decade.
More recently, the NEA received $75 million in stimulus funding as part of the CARES Act, the 2020 Covid-19 relief bill. That money was intended “to preserve jobs and help support organizations forced to close operations due to the spread of COVID-19.” Anecdotally, however, all the artists that my co-founders and I have surveyed through our work for Living Opera, our art and technology startup, say that they never received any of these funds. In fact, the vast majority of opera houses laid off the artists with whom they had contracts—even well-known institutions like Metropolitan Opera, which laid off artists by email in 2020.
Blockchain, DeFi, and DAOs
The good news is that a lot of potential exists to disrupt and transform arts philanthropy with web3 for the better, particularly with emerging tech tools. Decentralized autonomous organizations, or DAOs, are governed by smart contracts, or self-executing digital agreements, written and voted upon by all of an organization’s members rather than by a centralized entity. The organization’s rules and transactions are recorded on a blockchain, thus adding an important layer of transparency and providing incentives to members to carry out agreed-upon initiatives. An additional benefit of DAOs 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 chosen receive funds directly, bypassing any intermediaries. To the extent that a DAO embeds 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 way.
DAOs are no panacea for collective governance, but their transparency, efficiency, and ability to decentralize decision-making are appealing features that have great potential to coordinate tasks across groups whose members may not know one another or live near one another but are nevertheless united by a common purpose.
Motivated by technological advances 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 emerging artists, beginning with performing artists in opera. For example, if an artist needs an additional $500 for voice lessons, then the artist could submit a proposal to the DAO, and the community would vote on it. In contrast to legacy grant-making processes, which can take as long as a year and generally involve lots of paperwork and unclear decision-making, our vision is to create a community-driven, transparent, and value-added process for members.
In addition to providing a source of liquidity for its members, DAOs can relieve two major pain points for the arts community. First, philanthropists are often skeptical that their donations are having 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 substantial share of the funds often goes towards projects misaligned with donor intent.
Incentive for growth
The performing arts are a challenging profession, and most artists, according to our research, struggle with depression and mental health. But just like anyone else, they feel more motivated when they believe that they are learning and growing. Members in the Living Arts DAO community who submit proposals gain valuable experience in writing and presenting themselves to others—a skill they typically do not get in college—together with an arts-entrepreneurship digital certificate.
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, though college students who major in the fine arts and get some exposure to business curricula end up earning higher hourly wages. In this sense, the DAO is designed not only to meet an immediate need but also to equip members with the credentials and knowhow to market themselves over the long run. This also allows the DAO to become a community of practice that can simultaneously incubate talent and help arts institutions source the right people for performances.
Arts Philanthropy with Web3
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 profession by increasing transparency and accountability. My hope is that the Living Arts DAO functions as an early pilot for a new approach within the world of arts philanthropy with web3 that leads to transformational outcomes for artists, philanthropists, and society at large.
About the authors
Christos A. Makridis is a research affiliate at Columbia Business School, Stanford University and the University of Nicosia, and CEO and founder of Dainamic, a startup that aims to democratize access to AI for mid and small sized banks. Greek-Canadian operatic soprano Soula Parassidis is an entrepreneur, anti-human trafficking advocate, and producer. She has appeared on stage in the world’s major performance venues and is the CEO of Living Opera.