Leveraging Non-Fungible Tokens (“NFTs”) for Social Good: A Spotlight on Al Goanna
Marketplaces for artwork have historically perpetuated asymmetries between creators and collectors. Whereas the proceeds of a primary sale – the first transaction to a buyer – are largely conveyed to the artist, subsequent profits from secondary sales generally benefit the artwork’s most recent owner. With auction houses and galleries functioning as brokers of secondary sales, art collectors have opportunities to maximize profits by reaching broader, more affluent audiences that might not partake in primary sales. To put this into perspective, Peter Doig, a renowned Scottish artist whose collection has netted over $250 million in secondary sales, estimates receiving just $65,000 from primary sales of his most prized pieces (1).
Although some jurisdictions have adopted Artist’s Resale Rights (“ARR”) in an effort to embed royalties that compensate original artists during secondary sales, this practice has not been widely adopted (2). In fact, the Copyright Act of 1976 does not recognize resale rights in the United States for visual artwork and has preempted state legislation to implement ARR frameworks (3). Despite such regulatory inconsistencies around ARR, artwork encoded as non-fungible tokens (“NFTs”) on a blockchain can be configured to include lifetime royalties that flow back to artists even upon secondary sales. Moreover, in Web 3.0 – an internet where transactions occur on blockchains – creators have the ability to directly list their pieces on NFT marketplaces, as opposed to relying on third party brokers to broadcast their content. In short, NFTs have the potential to decentralize the art industry and level the playing field for artists.
The adoption of NFTs by artists and consumers has been hindered, however, by the perception that transactions on a blockchain are harmful to the environment. This is due to the reliance of earlier protocols such as Bitcoin, and Ethereum until September of 2022, on Proof of Work (“PoW”) consensus mechanisms (4). Settlement of transactions on PoW blockchains requires enormous computational bandwidth, to the extent that Bitcoin currently consumes 124 terrawatt-hours (“TWh”) of electricity – enough to power a small nation – each year (5). The sustainability dilemma of NFTs was exemplified in 2019, when French artist and climate activist, Joanie Lemercier, learned that sales from just six of his NFTs consumed enough energy to power his studio for two years (6).
Ben Wyeth (“Benji”) is an artist from Australia on a mission to make Web 3.0 inclusive for all artists and change the narrative that NFTs harm the environment. In 2020, amidst the worst wildfires to hit Australia in modern history, Benji recognized the possibility of sustainable “green” NFTs through the emergence Proof of Stake (“PoS”) protocols that achieve consensus on blockchains with minimal energy consumption (7). Specifically, Benji was drawn to Algorand – the first carbon-negative blockchain – as the medium to release his first NFT series, Al Goanna, and work towards making positive social impacts through NFTs (8).
Al Goanna pays homage to Goannas, a species of lizard native to Australia, and started in September of 2021 as a set of 489 one-of-one NFTs. From the very beginning, Benji committed to plant a tree for every Al Goanna NFT (or 489 total) in partnership with Carbon Neutral. As news of this tree planting initiative spread across the Algorand community, however, other creators and collectors began partnering with Al Goanna to support Carbon Neutral (9). Within two months, Al Goanna had facilitated the planting of over 43,000 trees and subsequently supported the launch of the Gilbert Goanna Tree Fund (“Tree Fund”). Today, the Tree Fund has planted over 200,000 trees across five continents and continues to promote NFTs as vehicles for real-world impacts (10).
With over $4.7 million in sales, the original Al Goanna collection (“V1”) is currently the highest grossing NFT project on the Algorand blockchain (11). Building on this momentum, Benji has launched an NFT marketplace, Shufl, to further empower creators and onboard collectors into the Algorand NFT ecosystem. Shufl maintains a commitment to tree planting by donating 2.5% of platform fees to the Tree Fund and has standardized royalties such that 5% of all marketplace sales flow back to original artists.
Following the V1 collection, which is made up of 489 NFTs held by roughly 300 collectors, a derivative (“V2”) series of 5,555 NFTs was released in September of 2022. The V2 collection, which consists of “mutated” and “zombified” Al Goannas, has significantly grown the community to nearly 1300 members. Although Benji has been the catalyst behind Al Goanna, Web 3.0 embodies decentralized ownership and decision-making driven by community inputs. Accordingly, the management of Al Goanna will be transitioned to a Decentralized Autonomous Organization (“DAO”) – known as the Goanna DAO – that will oversee the project’s future growth.
The Goanna DAO will be governed through on-chain voting by holders of Al Goanna NFTs. This includes management of the treasury, which was initially established through 25% of proceeds from V2 sales, and the approval of proposals geared towards the broader objective of growing the Algorand NFT ecosystem (12). Furthermore, Shufl has allocated 7.5% of platform fees towards Goanna DAO and its sustained development of Al Goanna.
Although just 18 months old, Al Goanna exemplifies how blockchain can be utilized for social good. While NFTs are critical to the preservation of creator royalties, particularly given the lack of widespread ARR adoption, this cannot come at the cost of environmental conservation. By committing to Algorand, already a carbon-negative blockchain, and literally sowing the seeds for a global tree planting campaign, Al Goanna has demonstrated how NFTs can actually benefit the environment. In its next chapter, as the Goanna DAO takes responsibility for the project, Al Goanna is poised to further its mission of sustainably bringing artwork into Web 3.0 and disrupting the NFT landscape.
1 Leah Collins, Artists should share in resale profits. It’s an old idea, but it’s not the reality in Canada yet. CBC Arts (January 14, 2022) https://www.cbc.ca/arts/artists-should-share-in-resale-profits-it-s-an-old-idea-but-it-s-not-the-reality-in-canada-yet-1.6315813.
2 France first adopted “Droit de Suite” in 1920 to pave the way for Artist’s Resale Rights, but this concept has yet to be implemented in China and the United States. Indraneel Banerjee, Artists’ Resale Rights: What? Why? How?, Culture Cog (August 11, 2021) https://medium.com/culture-cog/artists-resale-rights-what-why-how-47aaf53222db.
3 The California Resale Royalty Act (“CRRA”) was eradicated on the basis of preemption by the Copyright Act of 1976. The Artist’s Resale Right in the U.S. & E.U. | IP Legal Update, Pardalis & Nohavicka (October 9, 2019) https://www.pnlawyers.com/the-artists-resale-right-in-the-u-s-eu-ip-legal-update/.
4 In September 2022, Ethereum shifted from Proof of Work to a Proof of Stake consensus model and has reduced its carbon footprint by 99.99%. Andrew Hayward, Ethereum Energy Usage, Carbon Footprint Down 99.99% After Merge: Report, Decrypt (September 15, 2022) https://decrypt.co/109848/ethereum-energy-carbon-footprint-down-99-percent-merge.
5 Bitcoin network power demand, Cambridge Bitcoin Electricity Consumption Index (February 20, 2023) https://ccaf.io/cbeci/index.
6 Gregory Barber, NFTs are Hot. So Is there Effect on the Earth’s Climate, Wired (March 6, 2021) https://www.wired.com/story/nfts-hot-effect-earth-climate/.
7 The Australian wildfires of 2019-2020 affected an estimated 3 billion animals and destroyed more than 46 million acres. Linda Givetash, Australian wildfires declared among the ‘worst wildlife disasters in modern history,’ NBC News (July 28, 2020) https://www.nbcnews.com/news/world/australian-wildfires-declared-among-worst-wildlife-disasters-modern-history-n1235071.
8 Algorand allocates a portion of network fees into smart contracts that purchase carbon credits, thus offsetting the carbon footprint of every transaction. Ethereum-Killer Algorand Blacks Out Times Square to Celebrate Going Carbon Negative, PYMNTS (April 25, 2022) https://www.pymnts.com/blockchain/2022/ethereum-killer-algorand-blacks-out-times-square-to-celebrate-going-carbon-negative/.
9 Al Goanna initially worked alongside Carbon Neutral to support reforestation efforts in the Yarra Yarra Biodiversity Corridor of South West Australia. Reforestation and habitat restoration, Carbon Neutral (February 2023) https://carbonneutral.com.au/about-us/our-projects/.
10 Tree Fund plants over 200,000 trees across five continents, Medium (February 24, 2023) https://medium.com/@gilbertgoanna001/tree-fund-plants-more-than-200-000-trees-across-five-continents-64d49d6c1003.
11 Al Goanna, Asalytic (February 21, 2023) https://www.asalytic.app/collection/al-goanna?tab=analysis.
12 The Goanna DAO treasury and any of its on-chain activity can be viewed on AlgoExplorer: https://algoexplorer.io/address/EJMY42KM4WFHMDDFOACEITBUOYCPGKBEKAVCMTMHEBDLPY5D6VLZRDFPKY.