Introduction

For decades, the art community throughout the world has suffered from inefficiencies in the global art market. These inefficiencies result from poor price discovery, information asymmetries$^1$, unaligned interests, undisclosed intentions, incomplete provenance, and missing authenticity. These factors are contradicting economically efficient transactions and – more importantly – regularly become a huge burden for building mutually beneficial relationships between artists, collectors, and dealers. Way too often, artists are the ones suffering most from these inefficiencies, as they do not have the economic and bargaining power to protect their rights in a competitive global art market.

However, when artists get the short end of the stick, it's ultimately the entire global art community that loses out - as artists’ creativity and (financial) independence is the ultimate source of energy fueling the global art market. Approaches to solve these inefficiencies date back decades.

As early as 1971, Seth Siegelaub, a NYC based curator, art dealer and author published the Artist Reserved Rights and Transfer Agreement – or simply the “Artist Contract” - together with the renowned art lawyer Robert Projansky$^2$. The contract intended to safeguard the economic interest of artists, particularly in the case of an artwork’s resale, reproduction, or rental. It was based on careful considerations of the interests and motives of all involved parties over the lifetime of primary and secondary artwork transactions and was derived from discussions and correspondence with more than 500 artists, dealers, lawyers, collectors, museum people, critics and other parties involved in the day-to-day workings of the international art world.

To facilitate widespread usage the contract was set out to be an easily accessible document. It was written in simple English and translated in various languages. However, the contract did not find widespread adoption in the art market, mostly as artists did not have the power to impose or enforce the contract. As a consequence, the question was raised whether the art market is capable of organizing itself or if it needs governmental and legislative enforcement. And indeed, various governmental and supra-national initiatives can be observed that intend to protect artists’ rights$^3$. However, such legislative enforcements usually only cover royalty claims in secondary trades and miss out on various other important agreements necessary for a sustainable and long-term artist-dealer-collector relationship.

Moreover, contractual agreements are to be preferred over legislative enforcements, as they do not pit artists and collectors adversarially against each other but can be structured to facilitate long term relationships and partnerships. The Artist Contract is a prominent example of a mutual agreement that aligns interests and is net-positive for all involved parties - a Pareto optimality, to speak in game-theoretic terms.

However, as mentioned earlier the agreement could not be enforced – mostly due to missing bargaining power of artists and operational challenges in installing and enforcing the contract over the entire lifecycle of an artwork. Given technological limitations prevalent in the 1970s and persisting today, the contract has to be faxed or mailed separately and could not be physically attached to the artwork.

This results in a remarkable dilemma: on the one hand mutually beneficial agreements would be preferable for all parties but cannot be easily enforced. On the other hand, legislative (and hence coercive) action might be enforceable$^4$ but is never capable of covering all aspects of a sustainable artist-dealer-collector relationship.

Conversations with ALLOVR fellows suggest that a lack of formal contracts is widespread in the art world, for example contracts governing the relationship between gallerists and artists. Such formality tends to be viewed with scepticism (since it goes against the spirit of the art world), but ironically its lack only serves to cement existing disparities in “power”.

To improve overall efficiency in the art market a more generalized approach is required. The Artist Contract is a step in the right direction; however, it needs to be buttressed by strong economic alignment of interests of all involved parties, most importantly artists, collectors and dealer and a participation in gains must not be (arbitrarily) restricted to secondary sales - data suggests that secondary sales only benefit a smaller fraction of more established artists.

ALLOVR$^5$ provides a simple, long-lasting and effective alignment mechanism for artists, dealers, collectors, artists supporters and general art enthusiasts. More importantly, ALLOVR empowers artists to form deeper connections with their collectors and communities and to participate in their own success in the long term. Based on a holistic token-based incentive model, ALLOVR enables long-lasting relationships between artists, collectors and dealers that are mutually beneficial. Strong economic incentives enforced by the ALLOVR model result in Pareto-efficient results for all involved parties. It is important to outline that the ALLOVR incentive model is not based on fractionalization of ownership in artworks, as the non-fractional character of an artwork needs to be appreciated. The transaction settlement of an artwork transfer (primary sell or secondary sell) is required to utilize ALLOVR, as validated transaction prices are incremental to the enforcement of the underlying token economy.

At the same time, ALLOVR is compatible with existing marketplaces and auction models for price discovery and transaction settlement, meaning it provides full compatibility to existing market infrastructures. Transaction settlement on ALLOVR results in 100% price transparency for all market participants.

Objections to this might be raised, as this price transparency is unusual for market participants accustomed to the opaque pricing structure that is standard today. However, economic research from security and options markets shows that price transparency protects less informed market participants from high trading costs and overpaying$^6$. It is obvious that ordinary collectors tend to have an information disadvantage towards professional art dealers and traders$^7$ Improved price transparency significantly reduces the options of informed market participants to monetize their information advantage. Consequently, rent-seeking, dishonest market participants of today will suffer from the usage of ALLOVR while honest market participants will benefit in the long run. This self-selection process towards honest market participants is beneficial to the entire art community and market.

ALLOVR is governed by its users and contributors and relies on trustless technology.

The remainder of the paper is structured as follows: Section 2 introduces the ALLOVR model and shows that it is based on strong economic incentives. Section 3 introduces the ALLOVR economy based on three different types of tokens necessary to establish the ALLOVR model and incentive scheme. Section 4) describes the governance of the ALLOVR Network and the role of the AOVR Tokens in the establishment of the ALLOVR DAO. Section 5) introduces the ovr-program and provides details on the technical solution architecture. Section 6) provides a timeline and implementation roadmap in terms of technical set up (ALLOVR DApp) and establishment of the governance model (ALLOVR DAO).

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$^1$Adverse effects on markets due to information asymmetries have been famously investigated by George Akerlof in his classic paper ‘The Market for Lemons’, Quarterly Journal of Economics. The MIT Press. 84 (3): 488–500.

$^2$Artist Reserved Rights and Transfer Agreement; Seth Siegelaub, Robert Projansky; 1971; Download: https://primaryinformation.org/files/english.pdf

$^{3}$The Royalties for Artists Coalition is a private initiative proposing a change in U.S: XXX law to enforce long term royalty claims of artists in secondary market transactions. In 20XX the XXXX Directive turned effective in the European Union enforcing royalty claims of artists of up to XX% of the secondary transaction price paid.

$^{4}$Various studies show that enforcement of royalty claims among different jurisdictions worldwide has been regularly insufficient.

$^{5}$The name ALLOVR is derived from Allover [awl-oh-ver] paintings: A canvas covered in paint from edge to edge and from corner to corner, in which each area of the composition is given equal attention and significance A perfect symbolization of ALLOVRs mission: We want to reach each corner of the art market and give it equal attention - no matter if its big names, old masters or emerging new artists.

$^{6}$Marco Pagano, Alisa Röell; Transparency and Liquidity - Comparison of Auction and Dealer Markets with Informed Trading (1996) - The Journal of Finance, Vol 51 No. 2 p. 579-611

$^{7}$However, this does not mean that all professional market participants are monetizing their information advantage on the cost of less informed market participants. Many professional art dealers and gallerists know the importance of long-term and trustful relationships to collectors and try to lower existing information asymmetries through knowledge sharing and transparency. But this does not hold true for all informed market participants.