Technology is Shaping the Future of Creativity While Navigating Complicated Regulations
Coreum L1 Launch Party in Los Angeles, CA. (2023) Photo courtesy of Josh Sauceda.
I’ve put a lot of thought into how technology and culture intersect, specifically fashion, but also art in a more general sense as well. I want to dive into Web3 as a robust set of technologies that can come together for the public good with the promise of more online accountability, security, and transparency. Think of blockchains as the essential foundation for Web3 to include crypto, dApps, DAOs, and NFTs…
Yes there’s a lot of terminology, but I promise I’ll break it down. There’s an ever growing developer base building out practical Web3 applications aimed towards tech savvy consumers. Now, I’ve always envisioned Web3 as a method of accounting for all digital information, and it’s for this reason that I believe it’s going to be an increasingly important part of how markets communicate.
Web3 will eventually move from the early adopters to everyone, and we’re already seeing the first stages of mass adoption with the proliferation of decentralized finance (DeFi), that offers seamless, cost efficient transactions and transfers of large sums of verifiably authentic digital currency across borders. The capacity for more efficient financial tools means that commerce changes. DeFi serves as sort of like a forcing function for a new constellation of technologies. Things like advanced artificial intelligence that are going to be developed and fine-tuned during this ‘intelligence age’. A new period we’ve stepped into, for which thinking machines squeeze out efficiencies in everything imaginably profitable. DeFi is already a developer's sandbox for institutional interests to reconcile traditional banking, financing, and assets with existing systems.
Of course that’s not a new concept, it’s unspecific and I’m interested in uncovering the potential. How does Web3 affect creative culture? To answer, I think it prudent first to lay out the concepts of decentralization and cryptocurrency… So decentralization refers to the distribution of decision-making authority and control away from any single, central entity or governing body, spreading it instead across a network of participants. Within these systems, power is shared among many actors, reducing the risk of a single point of failure, manipulation, or abuse of power. This structure results in a high-confidence of transparency, security, and resilience, as no one party has complete control over the entire system.
A Blockchain centric Hackathon during Outer Edge | LA 2024, showcasing teams working together to create purposeful applications around decentralization. Photo courtesy of Josh Sauceda.
A fashion brunch sponsored by NEAR Foundation, a fully sharded, proof-of-stake blockchain built for mainstream adoption. Unfolding during NFT NYC 2023. Photo courtesy of Josh Sauceda.
Christie’s partners with nft now to host a major digital art exhibition for Art Basel Miami 2023. Photo courtesy of Josh Sauceda.
Applied through the context of blockchain technology—or peer-to-peer networks—decentralization means that data and processes are maintained by a distributed group of actors, each holding an independent copy of the information. Decisions, validations, and updates are agreed upon through consensus mechanisms, ensuring trust and cooperation without the need for centralized intermediaries. Decentralization, therefore, underpins systems designed to be open and resistant to censorship or interference.
Cryptocurrency is a digital or virtual form of money that relies on cryptography for security, making it resistant to counterfeiting or double-spending, limiting the potential for interference. Unlike fiat currency issued by the government, cryptocurrencies operate on decentralized blockchain networks. Essentially it's a store of value independent of central authority which makes peer-to-peer transactions without intermediaries like banks possible.
Nations are looking to leverage this technology for themselves. In order to do so, they must firstly establish a framework for how it is used within its borders. This results in regulations. Today’s younger demographic of tech savvy consumers crave transparency, wanting to know the origins of their purchases and the ethics behind them. Sentiments inline with the privacy and compliance regulations like the General Data Protection Regulation (GDPR) in Europe.
Take the Aura Blockchain Consortium created by LVMH; it’s a permissioned blockchain platform that grants customers access to verified product information—to include materials used, manufacturing processes, and sustainability efforts—while keeping sensitive supplier data and proprietary details under wraps. This is an attempt to establish a standard for the validation of physical stuff.
Web3 innovations like zero-knowledge proofs are essential tools in driving this change in commerce because they allow brands to validate specific information like that a product was made from organic Supima cotton without revealing important sourcing details that might give away a competitive advantage. Web3 is still new, but it’s robust enough to handle these dances of discretion, giving consumers an inside look to the true history of the garment, while upholding privacy commitments. However when it comes to fashion, privacy is far from the only issue that Web3 can assuage.
Better transparency also empowers more authenticity with digital twins. This means a whole host of things for the luxury fashion sector which is plagued with over $50 Billion in counterfeiting. High-end brands create value through marketing which revolves around scarcity, fakes undermine brand integrity and defraud consumers, especially in the secondhand market. Blockchain technology yet again offers a formidable solution to this growing problem.
The Aura Blockchain Consortium has also defined itself by embedding digital tokens into their products, allowing consumers to verify authenticity with a simple smartphone scan—ensuring that a coveted handbag is genuinely Parisian, not a convincing imitation. This system provides an immutable ledger of a product’s journey from creation to consumer, fortifying trust and elevating brand prestige.
In the art world, the stakes are equally high. Platforms like Verisart employ blockchain to issue tamper-proof certificates of authenticity for artworks connected directly to creators Shopify stores. This not only safeguards artists and collectors against forgeries but also preserves the integrity of creativity itself. The British Museum, for instance, is another example of a prominent organization partnership, with blockchain platform laCollection to release digital postcards of famous artworks as NFTs, each containing a secure record of ownership. Now these are examples of innovations which aren't merely about protecting profits; they’re about ensuring that the narrative value of creative works remain uncompromised. It just so happens that the best real world use cases for this tech happens to be in luxury goods.
But blockchain’s potential doesn’t stop at authenticity. Smart contracts—self-executing agreements with terms directly written into code—are revolutionizing how artists and designers monetize their own work. Digital artist Beeple made headlines when his NFT “Everydays: The First 5000 Days” sold for $69 million at Christie’s. Thanks to smart contracts, Beeple earns royalties every time the piece is resold, ensuring ongoing revenue streams that were previously unattainable. What a seismic shift from traditional auctions where artists have no connection to their work once it’s released into circulation.
Everydays: The First 5000 Days by Beeple.
For many of these examples mentioned above, I think that we’ve only scratched the surface when it comes to the potential applications of Web3 technology in a social landscape where more screens is the unbroken trend. In terms of creative and cultural industries like art & fashion, Web3 seemingly offers a scalable infrastructure of consumer side innovations.
A cloud of regulatory uncertainty still looms over the prospect of widespread use though. For one, the internet has no borders and decentralized systems currently lack uniform legal frameworks that would alleviate illicit activity across physical borders. The European Union has passed a unified proposal with the Markets in Crypto-Assets Regulation (MiCA), a landmark framework meant to govern the crypto-asset industry within its member states. It is a comprehensive regulation to bolster financial stability, establishing definitions, standards, and safeguards which encourage responsible commercial use.
The scope is very broad applied to entities involved in the crypto-asset ecosystem to include issuers of crypto-assets, providers of crypto-asset services like exchanges and wallet providers, and individuals engaging in activities such as trading and investment.
One of the main things MiCA does, is a classify crypto assets into three primary categories:
Asset-referenced tokens: These tokens are pegged to the value of another asset, such as a fiat currency or a commodity.
E-money tokens: These tokens are designed to function as electronic money, similar to traditional payment systems.
Crypto-assets other than the previous two: This category encompasses all other types of crypto-assets, including utility tokens and governance tokens.
Also importantly MiCA sets mandates for all crypto-asset service providers operating within the EU to obtain authorization from their national competent authority. Parts of these authorization processes require providers to meet specific standards related to capital adequacy, risk management, and consumer protection. Once authorized, providers are still subject to ongoing supervision by their national competent authority. All of these measures are meant to reduce market abuse by outlining rules to prevent insider trading, market manipulation, and the unlawful disclosure of inside information. Like with any regulation, there’s enforcement. This is why MiCa also provides for the cooperation and information sharing between national competent authorities and European supervisory authorities. And while MiCA took effect in June 2023, its full implementation follows a staged rollout. Titles III and IV, concerning asset-referenced tokens and e-money tokens, became applicable in June 2024. The remaining titles will apply in December 2024, marking the full application of MiCA regulations.
It’s worth a mention though that there’s exclusions which remain beyond its regulatory scope for certain blockchain assets to include:
Crypto-assets already regulated as financial instruments
Deposits and structured deposits
Funds and securitization positions
Insurance policies
Pension and social security schemes
Non-fractionalized non-fungible tokens
Certain transactions between public entities
Central Bank Digital Currencies
Non-transferable digital assets
A patchwork of state regulations has left companies in a tricky position, as expanding operations across state lines introduces legal complexities. There are federal developments, such as the Commodity Futures Trading Commission (CFTC) regulating certain crypto transactions and IRS-imposed tax reporting, but the lack of cohesive national regulations means that the landscape remains complex for businesses. Obviously there’s a hesitancy among investors because the lack of structure acting more so as a hindrance for cross-state or cross-border blockchain initiatives.
Outer Edge | LA 2023 convention hosting a fireside chat with crypto natives and newcomers. Photo courtesy of Josh Sauceda.
Today’s global digital economy necessitates international collaboration on blockchain regulation. The Financial Stability Board (FSB) and the International Organization of Securities Commissions (IOSCO) are at the forefront in seeking to align the various legal frameworks across countries. In recent developments, IOSCO has issued recommendations to nations for the adoption of consistent regulatory standards for crypto assets. Recommendations which could harmonize rules across borders, simplifying how artists sell their work & how global fashion brands authenticate luxury goods.
In terms of cultural industries like art and fashion, a more unified regulatory environment could minimize friction for global commerce down to the peer-to-peer consumer level. Achieving such a thing remains a challenge. More money, faster and safer, is an incentive for nations with vastly different economic interests and legal systems to come together.
The growing popularity of crypto assets has drawn much concern over the potential for misuse. The art and fashion worlds have been increasingly adopting Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) measures. Now Sotheby’s requires thorough verification processes before conducting high-value NFT sales, ensuring compliance with Know Your Customer (KYC) protocols. These measures are in line with global efforts to prevent illicit activities, especially in sectors where speculation can leave the door open to fraud and money laundering.
Digital Fashion Week 2024 at in collaboration with FIT. Photo courtesy of Josh Sauceda.
Digital Fashion Week 2024 at in collaboration with FIT. Photo courtesy of Josh Sauceda.
I ultimately believe that in order for blockchain to achieve mainstream adoption, consumer education is paramount. The way this happens is by larger tech players pushing more Web3 technologies into the forefront encouraging people to develop a sprawling ecosystem that connects their current offering to these new systems. In my experience blockchain to this day remains as a buzzword. A true shame all things considered. Understandably, investors would sink money into just the electric car company, before there’s a grid to power them across the country…
The good news though, is that we’re going to need a better way of discerning between human and machine online. The best method of accounting for digital information and IP is within the framework of a blockchain, this means we can count on many interesting developments in Web3 to come. I think Jason Zhao put it best in the title of his latest piece on Substack entitled How Blockchains Will Eat the World. From combating counterfeits and empowering creators to enhancing supply chain efficiency and satisfying ethical consumer demands, technologists and policymakers alike are already on the prowl testing what a future in the Metaverse truly looks like in a decade.
As cultural substrates, art and fashion have always been about more than just material objects—they’re about rich stories, identities, and connections. It’s no wonder why consumer application of Web3 technologies would manifest itself so usefully in these industries to begin with.
Booths at the ETH Denver 2023 convention. Photo courtesy of Josh Sauceda.
