South Korea’s oldest private art museum will be auctioning two sculptures designated as “national treasures” by the South Korean government. Two decentralized autonomous organizations (DAO) will be among the bidders on Thursday.
The DAOs – National Treasure DAO and HeritageDAO – formed independently of each other when South Korean media reported on the financially struggling Gansong Museum’s auction earlier this month. But they share a common goal: to prevent the artifacts from ending up in a private collection, where the public won’t be able to see them. The Gansong Museum has been closed since 2014 and has sold artwork to pay its debts. The museum told the Korea Herald that it hopes to reopen this year.
Both DAOs were inspired by ConstitutionDAO, the unprecedented and ultimately doomed attempt to buy one of the 13 original copies of the U.S. constitution. Although ConstitutionDAO was outbid by a billionaire, the initiative raised public awareness of DAOs by raising a whopping $40 million from thousands of hopeful investors. Post-ConstitutionDAO, people are spinning up DAOs to crowdfund big-ticket purchases, from golf courses to film scripts to Blockbuster.
The HeritageDAO and National Treasure DAO efforts are among the most ambitious and significant yet. The two sculptures, one of a miniature gilded bronze shrine with a Buddha inside is from the 11th century and the other of a gilded bronze triad of Buddhas that dates to the 6th century, are among fewer than 400 artworks that South Korea’s government has designated as national treasures.
According to the Korea Herald, Thursday will be the first time a South Korean museum has auctioned national treasures..
When Brian Cheong, founder of the Seoul Ethereum meetup and CEO of blockchain startup Atomrigs Lab, heard about the auction while watching television news, he was stunned.
“How come a national treasure is up for auction?” Cheong told CoinDesk. “I wanted to help somehow, but I don’t have that much money. I wanted to help with a community effort instead of just a few people’s donations.”
With help from Jason Han, the CEO of Ground X, the blockchain subsidiary of popular Korean texting app KakaoTalk, Cheong created National Treasure DAO.
But almost as soon as it started, the project faced a host of legal challenges.
Cheong heard about the auction on Jan. 17, leaving him only 10 days to create a DAO and find enough donors to raise his minimum goal of $4 million – enough to cover the floor cost and 15% auction fees for at least one of the statues.
“What can we do in 10 days?” Cheong said. “We cannot do a regular legal framework and set up an LLC. it would take another month to set up a legal entity. The best option was using crypto.”
“For fundraising, initially we thought about an ERC-20 token like ConstitutionDAO,” Cheong added. “We almost finished that initial contract coding but then several lawyers said, ‘Oh, no, no it’s very dangerous’ because the South Korean government still officially prohibits [initial coin offering] kinds of things.”
Cheong and his team instead raised funds via non-fungible tokens (NFT) minted on the Klaytn Blockchain, one of the most popular blockchains in South Korea. Cheong wrote smart contracts that ensured automatic refunds if the DAO didn’t reach its minimum funding goal by Jan. 26.
Cheong said that despite a whirlwind week of press engagements and over 30 articles and interviews about National Treasure DAO appearing in the Korean media, the DAO had raised only $2.1 million by the deadline and had already started issuing refunds.
Cheong blamed tightening crypto regulation in South Korea, which has seen nearly 70 exchanges shutter since September. Only a handful of crypto exchanges were able to meet new requirements set by the Korean Financial Services Commission (FSC), and of the surviving exchanges Cheong said that only two sell Klatyn’s native token. One made it nearly impossible to withdraw the crypto.
“This week, when we started to fundraise, Coinone prohibited exporting KLAY to MetaMask or other individual wallets,” Cheong said. “They only allow exporting to other exchanges’ accounts.”
Leon Kim, the CEO of Crayon Finance – a new DAO-based NFT finance platform backed by Animoca Brands – founded HeritageDAO when he and his team were approached by “an anonymous expert in the fields of ancient and modern arts over a cup of tea” on Jan. 23.
Kim told CoinDesk he and his team pulled three consecutive all-nighters to create the DAO’s website and establish a treasury for the project using Juicebox (the same service used by ConstitutionDAO).
Fundraising opened to the public on Wednesday and Kim said the project had raised 553 ETH (valued at approximately $1.3 million) by the time of his interview with CoinDesk.
Like National Treasure DAO, HeritageDAO hopes to raise a base amount of $4 million, the value Kim estimates to meet the floor price for at least one statue and pay auction and legal fees. But he said the initiative may not need the full amount.
Kim told CoinDesk that HeritageDAO is speaking with the Gansong Art Museum to potentially strike a deal for less than the asking price. The Gansong could favor such a deal because both the HeritageDAO and the National Treasure DAO plan to leave the artifacts in the museum if one of them wins the auction. HeritageDAO expects to hear back from the museum by noon Korea Standard Time (03:00 UTC).
“They heard about us somehow,” Kim said. “So they’re willing to talk about a direct, private kind of a deal.That way we might be able to secure [the statues] for a cheaper price.”
Unlike National Treasure DAO, HeritageDAO will keep raising money for a week, even if HeritageDAO doesn’t place the winning bid. Kim said that depending on how much money is raised, the DAO might attempt to buy the art from the auction winner or make a deal with the museum to purchase other art.
Though it has already begun issuing refunds, National Treasure DAO’s Cheong said that if the auction fails, the group could attempt a second fundraising round or, like HeritageDAO, try to make a private deal with the museum.
HeritageDAO’s Kim said owning a national treasure comes with responsibilities, including monitoring environmental temperature and lighting and reporting to the Cultural Heritage Administration, which strictly oversees art and artifacts of cultural significance.
Removing a national masterpiece from South Korea is illegal, so the list of potential buyers is small, he said.
“Obviously it’s not your everyday Picasso, because you can’t really enjoy it, per se,” Kim added. “So, like, it’s better off not to touch it.”
Despite the onerous rules of ownership, Kim believes the art is undervalued – and a worthy investment.
If HeritageDAO succeeds in buying one or both statues, Kim said it plans to “fractionalize the digital derivative of ownership” while the Gansong custodies and displays the actual statues.
“These national treasures have never had a chance to get a fair valuation, right?” Kim said. “So I think it’s going to change a lot if we try this.”
DAOs in South Korea
Even if a billionaire chaebol snatches up the statues, both Kim and Cheong agree the publicity received by HeritageDAO and National Treasure DAO is a win for South Korea’s crypto scene.
“Korean people are not familiar with the DAO concept yet,” Cheong said. “Even though the crypto exchanges in Korea have [a large volume of transactions], people don’t have any individual crypto wallets like Metamask.”
“They’re all just using centralized exchange accounts,” Cheong added. “They have no idea of how DAOs work. I want to show them a working model that is efficient, that doesn’t have a lot of hassles…if we have problem, we can refund it automatically because everything controlled by a smart contract.”
Kim told CoinDesk the ongoing presidential election season in South Korea made the timing of the auction ideal because candidates are trying to win the votes of younger constituents by espousing crypto-friendly policies.
“We [want to be] a good reference and use case that’s actually helping all the parties involved,” Kim said.