The Impact of Blockchain on the Art Market
Blockchain is considered to be a “disruptive technology” that is steadily transforming the global economy and will have a significant impact on numerous industries. The fine arts world has begun to utilize this technology to solve a number of issues that include issues of provenance, authentication, transparency, ownership, valuation, copyright, and art forgery. Blockchain would also be able to bridge the gap between art galleries and art lovers in a more secure manner that does not require a centralized corporation hub.
After a thorough search through industry reports, white papers, and other trusted media sites, we were able to find the information to provide an overview of how blockchain is impacting the global art market and its potential impact in the future.
The total sales in the global art market amounted to $56.6 billion, as recorded by Dr. Clare McAndrew, the founder of Art Economics for Art Basel and UBS, in The Art Market 2017 global art market analysis. Statistics also show that although online sales increased through the year, it made only 9% ($4.9 billion) of the total sales, while dealer sales went up by 57%. Unlike the other sections of the global economy, the art market is difficult to appraise. Similar to private deals, transactions are already being made by exchanging cryptocurrency for works of art, and artworks for digital currencies, all of which are not recorded in reports. It was in April 2015 when an Austrian art museum was the first entity to pay for a work of art using Bitcoins. Later in July 2017 cryptocurrencies became an acceptable means of payment in Mayfair art gallery, located in London. Transactions involving Ethereum Classic, Litecoin, Monero, Dash, and Ethereum were then accepted by another fine art gallery called Dadiani.
Driving digital art sales through digital scarcity
A large problem that is faced in the fine arts world is with duplicating and selling pirated digital art. When digital arts are replicated for free, the value of the piece falls, along with its prospects in the market. Therefore, in order to retain value, there must be a need for scarcity. The technology of blockchain helps in solving this issue through the concept of “digital scarcity” which is defined as creating a specific (limited) number of copies and “tying them back to unique blocks proving ownership”.
Democratizing fine art investment
This year (2018), a company called Maecenas is working to launch its first open blockchain platform that will democratize the access to fine art. Art lovers have a common dream of owning some of the most famous paintings that exist in the world today. Due to blockchain, people can now purchase and own shares in a Monet, Picasso, or a Warhol. Museums, collectors, and galleries can put up their works for bid on Maecenas to raise money to buy future works. By using blockchain, the transaction costs will be lowered to as little as a fraction of a penny through cryptocurrency. The company provides a case example to show the savings that go into using blockchain technology. The example is a gallery that wants to acquire a piece of artwork for $3 million to add to its Warhol collection. The art gallery can raise funds from Maecenas investors by providing some of their art pieces at a 6% one-off fee. This amounts to $400,000 in savings for the gallery. It is found that the investors are also benefited by the transaction since the cost of transactions is significantly reduced and the cryptocurrency can be divided an infinite number of times. Maecenas has the ability to transform artworks that are highly valued (in terms of millions of dollars) into small digital units which can be purchased and sold in real time.
Improving provenance and reducing art forgery
Art forgery is also a major concern that can be actively dealt with the use of blockchain and thereby, can establish a system of secured authentication and provenance. The distributed ledger is the core of blockchain technology and provides a record of provenance that cannot be altered. This record of provenance starts with secure authentication and ends with the current owner of the specific piece of art. Apart from reducing theft and art forgery, blockchain has the ability to support and protect artists through methods of art monetization.
Verisart is a company that verifies and certifies collectibles and artworks using bitcoin blockchain. The company is working to reduce art forgery by providing a methodology of airtight authentication that allows verification of artworks in real time using image-recognition technology and distributed target ledger.
Monegraph and Ascribe are two other companies that are working on decentralized ledgers of artworks and collectibles. Ascribe, a Berlin-based company, provides artists with a certificate of ownership for every artwork they create. Each artwork is then linked to a specific cryptographic ID through which the entire history of the art piece can be obtained. Monegraph provides artists with the platform to verify digital assets using blockchain. After submitting their artwork online, they are provided with a blockchain key which is then stored in a Namecoin (open source decentralized key) wallet.
Through blockchain distributed ledger, the journey of an artwork can be traced from the beginning of its creation to the current owner. With this technology, every aspect of an artwork’s life cycle is recorded and can be traced, thereby eliminating one of the most major concerns — “fragile documentation”. Deloitte has created a platform using blockchain called “ArtTracktive”, which is a proof-of-concept model that validates every movement of the artwork.
According to Invest Foresight, blockchain investors evaluate the prospects of establishing downloadable artworks into the market of digital assets. People can purchase digital assets using digital currency units. The very first digital assets market (ico4.art platform) for contemporary fine arts will be launched sometime this month (February 2018). The following are the four distinct product categories for digital artworks,
— Limited number of copies and no access to get the printed version
— Limited number of copies and access to get the printed version
— Unlimited number of copies and access to get a printed version
— Unlimited number of copies and no access to get a printed version.
Crypto-investors can obtain digital assets from one marketplace, which they can later sell at other marketplaces for different digital currencies and regular currencies (dollars, euros, or rubles).
To wrap up, blockchain is a public database that is increasingly being used in the fine arts world. Blockchain technology will continue to impact this industry in various aspects like fine art investment, fight against art forgery, digital art sales, etc. The technology provides secure transactions on a decentralized ledger that helps solve issues of provenance, authentication, transparency, copyright, and art forgery.