How the Blockchain is Changing the Art Market
Blockchain pioneers are ushering in a new era for the art world.
Leaders in humanitarian aid, finance, technology, and more have embraced the distributed ledger known as blockchain to bring transparency to their operations. The art world is experimenting with it as well, seeing the technology as a way to revolutionize how art is bought and sold, thwart fraud and tax evasion, and reduce friction during the auction process. Here are the many ways that buyers, sellers, and enterprising artists are embracing this new medium.
Visual artists are increasingly creating digital artwork, which might not ever have a physical presence. Digital files, however, can be replicated and distributed without the artists’ consent. By registering their work on the blockchain, artists can establish proof of ownership, and therefore a secondary market. Some are even using blockchain technology itself as a canvas. This past February, artist Kevin Abosch sold Forever Rose to a collective of investors for cryptocurrency valued at $1 million. Each buyer received one-tenth of a virtual rose–effectively a string of code–as a token on the blockchain, which they can keep, sell, or give away.
Forgeries are still rampant in the art world. Collectors worried about the authenticity of a purchase can use the blockchain to track its ownership history. Several startups, including Codex and Verisart, offer artists, collectors, and galleries registration and certification services. When a piece is registered, details of its physical characteristics and history are stored in a time-stamped entry on the blockchain that can be verified. “I think of [the blockchain] like LinkedIn,” says Verisart CEO Robert Norton. “A single unverified claim might look suspicious, but one that other issuers can endorse can hold more value and credence.”
THE ART INVESTOR
Singapore-headquartered firm Maecenas is using blockchain-based cryptocurrency to sell shares of artwork. In July, the company partnered with the gallery Dadiani Syndicate for its first sale, offering a 31.5% stake in Andy Warhol’s 14 Small Electric Chairs, valued at $5.6 million. “We’re not selling art, we’re selling a financial product,” says Kim Randall-Stevens, Maecenas’s director of acquisitions and sales. “Eventually, anyone who wants to liquidate a fraction of their artwork will be able to do it.” In the coming months, the company will roll out a blockchain-based platform for trading such shares.
THE AUCTION HOUSE
Christie’s piloted a blockchain-based encryption and registration service at the November auction of the Barney A. Ebsworth Collection in New York. The auction house worked with art registry service Artory to create a digital certificate for pieces in the estimated $300 million sale (which included work by Edward Hopper and Georgia O’Keeffe). The certificate records a description of the work and price, and tracks its provenance as it gets bought or sold. Richard Entrup, chief information officer at Christie’s, says that the benefits of the blockchain include “increased transparency and long-term data security for relevant information about the artworks.”
HOW BLOCKCHAIN TECHNOLOGY KEEPS ART OWNERSHIP TRANSPARENT
1. An artist creates a new piece, or a collector or gallery makes a sale, and certifies it with a token on a blockchain.
2. When the artwork is purchased from the artist, the token transfers to the buyer.
3. Each time the piece is resold, the token transfers with it.
4. The token transactions are stored publicly on a distributed ledger that anyone can edit or access, so buyers and sellers can easily track the entire history of ownership. If the token doesn’t originate with the artist’s crypto wallet, or with a well-known gallery or investor, its provenance could be called into question.
Source: Fast Company