One of the fake Modigliani paintings on display in the Palazzo Ducale in Genoa in March 2017.

Blockchain Isn’t Enough to Solve the Authenticity of Physical Artworks

Alysa Yamada
Jul 15, 2018 · 6 min read

With the onset of blockchain’s incredible tech, we’re realizing a huge shift in which the internet can operate for us — in a completely decentralized manner where anyone can safely inspect the immutable provenance stored in the ledger itself.

Although there is much praise to be said about the blockchain, there is still a huge drawback that needs to be addressed and taken seriously — the authenticity of physical items when linked to the blockchain.

Provenance on the blockchain is a great step forward, but it’s not enough

There are gaps in the provenance paper trail that hurt both sides of the market — increasing the possibility of the item being forged.

So far, blockchain applications are focused on securing the provenance and ownership in a decentralized title registry which records events and changes that affect an item’s value. This decentralization prevents and deters “bad actors” from manipulating data, since the rest of the network would soon take notice and reject it.

Provenance tracking has become a great innovation, but it’s still missing a key element:

Even the impeccable provenance of an item on the blockchain doesn’t guarantee that the physical item itself is the original, as it does not establish any secure connection to the item itself in the physical world.

There needs to be a secure way to link physical items to the blockchain

Wolfgang Beltracchi is a German art forger and artist who has admitted to forging hundreds of paintings in an international art scam netting millions of euros.

Without a secure way to link the physical work of art or collectible to the provenance on the blockchain, it’s easy to replace it with a fake at any time.

For example, whenever an item’s ownership changes or if the item is exhibited, transported, or stored — these are all instances where original items can be replaced or mishandled.

There are too many fraudulent opportunities and loopholes at each stage within the processes of the art & collectibles market — a frightening and underrated issue that can’t be ignored.

Without a secure and consistent tracking system linked directly to the blockchain, the item can be unrecognizably forged and replaced without being noticed. Then, that fake could be “verified” by connecting it to a legitimate blockchain entry.

The push for tokenizing physical works of art is proving itself to be a huge challenge without an effective solution to link physical items to the blockchain.

There is a need for an easy-to-use authenticity verification that can be used by anyone associated in the process of the art and collectibles market.

Are the current solutions bringing an answer to the problem?

Image from Codex Protocol.

Codex Protocol is a “decentralized registry for unique assets like art, fine wines, watches and more.” Its Codex Record stores all the item’s information, evidence of ownership and metadata. When the item is first loaded onto Codex, all the information needs to be verified by “Validators” (auction houses specialists, dealers, gallerists and appraisers), who Codex relies on to verify its provenance, judge its authenticity and resolve disagreements. The “validators” are incentivized through rewards, with an amount being now decided by Codex (Codex states that over time, a reputation scoring system will be implemented).

With no physical link established to the item, Codex is currently only relying on its provenance registry and “validators” in the same fashion as how is it done today — leaving room for potential bad actors to falsely add or manipulate the provenance data.

Image from Bitcoinisle.

Versiart is also focusing on provenance on the blockchain — creating secure digital certificates for art and collectibles and building a new global standard for art certification and verification. All records in Verisart are immutably stored in the blockchain and timestamped, allowing for detailed information and files to be attached to the record with privacy and easy access.

Verisart also relies on provenance without a secure way to permanently attach a digital certificate to the physical item. A great example of how this is dangerous is Terence Eden’s story titled “How I became Leonardo da Vinci on the Blockchain.” Terence rightly pointed out “what if I sell a fake and keep the original in my Underground Vault?” and went on to add Mona Lisa to the Verisart blockchain and designate himself as its creator and owner.

Image from IBM.

IBM’s CryptoAnchor technology is introducing tamper-proof digital fingerprints that can be embedded into the items and linked to the blockchain. They are in the form of “unclonable” tiny computers or optical markers that are embedded right into the item. The product is still under research and the verification process is not yet clear. The first models could be available sometime in the next 18 months up to 5 years with IBM’s main focus on fast-moving-computer-goods (FMCG) as a starting point.

Tags and markers. There are many other solutions based on embedding something onto or into the item like simple RFID/NFC stickers, QR codes stickers, or more advanced holograms, DNA markers, microtags and special inks.

The problem with these is that they need to be attached invasively (something rather avoided in expensive items) and can be easily cloned or removed (RFID, NFC, QR). Advanced solutions require special hardware or experts (making it hard or expensive for anyone to verify). It also represents a problem when the user can’t easily detect with his naked eye whether or not it was tampered with. A “trusted expert” is required to be present to ensure these tags are “verified.” Therefore it’s not a secure choice that is affordable, simple and fast enough to be widely adopted.

Image from Value Protocol.

Veracity Protocol is the “new kid on the block” which is the first to introduce artificial intelligence to address and solve the problem. For over 3 years, Veracity Protocol developed a unique technology that uses computer vision and machine learning to fingerprint any physical item’s unique material structure and integrate them into the blockchain.

With no need for special devices, just a smartphone is used to process the item’s registration (“fingerprinting”) and verification. The high-resolution pictures of the surface normally not visible to the naked human eye are immutably saved to the blockchain. The same as with human fingerprints, the verification process compares the surface picture with the one in the blockchain and determines if it’s from the same item. The hypothesis is that it’s impossible to forge an item at such a detailed micro-structural level.

Items are entered into the blockchain by a verified authenticity expert or the author/manufacturer itself. This allows artists to prove their authorship and link the item to its digital entry at the moment of creation, with no future need for authenticity experts.

With this breakthrough, Veracity Protocol sets itself to be the authenticity protocol and infrastructure for physical assets, allowing anyone to build solutions on top of their technology or integrate with other blockchains.

Art Market Guru interviews the founder of Veracity Protocol for a more in depth perspective of the project (disclaimer — I’m working on the project with them).

The future is bright — if the problem of authenticity is solved

For the successful transition into the new decentralized economy, the secure tokenization of physical works of art & collectibles is crucial.

The tech development will eventually democratize the access to the market and allow space for innovation — like secure fractional ownership in which the traded shares of items are linked to the physical item itself.

But to get there, a secure way to link physical items to the blockchain and these many loopholes in authenticity must be addressed and solved.

Only then we are able to talk seriously about secure tokenization of physical works of art and collectibles.

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