Future of art investment: market overview

Ineta Zukauskaite
Jul 17, 2018 · 9 min read

In April, 2018, Michael Jackson, the venture capitalist and former Skype executive, spent US$400,000 on a 10-foot-long neon sign consisting of 42 yellow letters and numbers that make up the blockchain contract address of a crypto-themed work of art called “Yellow Lambo”. It was a way to physically manifest the wealth a digital coin can represent.

Jackson’s story shows that blockchain, tokenization and crypto-investment are becoming a new basis for the economy of the future. CoArt team is glad to be the part of the global fine-art investment revolution. But we are not alone!

John Koetsier, who has recently spoke at Skolkovo blockchain-conference, wondered: how can blockchain technology affect the art world? The answer was extremely simple, because new technologies are applicable in at least two aspects:

  • Protection of artists and paintings from fraudulent activities
  • Creating new opportunities for investing in art

Over the past few years, a lot of projects that use blockchain in the field of art have been announced. We have tried to analyze the most interesting projects, both business-models and non-profit platforms. Our analytic work has contributed to the writing of this article. Enjoy! :)

Our previous article about differences between Maecenas, CoArt and Masterworks is also available. Projects are divided into several groups.

1. Direct sales of shares in art assets to retail investors

Maecenas

Maecenas is one of the most interesting and successful projects using blockchain technologies in the fine-art investment. Its concept can be described in three points

  • Art investment without intermediaries.
  • Raise funds from a syndicate of investors using your art collection as collateral.
  • Invest in fine art in the most transparent and efficient way.

Maecenas uses blockchain technology to create tamper-proof digital certificates linked to pieces of art. A single artwork is broken down into thousands of certificates, similar to how a public company issues shares. Investors can then purchase these certificates to own a percentage of a given artwork, and they can sell them back to other investors via the Maecenas marketplace.

Masterworks

One more blockchain-based fine-art investment platform. Masterworks tokenizes the painting as a security on the blockchain. There are several steps in the work process of the platform:

  • Masterworks firstly identifies potential acquisitions
  • Acquires the painting
  • Files an offering document with the SEC pursuant to Regulation A
  • Masterworks plans for the offering to be qualified by the SEC

Once qualified by the SEC, investors will be able to buy shares of the SPV which will be represented by ERC20 tokens on the Ethereum blockchain so long as their investment in Masterworks shares does not represent more than 10% of the greater of their annual income or net worth (non-accredited). Also, Masterworks plan to release an approved trading platform to provide liquidity.

Feralhorses

Feralhorses — ambitious Italian project based on the Codex protocol. It’s interesting that ICO’s founders are not satisfied with the instability of tokens; they do not consider them a convenient and useful tool for users.

By the way, the main technology relied on by the creators of the project is a blockchain, by which art objects are divided into shares that are freely circulated within the framework of the feralhorses platform. The business model is described as simply as possible; creators do not focus on technical, legal and economic details, but rather on loud slogans about “the fine-art investment revolution”.

FIMART

FIMART is a member-owned and controlled platform for the purchase and sale of real, legally binding, fractional ownership of art pieces. Very ambitious project, it can be interesting for museums, galeries, artists, curators and collectors.

Artbyte

Artbyte is a 2014 project, «middle ground» between social network and blockchain platform. Their main goal is to support artists of all genres and trade their works (particularly music). Interesting fact: Artbyte coins can be mined!

OrionVault

Complex blockchain based platform partnering with artists and museums to make a hyper-detailed digital version of the most desired fine art pieces. OroinVault also make it possible to buy, own and trade a perentage ownership of famous Digital Masterpieces. With investment opportunities where investors support artists with smaller donations each month and in return they get share of profits from the sale of those artists works (via tokenization of art objects).

  • Automatic and effortless integration of ownership tracking of all transactions on the OV platform;
  • No need for multiple middlemen. Users can trade faster directly between themselves and retain more profits;
  • Thanks to transparency, automation and direct interactions between users we can offer significantly lower fees than currently available options.

2. Block-archives and systems for distributed accounting and management of art assets

Artherium

Artherium is a very promising project iin its original design. A key investor has moved two developers from Russia to the United States and provided them with a working base, but in February 2018 they disagreed on the concept of the project development and terminated their contract. Now the developers are creating one of the blockchain-archives — the system for managing art assets.

“Such a database can protect artists and their heirs from illegal sales” — as Anna Karganova stated at Skolkovo Robotics forum.

Artprice

Very interesting French project. It’s a kind of a global archive-catalog of art objects sold all over the world, and at the same time it’s an aggregator of many art-indices. Since the beginning of this year, they have also begun to reorganize their system by the blockchain, but their ICO is not going to be conducted. They only introduce the technology into their model. They are potential partners for the creation of that art archive-catalog, which we declare as one of the non-profit goals of CoArt.

Ascribe

Online-catalog of art objects. The main focus is on the registration of rights to Digital Art objects and the assignment, including temporary, of these rights to third parties. The blockchain is used as a basic technology, but no data on the conducted or forthcoming ICO of the Ascribe is found. Storage of information in their «system of administration of art-assets» is chargeable.

Artchain

This platform was created for the verification of paintings, as well as tracing, and protecting works of art. The platform is based on an open and constantly expanding blockchain technology. ArtChain Global synchronizes digital and offline assets for all those involved in the trade, collection or production of works of art. ACG also uses publicchchain technology with access control. Offline art assets are registered in a system that synchronizes with the block to ensure that the owners and collectors have all the rights to these or those works.

VerisArt

Platform, the creators of which use blockchain technology to ensure the transparency, anonymity and safety of artists and art owners whose rights are confirmed by a certain record being entered into the system.

The main goal of the project is the approval of a new global standard for certification and verification of works of art. It’s emphasized that all entries made to the Verisart system are encrypted in the most reliable decentralized “account book” in the world.

3. Platforms offering to either buy or jointly create digital art for users themselves

Artcoins

Artcoins conception is based on the use of AR (augmented reality) and special 3D scanning for the organization of the «virtual exhibition space». But, at the same time, they also represent their coins as «a universal means of settlement in the art market». Unfortunately their WhitePaper is poorly organized and some issues remain unspecified.

Pixinch

Blockchain platform, focused primarily on Digital Art, but still offering investment in traditional types of art assets. Recently completed their ICO by selling 138,413,120 of their PIN tokens at the rate of 1 ETH = 400 PIN and collected 98,000 ETH!

Bit painting

The platform for crypto-collecting of objects of the world art market, developed by the company Tapinator — a leading developer of applications for iOS, Google Play, Amazon and Ethereum platforms. Each picture on the BitPainting platform is a unique (ERC-721) token, which is stored on the basis of Ethereum blockchain. BitPainting is built by using specialized «smART contracts», which guarantee the limitation of the object of art, and also confirm its ownership and origin.

Previously mentioned «smART contracts» allow BitPainting members to create limited editions of their work, which allows for the receipt of limited, decentralized tokens, thanks to which further profit can be traded. It is important to note that the project is still under development.

CryptoCanvas

An unusual project, combining both a platform for creating art objects by drawing pixels on a digital canvas, and a platform for tokenizing the resulting pictures for the subsequent distribution of shares by the auction (which is conducted after all the pixels are installed). Anyone can make a bet. 96.1% of the winning bid from the auction is distributed among artists. So, for example, the artist who draws half of the canvas gets 50%. Each time the canvas is traded, 6.1% of the value of the transaction is again distributed among the artists.

DADA

A social network by which people talk to each other through drawings. DADA allows artists from around the world to create joint pictures, while simultaneously participating in spontaneous visual conversations. According to one of the creators of the project, «thanks to the blockchain digital art can be verified and get a confirmation of ownership of it, and artists can be supported by selling digital drawings for Ethereum».

«Creeps and Weirdos» (the alternative name) — one of the world’s first collection of digital art of limited circulation for fans of cryptography and fine-art. The site is always updating the ratings of the most popular artists and the most expensive sales.

Vrallart

The blockchain platform that implements the concept of a virtual art gallery using virtual reality applications. Three directions — exhibitions, education, marketplace. Issuing their own AllArt Coins.

4. Online auctions

Paddle8

Paddle8 is one of the oldest online-auctions for the sale of art objects that worth less than $ 20,000 (in the US it was considered as a price «below the market» of auctions and galleries when the project was launched 5 years ago). Earlier this year they have also announced their plans to use blockchain technology (but without any information about future ICO).

artsy.net

One more art-market information aggregator with it’s own online auction.

artnet.com

The aggregator of information with its own online auction.

5. Examples of “art funds” that offer token holders using blockchain to invest in their own assets and make a profit

Antiqmall

Antiqmall finished all the ICO-creation procedures in April, 2018. There is no data on fees on the site. Apparently, they are going to use different blockchain technologies primarily to create a global blockchain-archive of antiques that echoes CoArt «non-profit» idea of ​​tokenization of the Cultural heritage of mankind.

WHS-Coin

One more platform which has surprisingly finished its ICO even earlier than it has been planned. But still, the results of the tokenization haven’t been published yet. Judging by the comments of its founders (video on the site), the project is aimed at promoting Japanese artists, currently undervalued in the world art market. This kind of investment is akin to investing in young, but talented artists, in calculating the price growth of their works in the short term. As has already happened, for example, with a number of artists in Russia and post-Soviet space after the collapse of the USSR.

Artcoinfund

Example of “portfolio investments”. Looks like SCAM. Information on the results of pre-ICO and ICO is not disclosed. This kind of “portfolios” we also assume in the future development of CoArt Exchange. But, in this particular project, there is no talk about the tokenization of art assets and the possibility of trading their tokens — there are no “shares” on the stock exchange at all.

Bonus: CoArt!

CoArt uses the following steps to resolve fine art industry problems:

- The CoArt openAPI Protocol
- Transparency and authenticity of transactions
- Collaboration with hedge funds, family office, and other financial institutions
- Tokenization of art-assets
- Cooperation with crypto funds and other exchanges using CoArt API
- Professional participation in the fine-art industry for buying art-assets
Independent review of acquisitions through the CoArt Platform

Do not forget to check our updated Whitepaper! You can also follow the news on our social media accounts:

Twitter

Facebook

Telegram

LinkedIn

Welcome to a place where words matter. On Medium, smart voices and original ideas take center stage - with no ads in sight. Watch
Follow all the topics you care about, and we’ll deliver the best stories for you to your homepage and inbox. Explore
Get unlimited access to the best stories on Medium — and support writers while you’re at it. Just $5/month. Upgrade