THE TOKENIZATION OF ART

THE TOKENIZATION OF ART

The new age of high tech is upon us and it continues to make great strides forward across the world: artificial intelligence development, information technologies in goods and finances, the first step of economy digitization and other aspects of our lives. All of this one way or another has its effect on the more conservative areas, the art industry in particular. Art and collector’s items are financial products as well. At the moment it represents a $2 trillion worth of assets, which are expected to increase up to $2.7 trillion in the coming ten years (estimated by the Deloitte consulting company) and $620 billion worth of annual transactions.

In the past, if you wanted a certain artwork you’d order it from a painter who copied it from the original. Since the advent of modern technologies — cameras, digital images and the Internet — this process got much simpler. Art reproduction has become a common affair, and that is why a problem of art verification has arisen — for example, a simple Google search allows anyone to find high resolution pictures of almost any artwork or photograph, absolutely free of charge, therefore authors of these artworks do not receive any monetary compensation for their use. A number of problems have appeared in the art industry as a consequence of this fact:

• Lack of transparency;
• Origin / copyright / ARR / trade restrictions are harder to monitor;
• High fees and low liquidity;
• The industry is not prepared for the digital economy;
• Old ways of conducting business will lead to competition almost entirely disappearing.

CERTIFICATION

These problems affect the collectors, who want to purchase certain works of art, but require guarantees of originality. The most effective solution to this is the blockchain technology, which can verify the authenticity of the artwork through the tokenization of ownership, as well as verifying a person to be the owner of the original piece of art. Artists and authors need to have an ability to certify their works. However, if there is a need to verify older works of art, let’s say from XVII, in this case there have to be laid down some basic rules for their verification.

Obviously this technology can be applied to the traditional artworks, as well as the digital ones.

DIGITAL ART

The blockchain tokenization technology can lead to ownership of digital art, if developed properly. A good example is the CryptoKitties, a game where you purchase virtual pets using ETH, every digital cat has its own properties and a unique 256-bit genetic sequence, allowing for a 4 billion unique digital animals — it’s kind of like the Tamagotchi games of our childhood.

Such projects show the demand for unique digital asset and complete feasibility of their certification.

The artist is able to sell to the buyer the single unique verified copy of their work, and the buyer in turn has the ability to prove the originality of their purchase. Alternatively, there is an option of creating several verified copies (let’s say 50), a limited circulation. These technologies will bring great changes to the digital art industry.

The same applies to the other part of the digital arts — photography. Today almost no one prints photographs, since we have monitors and other high definition screens to see the images.

Another potential application of the blockchain technology is the use of the “ownership-token” for digital image encryption. The token in this case becomes a kind of a key that grants access to the image file. In the case where you make a screenshot or a print of the key the certification rules no longer apply, but you will still own the digital token that verifies the file.

Several platforms are working in this area right now. There is Verisart, that certifies and checks the physical artworks, and Dada.nyc, a service that works directly with artists, that allows to purchase limited digital art with IP protection and ownership verification.

FUTURE TRENDS OF THE ART INDUSTRY

There are three main trends that are going to play a major role in the coming years:

1. The online-peering trade/exchange. Blockchain based ownership tracking, secure transactions, that allow private investors to trade with other investors.
2. Fractional ownership. When a single work of art can be owned by several investors. Artwork shares with the price of a million dollars can be traded on the world market. This provides liquidity for the investors and a way to set the market prices.
3. Crowdfunding. A way to invest in the future works of an artist, providing investors with a share of profits for the future sales.

PRODUCT PROTOCOL AND THE ART INDUSTRY

The Product Protocol projects is an innovative software solution for galleries and art-spaces. The blockchain platform provides all the necessary features for tokenization and online trading of products, including works of art.

The PP Marketplace has the following features:

• A way to list artworks and register artists and buyers.
• Direct sale, auction or exchange.
• Innovative tools, such as fractional ownership and crowdfunding.
• Full control over the system.
• Creation of a digital registry of artworks between the partner galleries.
• Short time for market entrance (days/weeks) and an affordable solution price.
• A simple process of attracting new investors, partners and artists.

CONCLUSION

Art is a broad term, that includes a number of meanings and categories, but this does not matter when it comes to the blockchain technology, since it makes tokenization possible for any kind of digital assets and makes trading them that much easier.

Tokenization is also a way to encode ideology or meaning into the things that culture and art create. Instead of being limited by stylistic gestures, people can now translate their ideology through new technologies. A good example of this is the CryptoRave — a mix of rave culture and blockchain technology.

Raves have always been a secretive affair, allowing only trusted people inside. With the rise of blockchain technology participants can in addition to invites receive keys in different forms: public blockchain PGP-messages or DAO tokens, which are effectively become the tickets for the party.

With the advent of global tokenization comes the new era of art, where the questions of what is and what isn’t art, and what makes art valuable will become the topics for discussion in the next ten years.