An Introduction To Art On Blockchain: Applications And Industry Affects
When we founded Chronicled in 2014, the company was originally named ArtCOA, or Art Certificate of Authenticity.
We were primarily focused on blockchain solutions for the fine art and contemporary art spaces.
But we quickly discovered that the market hadn’t caught up to the technology. People weren’t educated about blockchain, and they weren’t aware of the potential.
We realized early on that the art world wasn’t really a place to develop blockchain systems in the wild.
Not only was it important for us to have a proof of concept, but we needed to have real production systems up and running. We couldn’t do that with physical art at the time due to the low transaction volumes.
That’s why we moved to sneakers—another type of collectible physical asset that was often resold.
But we have always maintained a commitment to the art community.
Now, we’re seeing growing interest in what blockchain can do for the art world.
People have a basic understanding of tokenization, and they see blockchain in the news. They understand it’s something that will affect their industries.
That’s exciting, because blockchain offers some truly revolutionary possibilities for the art world.
Practical Applications For Art
The initial focus for art is on improving provenance and reducing art forgery.
You can use NFC PKI microchips — the same chips in passports and credit cards — to authenticate works of art.
The process is actually pretty simple.
One of the chips is placed somewhere on a work of art. There’s a private key that’s stored in the chip, which is invisible to the eye. There’s also a corresponding public key stored on a blockchain.
When you scan the chip, it goes through a cryptographic algorithm and affirms that this is the authentic work of art.
There are two ways to use the chip.
First, there’s self-authentication — the artists themselves can attach it when they produce a new work. But the chip can also be applied to older, more renowned works as a certificate of authenticity by art authenticators.
Once you have that unique link registered on the blockchain, it creates proof of the link between the object and the blockchain.
And once you have that proof, all kind of options open up.
First and foremost, the cryptographic link between a physical work and the blockchain helps to prevent forgeries.
I talked to an artist recently who was selling her work at a gallery and doing very well. But she found out there was a guy posting photos of her work online, claiming to be the original seller. He would place an order with her, display it in his gallery, and sell it at a much higher price.
Once a piece of art is registered on blockchain, it’s identity is established and buyers can authenticate a piece before buying — cutting down on forgeries and other shady dealings.
How does a collector know that the art that they purchased, let’s say in Europe, is the same piece when it arrives to their home in New York City?
How does the collector know that the work hasn’t been swapped out for a fake?
Registering artwork on blockchain can also help settle issues with transportation. When a work of art is traveling, it’s essential that exposure to light and humidity is closely monitored.
A sensor placed on or near the artwork can register data about humidity or temperature to the identity of the artwork on blockchain, ensuring the piece’s value is maintained. So, if a shipping company doesn’t maintain the proper humidity while moving the art, that information is available to the collector or gallery.
This has a range of implications for insuring the work in transit as well.
Imagine buyers and galleries at the next Art Basel being able to buy a piece, see it’s entire history in a mobile app, insure it in real-time based on verifiable and immutable data, and then track its life after the point of sale.
Registering art on blockchain may also end up democratizing the art world.
At the moment, only someone with vast wealth can buy and collect expensive artwork. But registering it on the blockchain allows for fractional ownership. For example, a $20,000,000 work of art could potentially have thousands of investors who own a fraction of the piece and can trade on its value over time.
Currently, an artist only makes a profit when they initially sell a piece of artwork.
Auction houses routinely drive up prices to increase their own profit from a work of art, but the artist doesn’t see any of that money.
The profit margins for certain artwork are astounding — and it’s only picking up steam.
We’re seeing this in the success of contemporary art, exemplified by Peter Doig’s “The Architect’s Home in the Ravine.” This piece originally sold for $3.6 million in 2007. Six years later, it was sold again for $11.9 million. Now, Sotheby’s is putting it up for auction at a projected value of $19.3 million.
But by registering works of art on blockchain, artists would have the ability to track their art and potentially take a percentage of each sale downstream.
In the Real World
We’ve seen other projects like the Codex Protocol in the space popping up to tackle some of the challenges and use cases presented above.
The tokenization of almost anything — from fine art to collectibles to antiquities — presents a range of new business models and interactions.
But what these protocols are missing is the physical, cryptographic link between a real world object and a blockchain.
Before we tokenize art, before we build decentralized auction houses, before we incentivize artists and galleries with royalties, we need to represent a physical object on a blockchain with confidence that it exists and is authentic.
And that asset-based approach is exactly what we at Chronicled and Ethereum Art Collective believe will be the cornerstone of the art world of the future.
How This Impacts The Art Community
The art world is not an early tech-adopter industry.
It’s traditionally much slower moving, with a strong interest in maintaining current systems and structures.
But no industry will be able to ignore blockchain entirely.
Blockchain is exciting because it’s changing some of the structures that have been built over hundreds of years. People are proposing new models, not just for commerce, but for society.
It may be a challenge to established norms and social paradigms, but it’s a challenge that we have to address.
That’s why at Chronicled we’ve decided to sponsor the Ethereum Art Collective — a consortium made up of participants from every corner of the art world. It’s a chance to bring together artists, galleries, auction houses, and collectors and help determine the future of the art world.
We can’t do that without input from everyone, and that’s why we’re inviting all parties to come together in the Collective and help drive new standards.
We’re proposing that the art community comes together now, in order to set a course for the future.
We can determine how this technology will be used in relation to art, but it’s going to take collaboration and conversation.