Is Provenance a Killer Application for Blockchain?

Provenance may start with but does not stop at art

Csilla Zsigri
Nov 8 · 5 min read
https://www.esquiremag.ph/the-good-life/pursuits/provenance-art-gallery-dom-laroza-exhibition-a2180-20180625-lfrm

In a report entitled Time for trust: The trillion-dollar reasons to rethink blockchain published in 2020, economists at PwC identified provenance as the number one application area that is not only driving the adoption of distributed ledger technology (DLT), but also has the potential to yield the most economic value. [Payments and financial instruments, and identity are the other areas that made it to the podium.]

Provenance, in essence, captures the life journey and ownership history of an asset. Verified provenance not only proves the authenticity, but may also significantly increase the value of an item. For example, a pair of Nike Air Jordan 1s — game-worn by Michael Jordan in 1985 and signed by him — were sold for a record-setting US$560k at an online auction held by Sotheby’s, in May 2020.

In the art world, provenance and its importance need no introduction. Collectors require reliable provenance records that confirm the authenticity of the artwork they are interested in acquiring, as well as proof of ownership, so the item can be legally passed to the buyer upon purchase. Verifiable information on specific events in an artwork’s journey — e.g. its inclusion in a renowned collection or having a famous owner — may increase the desirability, hence the value of a particular piece of art to potential buyers. Gaps of time or holes in an artwork’s history, on the other hand, are undesirable as those may indicate possible forgery or theft.

The benefits of recording and sharing provenance data have also caught the attention of the food and beverage industry. In addition to reducing fraud and tampering, accurate and granular provenance records help improve food safety by speeding up product recalls, as well as ensure that what is on the consumer’s plate is fresh and comes from ethical and sustainable sources.

I think it’s fair to say that in line with the ever-growing global concerns about climate change, as well as the environmental and social footprint of human activities, consumers care more and more about the provenance of products they are purchasing, and will likely choose vendors that are environmentally, ethically and socially conscious, and provide the data lineage that can prove that.

With provenance capabilities built into the supply chain — whether that is food or other goods — all involved participants can have a clear picture of the origin, real-time location and status of their various items and products, which makes the supply chain more efficient, transparent and resilient — a need that has been amplified across industries during the coronavirus pandemic.

In soft commodities markets where price had traditionally been the only real differentiator, provenance data can be used to create opportunities for additional differentiation such as fair trade, social inclusion and environmental compliance.

Mainstream provenance practices are pretty much archaic — siloed and paper-based, in other words, very inefficient processes that are prone to error and fraud, and in desperate need to be modernized.

Think of a piece of art that travels from its creator to a gallery, then to an auction house, and ends up with a collector who may loan it out to a museum. In the majority of cases, these transactions are recorded on paper, spreadsheets, emails, etc. These scattered manual records about an artwork’s journey not only make verification a tedious and expensive process, but also leave plenty of opportunities for forgers and thieves to do their thing.

By leveraging blockchain technology, these alterable, disparate, manual records become immutable, aggregated, digital records of provenance-related events about an asset. The ability to digitally record the origin of an asset — whether that is an artwork, a diamond, a food item or something completely different like a medical implant— and track that asset throughout its journey immutably and in real time, helps organizations mitigate the risk of counterfeits and fraud among other types of risk.

From the buyer’s or consumer’s perspective, blockchain-based provenance records should guarantee that the product they get is the product they wanted and paid for. For example, if I want my coffee to be an ethically-sourced wet-processed Arabica, then I also want to verify that this is what I’m getting, upon purchase.

So, how does this work technically? For illustration purposes, let’s go back to the art example.

When an artist creates an artwork — whether physical or digital — a digital ID, twin or token is generated that represents and is unique to that specific piece of art — with its public/private keys — which is then recorded on a distributed ledger. Typically, the distributed ledger is not owned nor controlled by a single individual or organization — but hosted collectively — and therefore, it provides an impartial, single source of provenance records.

When the artwork is sold, the seller transfers the ownership of the digital item or digital representation of the physical item to the buyer. As all transactions are recorded on the blockchain, even the buyer that is several transactions away, can verify the artwork’s authenticity and learn about its history, by tracing its digital thread back to its source and without involving intermediaries and burdensome manual processes.

Other types of provenance-related events that do not necessarily involve change in ownership — e.g. when an artist or collector loans out an artwork to a gallery or museum — can also be recorded on the blockchain. Records can include references to all the public showings, articles and essays describing the artwork’s significance, the whole bit.

All of this creates the full life story of a piece and feeds into being able to verify its authenticity. If you only had some sort of tattoo or engraved identifier on the artwork, and that was the ID recorded on the blockchain, you would still be left with having to verify that the artwork was a true Picasso or Pollock.

Any industry — art, commodity, food or other — with a need to accurately authenticate the origin, as well as to track and trace an asset — whether digital or physical — across multiple parties and sources, can benefit from a blockchain-backed provenance solution. A blockchain’s decentralized, distributed, and immutable nature makes it a great fit — digital backbone — for this type of data sharing and exchange.

Special thanks to Kevin O’Donnell for his contribution to this post.