10M Art Items for Sale on the Blockchain: Codex Protocol Exclusive Interview
This week, we sat down with Mark Lurie, Founder & CEO at Codex Protocol, a blockchain-based arts and collectibles registry that is tackling this USD$2 trillion a year industry. With a number of partnerships signed up and a strong consortium backing the project and guaranteeing its token use-case, Codex is launching its ICO on the 24th of July and a lot of attention is expected for this one.
Here is what Mark had to say:
Coinvision: What challenges were behind the ideation of Codex Protocol?
Mark: It is hard to purchase and unlock value from unique assets. This is fundamentally because verifying provenance is a constant challenge that creates costly friction. In many asset classes, a title registry solves this problem, yet no centralized title registry exists for the $2 Trillion arts and collectibles (A&C) asset class because collectors are unwilling to trust a central entity with information about their valuable possessions. For unique assets, the identity, chain of ownership, and other metadata about an item is fundamental to value, and the blockchain enables this information to be verified using cryptography so that it is provable, private, and decentralized.
Coinvision: How can blockchain technology provide new and better solutions for the art auction industry as we know it today?
Mark: Today, the first dapp built by Codex, Biddable, lets you register and pay with cryptocurrency in auctions around the world, and our partners include auction house software providers LiveAuctioneers, Auction Mobility, and Canada’s largest auction house, Heffel Fine Art Auction House.
More broadly, Codex provides a highly efficient means of valuing and vetting inventory for buyers, auction houses, galleries, and dealers, enabling secure and provable transfer of provenance documentation as part of a transaction. This can help buyers protect themselves against dealing in inauthentic works or works used for money laundering and terrorism financing. Smart contracts can facilitate easier and more trustworthy sales by ensuring buyers pay and brokers receive payment. Most importantly, collectors will purchase more if services and leverage are easier to access.
The first dapp built by Codex, Biddable, lets you register and pay with cryptocurrency in auctions around the world
Coinvision: What main barriers do you foresee as challenges to achieving your roadmap goals?
Mark: There is strong interest in the blockchain and cryptocurrency, but there are still some unknowns in the emerging space. We will navigate these challenges by listening to our community and our consortium of industry stakeholders, and feel we are in a strong position to tackle any uncertainties because of this.
Coinvision: What advantages can come from having a permanent registry of ownership of art pieces?
Mark: The A&C Asset Class is estimated to be worth USD$2 Trillion. At Codex, we believe there is immense room for growth as investing in tangible, fine artworks and collectibles becomes more accessible, and the value of each piece is better understood. Solving the provenance challenges provides an opportunity for the industry to expand, as services like asset-backed lending, insurance, fractional ownership, bidding, escrow, etc., become more widely available and easily accessible. By bringing trust and efficiency to the ecosystem, Codex Protocol will ensure more buyers acquire the objects they desire, more sellers receive a fair value for their items, and more intermediaries grow their revenue.
Coinvision: What purpose will your token serve within the network? When can we expect to see the token being used in the Codex Consortium network?
Mark: The token is an ERC-20 utility token which is required to write operations in the registry, either by paying tokens or by staking tokens. Fees are used to reward validators like auction houses and appraisers who vouch for items in Codex, who also have to stake. The staking requirements provide a mechanism for the devolution of governance to end-users over time.
The Codex Record, which represents a unique asset, gains provenance information as the piece is bought, sold, insured, and lent against using smart contracts in the Codex Registry. Since provenance is the primary monetary value-driver for the A&C asset class, those who have made significant investments in fine arts and collectibles will be highly motivated to utilize the Codex Record for each valuable asset, which instantiates verifiable authentication from reputable sources immutably.
The consortium has already contractually agreed to make Codex Records available for the items they sell, which includes over 10 million items sold each year in tens of thousands of auctions with over 20 million bidders.
Coinvision: What challenges does price volatility present for art sellers and buyers and how do you intend to tackle it?
Mark: Accepting and making payments in digital currencies doesn’t require holding cryptocurrency for long periods of time, so volatility isn’t necessarily a big concern. Meanwhile, there are several benefits for both buyers and sellers of transacting in digital currencies, including lower cost, higher speed transactions, and ease of cross-border transfers.
On the other hand, the A&C asset class is an investment that crypto-wealthy are exploring because of its high returns and its diversification benefits.
Since the A&C asset class is a store of value that is non-correlated and therefore less susceptible to macroeconomic swings than currencies, volatility in the markets may be a good thing for arts and collectibles as tangible investments with real value are sought after.
Coinvision: How do you plan to promote adoption of the token by bidders, particularly for the segment of the market that is more conservative regarding innovation?
Mark: Codex has many benefits for bidders. These benefits simply outweigh challenges. Privacy, preserving the resale value of their investment, and easier access to international auctions are some of the biggest benefits. Meanwhile, we expect DApps to abstract away the complexity of cryptocurrency for many users until users become savvy enough to adopt the token themselves or new blockchain infrastructure makes doing so easier.
Codex Protocol is using blockchain to create a decentralized registry for unique assets starting with the $2 trillion Art and Collectibles market. Learn more here — https://t.co/ZQnAtMh5fO pic.twitter.com/QrGATTa6yq
— codexprotocol (@CodexProtocol) July 10, 2018
Coinvision: You have recently established a partnership with Luxury Asset Capital for establishing art asset-backed loans within your network. How is this going to operate and what benefits does the blockchain bring to this type of contract?
Mark: Today, a large market exists in loans secured by A&C. Owners seek out asset-backed Lenders loans for many reasons. The Codex will support art lending since it will allow lenders to be more confident that they can confirm valuations, authenticity, and title and do so quickly.
With Codex partner Luxury Asset Capital, a leader in the online alternative lending market, one can receive a one-click quote for an asset-backed loan and a lien will be registered on the Codex Record which custodians and future buyers can verify.
Coinvision: Codex Protocol has established a number of partnerships in recent months, including the Clarion List, Dust Identity, ValueMyStuff and Feral Horses Art Stock Exchange. What do you expect to benefit from these partnerships?
Mark: We’re proud to have announced nearly a dozen partnerships this year. A key benefit of using the Codex Protocol are the applications and services available in the Codex Ecosystem that can unlock additional value from the asset. The larger the Codex ecosystem becomes, the more incentive there will be for buyers to demand Codex Records with their purchases.
Since provenance is the primary monetary value-driver for the A&C asset class, those who have made significant investments in fine arts and collectibles will be highly motivated to have a Codex Record for each valuable asset.
With the options to tie the physical item to the digital one with the Dust Identity partnership, or have an appraisal done instantly with ValueMyStuff, or fractional ownership options with Feral Horses, and many more, with all of this activity recorded on the blockchain, future buyers can take comfort in knowing that the item has a verifiable history.
Coinvision: More broadly, what impact will Codex Protocol have in the art auctioning industry and what new possibilities will it open to users, investors and pensioners?
Mark: While provenance is critical to value, other information is critical to provision services that help unlock the value of a piece. These include some that may be offered by auction houses, for example, in order to be shipped, a piece may require shipping reports and access export licenses, or a buyer may need to know what artist royalties are encoded on the item. Reports, current possession, third-party appraisals, liens, many services rely on reading and writing information relating to an item’s identity. For all in the ecosystem who are using Codex Records, facilitating services between buyers, sellers, and intermediaries will be seamless.
More broadly, the Arts & Collectibles asset class is where we are starting because the need is so great, but we do see opportunities for decentralized registries in other industries. This could include luxury goods, industrial equipment, and digital assets.
That is all from Mark Lurie, Founder & CEO at Codex Protocol.
Stay tuned for our upcoming updates, alerts and interesting articles.
Disclaimer
We are stating our vision and opinions, we are not giving you financial advice and if you invest in this project it is your full responsibility. You are investing at your own risk. Always invest only what you can afford to lose and try to diversify your investments. Finally, do your own homework and learn about the project use case, roadmap and team.
Originally published at www.coinvision.co.
