How the Art Market will benefit from Blockchain
Imagine a physical object, like a painting (work of art) and convert it into a token that can be redeemed, fractioned, transferred along a blockchain system. Thanks to Blockchain, and using the concept of fractional ownership, an investor could invest in a portion of digital assets, without the need to rely on a third party or to trust the other co-owner. It’s the technology itself that acts as trustee.
When it comes to the Art market, even though its value is priceless (in particular in a country like Italy), it encounters many problems:
- Lack of Liquidity
- Lack of transparency and information
- Limited efficiency in terms of bureaucracy, time, cost and third parties involved
- Limited Accessibility for the masses
However, considering the technological improvement Blockchain Technology and exploiting the above-mentioned concept of fractional Ownership concept of we could now overcome these problems:
- Increase the liquidity due to the possibility to trade a fraction of artworks like shares
- The Blockchain increases the level of trust into the system, ensuring more transparency and the same level of information for everyone
- The distributed ledger, as we said, remove the needs for third parties, increasing the efficiency level
- Lowering investment thresholds increase exponentially the accessibility to the market, which in turn contribute, again, to put liquidity into the system.
Possible Implementations
There are many ways in which the Blockchain can improve the actual Art market:
- Tokenization of Artwork
It allows to buy and trade a fraction of artwork. Such fraction, that will be translated into a digital piece of information (token) will represent the real Ownership of it. In this case, the token represents a real Security. The co-owner will be entitled to receive an economic benefit (revenue share etc.) due to the monetization of the artwork.
The first auction of artwork on Blockchain took place in 2018. The fractional ownership of 49% of Andy Warhol’s 14 small electric chairs was sold for a value of 5.6 million dollars.
- Certification of authenticity/uniqueness
It is possible to certify the status of an artwork, his uniqueness, and authenticity through the association of the physical object to a piece of unique digital information.
Technically speaking the artwork will be associated with a particular token standard, called Non-fungible token (ERC 721 standard). Meaning that every token is unique and different from another one. These certificates can be traded in the same way as fractional Art ownership.
- Tokenization of services
It can be created also another kind of token, called Utility token (ERC-20 standard) that could be used as an alternative currency for the Art-market.
Each token, or fractions thereof, can also be used to purchase goods and services in the art world, such as having privileged access to museums or artistic sites in the world, avoiding queues and making use of services rendered to create an experience of a unique visit. Thanks to Blockchain technology, these tickets tokens cannot be falsified or duplicated and can be easily spent with just a smartphone.
