Art has always been the subject of trade and speculation since the early Middle Ages - much longer than stocks or bonds - and is a legitimate and investable asset that falls into the broad category of "alternatives" in legacy financial services. The industry quickly adopted the blockchain technology for address issues of transparency and provenance.
Non-fungible tokens (NFT) and crypto art, a new frontier for young artists
With the advent of non-fungible tokens (NFTs) and crypto art, we've been seeing widespread adoption of decentralized technology across the traditional art world for a few years now, while new formats and disruptive art communities are also emerging. Before the implementation of blockchain technology, the registration, resale and transfer of ownership of artworks was an entirely paper-based process. All the museums in the world, all the auction houses, art galleries and archives have carried out provenance verification manually and each has used different procedures. This resulted in time-consuming, expensive and error-prone processes, which auction houses wanted to transfer to the blockchain.
As of 2018, Christie's New York became the first auction house to record a sale on a blockchain platform with the $318 million sale of the Barney A. Ebsworth Collection. One of the most sought-after collections of XNUMXth-century American art in the world. world, the Ebsworth collection included works by leading American artists Edward Hopper and Georgia O'Keeffe, among others. The live auction took place in person, online and over the phone, but all transactions were recorded entirely via blockchain technology.
The benefits of recording artwork on a blockchain are many
Blockchain technology offered by various platforms and iterations can be used to ensure privacy or anonymity among buyers, sellers, the public, and other industry players. Blockchain art markets can also create transparency and fairness in the bidding and transfer phases and in the ability to publicly verify transactions. Additionally, the immutable nature of blockchains – where publicly held data cannot be changed anywhere – can be used to resolve ownership disputes or damages.
The utility of blockchain technology extends to the art world well beyond the auction process and includes:
- Significant reduction in fakes that have always plagued the sector
- Trading forms of digital art that were previously too difficult to trade
- Drive digital art sales through verifiable digital scarcity
- Democratize access to investment in the fine arts
Through tokenization, the data contained in a digital file is transformed on a blockchain into unique digital tokens by adding unique identifiers and indelible signatures. This process creates an NFT, which holds all the essential data relating to the provenance, ownership rights and access to a specific work. Essentially, this process can fragment ownership of a painting into thousands of pieces – or more. Buyers can purchase a tokenized percentage of a painting in the same way they would purchase a percentage of a company by purchasing its shares.
