How Blockchain is Shaking Up the Art Industry
26 January, 2021
Blockchain has made its presence felt in a number of industries, with the fine arts sphere being no exception. Thanks to distributed ledger technology (DLT), the art market now is able to tackle a host of issues connected with ownership, transparency, provenance, copyright, and forgery. As well as this, blockchain has changed the way we purchase, own, and even create works of art – thus transforming the art industry in ways never seen before.
The art auction industry has historically been a capricious playground of the elite. Major art auctioneers such as Sotheby’s, Christie’s, and Freeman’s, have operated since the 18th century, selling the world’s most valuable paintings to wealthy buyers for prices in the tens of millions of dollars.
However, recently, the art auction industry has been threatened by sophisticated technological forgeries. For example, the $11 million sale by Sotheby’s of a Frans Hals the Elder portrait that was later revealed to be a synthetic fake demonstrates the potential of forgeries to delegitimize even the most respected auction houses.
Forgeries have also tainted provenance records, causing paintings to falsely gain or lose value at the expense of the artist, investor, and auction house. And not only that – artists themselves have historically been excluded from profiting from the sale of their own works. David Hockney, an artist whose painting in 2018 was sold for the astronomical sticker price of $90 million, received a net profit of precisely $0 from the sale. By failing to modernize, the art auction industry has reduced its own influence.
Nevertheless, there is still potential for auction houses to regain their credibility. Blockchain, one of the 21st century’s most ambitious computing innovations, is the very tool to modernize and legitimize this centuries-old industry and help it overcome numerous challenges. The technology is capable of enhancing various aspects of the art industry and dealing with such facets as ownership, transparency, affordability, availability, valuation, authenticity, and many others.
Read on to learn more about how the art industry leverages blockchain, how art auctions can benefit from this ingenious technology, and what blockchain solutions exist in the art industry today.
Art market overview
In the art market, both buyers and sellers are looking for profit. In 2018, the global art market reached its second-highest level in 10 years. Art Market 2020, published by Art Basel and UBS, provides a definitive analysis of the main trends in the international art market. The report also highlights some other important developments of the past year. Below are some of the more interesting statistics:
- Global sales of art and antiques reached an estimated value of $64.1 billion, down 5% in comparison with the previous year;
- Millennials lead sales in the art market. They spend six times as much as boomers;
- Female collectors spend more money on works of art than men;
- The three largest art hubs, the USA, the UK, and China, still account for the majority of the value of global sales in 2019;
- Sales in the gallery and dealer sector reached $36.8 billion in 2019, a rise of 2% compared to the previous year;
- Sales at public auction of fine and decorative art and antiques reached approximately $24.2 billion in 2019 – a decrease of 17% compared to 2018;
- Art fair sales reached $16.6 billion in 2019.
One more interesting finding that has been released is that sales made online and specifically through blockchain technology were significantly driving sales in the art market in general. Why so? Simply put, the middlemen have been replaced by more reliable, unbiased, efficient, and cheaper machines. Blockchain implementation has made the art industry more inclusive and democratized, allowing a larger number of art lovers to obtain works of art.
How does the art industry make use of blockchain?
Although blockchain has been popularly tied to Bitcoin applications, the technology at its core is a means of recording financial transactions. The transactions recorded through blockchain generate hashes, patterns of numbers, and letters that protect against forgeries. After a hash is created, an enclave of computers, called a node, verifies the hash, writes a block and spreads a copy of the blockchain amongst numerous different computers.
Blockchain is a system that operates 24/7. Records created through blockchain are impossible to erase, and faking a block requires enough computer power to fool thousands of nodes, a feat that is essentially impossible.
Compared to the fickle and human-error-riddled record-keeping of today’s art auction houses, blockchain is an unparalleled stabilizer. Blockchain has the potential to remedy the maladies of art auctioning and revolutionize the art industry by promoting legitimacy, transparency, and egalitarianism amongst auction houses.
Additionally, blockchain has expedited several industry advances in the world of digital art. Blockchain records allow collectors of digital art to determine a piece’s “provable scarcity”, the number of copies of a particular piece available for sale. This amount greatly influences a digital art piece’s value and can ensure that buyers pay a fair price. Blockchain can also guarantee that a piece of digital art has a low number of valid copies and remains scarce. Digital artists can register each of their copies with a unique blockchain token, rendering any illegitimate copies without the token worthless. The scarcer the piece of art, the higher the final profit for the artist.
How is blockchain transforming the art industry?
The art industry has long been experiencing considerable challenges relating to transparency, authentication, ownership, provenance, copyright, and art forgery. Just as importantly, the art industry has traditionally been limited to wealthy people who can afford to spend millions of dollars on a work of art. But art is surely meant to be for everyone’s enjoyment, as art should know no social or economic boundaries.
Luckily, with blockchain looming on the artistic horizon, the challenges above have almost been overcome. And as of today, amazing and advanced blockchain solutions have been developed and successfully implemented in the art industry. They are driving a quiet revolution in how art is being bought, sold, supported, enjoyed, and even created.
Let’s take a look at how exactly blockchain is shaking up the art industry.
Digitally created art
Computer-produced works of art don’t seem to surprise anyone today. From sketching to photoshopping and GIF animations, the range of possibilities is enormous and diverse.
Blockchain, in its turn, is perfectly capable of making this kind of art much easier to create and even authenticate. Besides, quite a number of people consider blockchain games and collectibles as a kind of digital art!
Digitally represented art
The digital art world is also responsible for the digital representation of real works of art where screens are the new walls. High-definition displays and screens can accurately represent any real artwork and allow viewers to admire its finest detail. You may wonder what blockchain has to do with the digital representation of art. Well, it’s pretty simple! It’s responsible for certifying runs of high-quality image files.
Buying artwork using cryptocurrencies
Cryptocurrency is suitable for carrying out transactions when purchasing works of art. It allows you to transfer large amounts of value to whoever you want at short notice. The greatest benefit of this is that you don’t have to resort to the services of banks to authorize your transfer.
Blockchain art provenance
Thanks to blockchain art verification, it is possible for art buyers to know the history of previous owners. The major advantage of the technology is that its ledger is totally immutable – thus, it is difficult to forge or fake the provenance of a piece of art once it has been listed on the blockchain.
Making art more affordable
With blockchain, it is possible to purchase a work of digital art directly from the artist without any middlemen. So it is the easiest and most affordable way to become an art collector. As of today, you can buy a work of art for less than $10 online, and the file you receive is not simply a reprint of the original artwork. It is an original, verified copy that is part of a limited run.
Making art more accessible
Traditional art markets have been a Mecca for the elite at all times. These markets have always intended to cater to the tastes of upper-class westerners. However, once a work of art is digitized and traded on blockchain art marketplaces, it becomes much easier for anyone from any part of the world to obtain directly from the artist.
Decentralizing authority to sell
With decentralized blockchain art marketplaces, art lovers can buy and sell artwork much more quickly and conveniently.
When you sell a work of art, for instance, you can take bids from any corner of the world. Smart contracts will then help complete the transaction, ensuring that you receive your funds. Finally, the recipient gets the file, and the original doesn’t exist on your computer any longer.
It is almost certain that art galleries will remain with us for a long time. No matter to what extent our world will be digitized, art galleries will still be desirable places to visit. Nevertheless, blockchain has managed to introduce some innovation even in this regard. Blockchain art enables you to establish an art marketplace that is a DAO (Data Access Object), completely ownerless and reliant on smart contracts to help carry out art trades.
Expanding the borders of art
Technology has shaken up the art industry. It has expanded the sense of what art can be. Anime Coin (ANI) crypto, as well as MS Paint, can today be sold on digital marketplaces. Believe it or not, but some people consider these items to be valuable and unique masterpieces and they are willing to spend huge sums of money on them.
Blockchain in the art auctions
The glamorous world of fine art auctions is a landscape that requires particular tools to traverse. If implemented, blockchain technology could make art auctioning a fairer trade for the artist, promote transparency for the buyer, and preserve the integrity of the auction house.
Mixing the centuries-old traditions of Sotheby’s and Christie’s with the continuously emerging, evolving, and expanding technology of blockchain seems at first illogical. However, if these auction houses want to stay relevant in the modern era, they need to take advantage of the newest technological feats. In the next five years, blockchain technology in art will become a marker to differentiate the inflexible art auction mainstays of the past from the progressive auction houses of the future.
Below we consider the challenges of the art auction industry and how blockchain helps address them.
The most fundamental issue of the modern art auction world is the inability to wholly authenticate the legitimacy of a piece of art. Some of the most valuable artworks are those that date back several centuries, meaning that determining the legitimacy of their provenance and their ownership and history is nearly impossible.
Nevertheless, by implementing blockchain-based provenance recording, art auction houses can develop an indelible ownership record for their pieces. Since information from blockchain can’t be manipulated without altering the prior proof of work (an alteration that requires intense computing power and is essentially mathematically impossible), blockchain has the potential to provide an immutable provenance. With blockchain provenances, art ownership data couldn’t be exploited to unfairly raise or lower a work of art’s value.
The permanent database of art information compiled through blockchain can introduce a new degree of transparency to the art auction industry. The blockchain record of ownership for a particular piece of art will grow over time. If these records are made publicly accessible, potential buyers can better understand the artwork’s history, track its past locations, and determine its true value. These records would be considered widely reliable since they were stored through blockchain and cannot be altered.
Art auctions, unfortunately, allocate little wealth to the artists and bar the participation of anyone without bank accounts in the multi-millions. Blockchain, however, can restore an element of egalitarianism to the art auction industry.
Most importantly for artists, a legitimate record of a painting’s sales at auction would allow the opportunity for royalty earnings. Artists could use public blockchain provenance records to track the sales of their paintings and earn a percentage-based royalty on each sale. In addition, blockchain is particularly useful for digital artists.
Blockchain companies transforming the art industry
Blockchain has been referred to as an innovative art tool, which has sparked interest amongst many people. Due to its popularity and multifunctionality, quite a number of companies have come forward, offering their services to help leverage the power of DLT to establish new business channels and make fine art more accessible to a larger number of art lovers.
Let’s look into how various blockchain companies and startups enable the art industry to become more modernized and democratized.
Apart from simply recording information about a piece of art and its history, blockchain also has the potential to detect physical forgeries. The startup ArtChain Global has consolidated artificial intelligence technology with blockchain to create a program that uses a high-resolution camera to analyze images of artwork.
The camera uses algorithms and a database of images to examine a painting’s brightness, saturation, and depth, comparing these qualities to an original version. Using blockchain, the data that the camera obtains from the painting can be forever immortalized.
Ink Labs Foundation
Blockchain also has the potential to promote transparency measures that benefit the artists themselves. Ink Labs Foundation, a Singapore-based blockchain startup, allows artists to use a blockchain network to bypass auction houses and gallery middlemen when selling their work.
Ink Labs Foundation facilitates direct artist-to-customer communication to conduct sales, preventing auction houses from taking a percentage of the artist’s profit.
Major auction house Christie’s has already experimented with using blockchain to record provenance. In 2018, for the sale of An American Place: The Barney A. Ebsworth Collection, one of the most prolific 21st-century private collections of American Modernist art, Christie’s partnered with blockchain art registry startup Artory. Artory created a permanent database of the provenance and relevant qualitative information on Ebsworth’s pieces using blockchain. Thanks to that, the provenance of Ebsworth’s sold pieces will never be disputed.
Furthermore, artist Jackie O’Neill has built a similar system to validate provenance with blockchain. O’Neill markets her product directly to artists, selling a $10 microchip that can be fastened to paintings. This microchip can be scanned to reveal a painting’s artist, title, date, medium, area, region, and origin, and travels with the painting as it’s sold to various buyers. If a forger attempts to remove the microchip, the chip breaks into several pieces and sends a suspicious manipulation alert to a computer. O’Neill’s product is particularly important as it gives the artist further autonomy in ensuring the legitimacy of their piece.
Artory has also recently acquired sales information from auction analysis company Auction Club for storage in blockchain records. Auction Club’s information included sales data from over 4,000 auction houses, data that will be available to the public for the first time. Making this data public will benefit both buyers and auction houses. Buyers will have access to more information, allowing them to make smarter investments, and auction houses will be able to ensure the history and quality of their art pieces, attracting new investors.
CryptoPunks & Dada.Art
CryptoPunks, a company created by John Watkinson, and Dada.Art, a company founded by Judy Mam, allow digital artists to own their own work by assigning distinct blockchain tokens for original creations. These firms work to improve the standing of digital artists who are often marginalized in the art world and regarded as inferior to 2D and 3D artists.
Gallerist Adam Lindemann’s Artblx website also caters to digital artists. Artblx serves as an alternative platform to a traditional gallery and virtually displays digital artwork, verified with blockchain tokens, for sale. Artblx uses blockchain-based transactions to allow buyers to invest in a certain percentage of a piece of art.
Percentage-based investment in artwork allows investors of lesser financial means to get involved in the art auction industry. Dadiani Fine Art recently partnered with blockchain service Maecenas to allow investors to purchase tokens (percentages) of Andy Warhol’s painting “14 Small Electric Chairs”.
In this way, blockchain has democratized art ownership: one doesn’t have to spend millions of dollars to become an art owner. Instead, investors can spend much smaller sums in exchange for substantial percentage controls of valuable pieces. In addition, the blockchain service through Dadiani Fine Art and Maecenas gives buyers liquidity. After investing in a token of an art piece, buyers can use blockchain servers to auction off their holding for cash, making art investments appeal to a wider clientele.
FRESCO is a Swiss-based trust distribution platform specially created for artists and dealers as well as art organizations. FRESCO’s trust token distribution mechanism, called FRESCO Protocol, allows users to assign FRES tokens to any artwork, representing the potential value of the artwork that was anonymously assigned by the owner and the community.
The platform has a communal aspect that is enabled by FRES cash. It lets community members assign their own assets to other works, thus giving credibility to the value of a work of art beyond the owner’s evaluation.
Verisart is a blockchain platform that assists users in creating secure digital certificates for artwork and collectibles. With the help of blockchain, they are able to bind these works to detailed provenance records. Verisart specializes in creating tamper-proof certificates of authenticity and ownership to diminish fraud risk and protect legitimate art exchanges.
The startup allows you to create a museum quality record for any object using your mobile device or computer. All the records are encrypted and timestamped by a decentralized ledger.
Blockchain Art Collective
Blockchain Art Collective is a movement of artists that uses blockchain technology to verify a work of art’s origin, authenticity, and journey. They manage to do this by producing certificates of authenticity with the help of blockchain technology and making all the data available to all relevant parties. The goal of Blockchain Art Collective is to digitize art and improve conditions in the art market for both artists and art buyers.
Portion majors in setting up an ecosystem capable of replacing traditional art auction houses. The company adopts a decentralized approach that heavily relies on blockchain-powered provenance records and cryptocurrency payments.
Portion is eager to bridge the gap between art, luxury goods, and crypto. This online marketplace manages to connect artists and collectors via blockchain technology and enables all of them to easily sell, invest, and own art and collectibles without compromising on total transparency.
As the founders of Plantoid state, a Plantoid itself is “a plant equivalent to an android; it is a robot or synthetic organism designed to look, act, and grow like a plant”.
Plantoids are viewed as physical sculptures whose existence is sustained through cryptocurrency donations. These are extraordinary applications of blockchain-powered crowdfunding for public works of art.
Plantoid aims to demonstrate one of the most revolutionary aspects of blockchain. It illustrates the ability to create blockchain-based lifeforms, algorithmic entities that are autonomous, self-sustainable, and capable of reproducing themselves with the help of a combination of blockchain-based code and human interactions.
Even if the combination of blockchain and art seemed rather odd and unbelievable to you, perhaps you can now see that these two can perfectly coexist together. Art has long been one of the most vigorous and gainful fields of investment. However, it can be a rather challenging market to enter, as the best pieces often demand astronomically high prices, and the industry itself has faced issues related to the provenance or value of a work of art as well as counterfeiting, fraud, and so on.
But even such a demanding sphere as the art industry has found it hard to resist the influence of blockchain, and today we can witness how this unique technology is revolutionizing the business of buying, selling, creating, and collecting. Blockchain will definitely continue shaping the art industry and tackle the issues of provenance, authentication, transparency, copyright, and art forgery.
Once you make up your mind to try out leveraging blockchain in art, make sure that you have a reliable and skilled team of blockchain experts (preferably with a fine taste in art!) by your side – like the one at PixelPlex. You can be sure that the combination “Your Vision + Our Professionalism” will produce the desired result.
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