A Look at Artfi: The Fine Art Investing Platform

Non-fungible tokens (NFTs) have taken the crypto market by storm, from the Bored Ape hype to the recent Reddit avatar trading phenomena. While NFTs are mainly known for similar profile picture avatars, there is much more to the technology. By pairing NFTs with fine art, regular investors can have increased access to traditional art pieces that are usually out of reach for the average person. Artfi is one platform that aims to simplify the process of investing in fine physical art, and we will look at how the platform works.

What is Artfi?

Artfi is a blockchain-based platform for investing in fine art. The platform enables users to tokenize their works of art and sell them to prospective buyers. The platform is built on the Polygon Layer 2 scaling network for Ethereum, so transactions are faster and more affordable for users.

When it comes to investing in fine art, there are several hurdles for investors to go through, including dealing with brokers and auction houses. Investors also need to be sure they are purchasing authentic art pieces, which can be costly and time-consuming.

By using blockchain technology to tokenize works of art, the platform aims to make it easier for regular people to invest in fine art. One way they plan to do this is by using fractional NFTs to reduce the costs for investors. Fractional NFTs are non-fungible tokens that can be divided into different pieces, each fraction representing part ownership of the NFT.

The platform also aims to improve the liquidity of the fine art market through tokenization. Instead of dealing with brokers and auction houses, users will be able to buy and sell artworks (or pieces of art) almost instantly via the platform.

How Artfi works

The Artfi platform enables the tokenization and sale of fine art pieces. The platform can tokenize high-value paintings on behalf of an artist before listing them on the platform for sale. These tokenized art pieces can be sold as fractional NFTs, making it easier for investors to own a piece of the art. The platform works by users connecting their crypto wallets to the platform and making a purchase directly, without any middlemen or intermediaries.

Artists are able to earn royalties on the sales of their art pieces. This is similar to traditional NFT projects that enable artists to earn recurring fees for sales on the secondary markets. However, with Artfi, royalties are earned on the initial sales of the art. At this time, it is not clear if artists will be able to earn royalties on secondary sales. Royalties are paid out to the artists by smart contracts as soon as a sale is made.

The platform also has a physical gallery space in Dubai where art pieces can be viewed in real-time. This way, physical art pieces can be paired with their digital counterparts, improving trust and transparency for prospective art investors.

Consignments of high-value artworks are welcomed by the firm from sellers who, in the past, have only been able to choose between consigning their artworks with an auction house or holding a private sale of their collection. The artwork is subsequently made available for purchase by the general public at a predetermined price and is paid for in the form of 10,000 NFTs. These NFTs signify ownership of the artwork that is being consigned.

Once all the NFTs have been purchased, Artfi will send the money to the consignor while deducting a fee percentage. This commission percentage is lower than the normal commission rate of 20%, often paid by traditional auction houses. In addition, because the artwork is fractionalized into 10,000 NFTs during the Artfi transaction, consignors are given the opportunity to keep a piece of their artwork and only sell the amount that they are comfortable with.

Artfi will keep the artwork at an art gallery in Dubai on behalf of the NFT holders, where it will be displayed for the general public. At some point in the future, Artfi may sell the artwork and distribute the money back to the NFT holders; however, another fee will be levied on the transaction.

Fractional Art Investing

Investing in "blue chip" fine art, which has a market value of over one million dollars, may be approached in a novel way with Artfi.com. Artfi allows all classes of investors to join the market with as little as $1,000, according to the company's fractional art investment model.

Since blue-chip fine art has historically outperformed the S&P 500, Artfi believes that most of its consignments should appreciate in value over the long term. This is because the paintings available for investment on Artfi have been specifically selected for maximum potential price appreciation.

If the overall market cap of the NFTs were to fall below the professionally-appraised market price based on their accompanying artwork, it would create an opportunity for arbitrage for market players, including Artfi itself, to build fresh long positions in Artfi NFTS.

Artfi NFT holders have two primary options when it comes to how they can potentially profit from exposure to blue-chip fine art: 

1. They can sell the NFT on the secondary market at their discretion.
2. They can wait for Artfi to sell the painting and burn their NFT in exchange for the proceeds from the sale of the painting. 

Fine art investors, typically searching for stable yearly returns in the vicinity of 15%, will be Artfi NFTs' target demographic

The ARTFI token

The platform is powered by the ARTFI token, the official currency for buying and selling art on the marketplace. ARTFI is a Polygon-based token inheriting the network's low fees and fast settlement times. The token can also be staked to secure the network, earning holders additional tokens in return. As a result, holders will also be able to earn some of the trading fees generated by the marketplace. Additionally, the token has a burn mechanism that reduces the supply over time, increasing its scarcity.

Conclusion

Artfi is a blockchain-based marketplace and platform for creating, buying, and selling tokenized art pieces. By enabling the fractionalization of NFTs, the platform aims to make it easier for regular investors to own pieces of fine art.