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The art sector has, for decades, been a lucrative investment sector with compelling and dynamic markets. In 2019, the art market value was estimated to have crossed USD 64.1 billion, with close to USD 20 billion used on ancillary and external support services for the art market. Despite its lucrativeness, the art sector has its fair of challenges marked by unreasonable pricing for the best art pieces, counterfeits and fraud, information asymmetry, and a general lack of transparency and trust. 2020 was also a more challenging year for the art sector thanks to the COVID-19 pandemic, which forced many art galleries, exhibitions, and museums to close, affecting the sale of premium art pieces.
But amidst the numerous challenges facing the art sector, blockchain technology seems to be an unprecedented solution. Blockchain technology has already disrupted several sectors, notably finance, and the art sector seems to be on its path. For starters, blockchain is a shared and immutable set of data that records a series of transactions connected to each other using cryptography. The art sector has embraced blockchain technology, slowly transforming how art is being bought, sold, supported, enjoyed, and even created. Several blockchain-based art platforms have already been launched, giving a heads up for the widespread usability of the sector's technology.
Here's an overview of how blockchain technology is revolutionizing the art sector, plus top blockchain platforms in the art sector.
In recent times, blockchain has been embraced in the art sector, evidenced by the increase in art summits dedicated to blockchain technology, i.e., Ethereal Summit, increase in art and blockchain-related news, as well as the rise in the launch of blockchain-based art platforms. From art collectors, investors, and art auction houses, key players are increasingly looking at exploiting the technology's benefits to streamline functions and enhance profitability.
A report launched last year by Art Basel and UBS titled Art Market 2020 established that sales in the art market were greatly driven by blockchain technology. Online sale or art via the blockchain technology was estimated to be at $5.9 billion. As such, the technology is significantly revolutionizing the art sector by opening up new opportunities, enhancing diversified high-end art portfolios, and eliminating counterfeits and fraud.
Ways Blockchain is Changing the Art Sector for the Better Decentralizing Art Platforms
Blockchain is eliminating intermediaries in the art sector by decentralizing art marketplaces. Eliminating intermediaries enables artists to have full control of their artworks, thus benefit from them entirely. Decentralized art marketplaces based on blockchain technology such as the Blockchain Art Exchange (BAE) and DADA have greatly enhanced transparency, improved traceability of artworks, and lowered the cost of operations in maintaining a physical art gallery.
Blockchain guarantees the copyright of art pieces, ensuring that the rightful owners benefit from their works. It's possible to permanently store the intellectual property of artwork through blockchain to limit its reproductively and counterfeiting.
The rise in piracy levels has made it almost impossible to monetize digital art. However, blockchain technology seeks to change this narrative, enabling art owners to receive full value for their work. Several blockchain-based platforms allow artists to upload their digital art, whether in the form of illustrations, graphics, or videos and receive commissions in return based on the number of views. The art consumers would be required to pay a certain amount to access, download, and share the art content.
Tokenization is the process of leveraging blockchain to issue a digital token, which is a representation of a physical asset. Blockchain technology has brought tokenization of artworks bringing several advantages to art collectors, including the ability to own shares of artwork and trade them in the increasingly liquid market. Tokenization also enables art collectors to verify the authenticity and provenance of artwork and protect them from forgery.
Artworks can be tokenized in two major ways: single token per art object or multiple tokens to facilitate bifurcated ownership. Single token per art is ideal for art collectors to better manage their collection, while multiple tokens benefit far more groups, including artists and collectors.
Blockchain-based tokenization enables artwork to be owned by many people, making art collections more accessible and democratic. One doesn't need to spend a fortune to own their favorite art, plus they can have it as an investment. Additionally, art auction houses find larger markets with previously untradeable artworks finding new customers. Examples of a well-designed platform that is increasingly leading to tokenization of artworks are Artisia Token, Monart and Maecenas. Let’s look at them.
Artisia Token is a blockchain-based platform that seeks to solve some of the challenges facing the art industry. Specifically, the platform offers tokenization of art where its community will own pristine arts, displayed in various locations across the globe. Artisia's art collection encompasses some of the world's best art pieces, including arts from world-class art producers including Monet, Picasso, Michelangelo, Donatello and Modigliani Dali among others.
Artisia's community-owned art collections will be showcased to art enthusiasts via a digital, interactive, and virtual museum with a probability of a social art platform. Users can own a portion of the art collection via the purchase of ARTZ tokens. In addition to tokenizing art, Artisia also offers individuals a chance to invest in the crypto sector with a high probability of forming part of one of the next generations of "Unicorns'' of cryptocurrencies to watch out for in 2021.
ARTZ token powers the Artisia platform and assists in service delivery. While it was initially launched as a payment option, ARTZ was upgraded to a security token enabling users to acquire a fraction of the art collection. The token is therefore used in every purchase and sale in the Artisia ecosystem. Past art, Artisia is also focused on philanthropy and will donate 3% of each transaction value to the Artisia Foundation, which supports various social projects across the globe. ARTZ tokens can be easily purchased in DEX, such as Uniswap and other centralized exchanges.
Token holders will use the tokens depending on their needs, either to exchange value or as security tokens on the Artisia ecosystem. Artisia is also looking into launching a staking farm in collaboration with its NFT partners, notably ADORS.
Monart is another excellent platform that tokenizes collections of art or single artwork, based on ERC721 unique Ethereum tokens. The platform functions as an Art Stock Exchange that democratizes access to the art market, allowing individuals to start investing in selecting premium artworks starting with as low as 100 euros. The blockchain-based platform allows artwork collectors, art enthusiasts, and retail and institutional investors to buy and sell fractionalized shares of artworks or collections.
Through fractionalized art ownership via tokenization, Monart seeks to launch Initial Art Offerings(IAOs) similar to IPOs for companies with an estimated $3 trillion of art assets worldwide.
On the platform, individuals can: create shares, purchase shares, trade shares, and even sell their artwork collections through voting.
Maecenas is tokenizing the art sector by developing a decentralized art gallery where fine arts can be bought and sold without the involvement of intermediaries. The platform divides artworks into shares which can be traded or held as investments. The shares present a fractionalized ownership of artworks and can be traded like stocks in a liquidity secondary market on the platform.
Maecenas charges a flat fee of 2-6% for monetizing artworks. The platform is powered by an ERC20 token i.e. ART which represents legal ownership of the artwork by creating a special purpose vehicle(SPV) for art ownership. The company defines standards for the linkage between tokens and ownership.
The minimum value of any artwork to be listed on the platform is $500, 000. The platform mainly focuses on Fine Arts such as sculptures, paintings, and drawings from the period 1840-1990. Investors can physically display the arts in their galleries or exhibitions by paying a leasing fee of between 2-3% of the art value. The leasing fee also depends on the period of the exhibition, type of artwork, type of exhibition among other factors. In essence, the platform is incredibly transforming the art sector with the creation of a decentralized art gallery which is great for long-term investment.
Blockchain technology has revolutionized various sectors, and the world of art has not been left behind. The art sector has traditionally faced some enormous challenges, notably lack of transparency, trust, and information asymmetry. Another area of concern in the art sector is the reluctance to embrace traditional legal service with many transactions carried out in "grey areas" lacking any form of documentation.
Blockchain is proving to be a solution to these challenges by bringing on board unprecedented transparency, accountability plus enhancing decentralization at an institutional level. Blockchain tokenization of art has also brought far-fetched advantages to the sector enabling individuals to own shares of their favorite artwork and enable artists to sell their work at the right market value. In the future, the adoption of formidable and fortified blockchain systems will play a crucial role in transforming the multi-billion art sector for the better.