Of Art Tokenization, Blockchain, and Provenance with A Sprinkling of Non-Fungible Tokens

The global art market grew 6% in 2018 to 67.4 billion in sales according to economist Clare McAndrew’s report “The Art Market 2019,” released by Art Basel and UBS, however, despite the 6% growth, 57% of dealers saw their sales decline in 2018.

This follows a trend over the past decade, during which the value of all sales has gone up 9%, while the number of artworks sold has gone down 9%. Just 0.2 percent of artists have work that sells for more than $10 million, 32 percent of the $63-plus billion in art sales in 2017 came from works that sold for more than $10 million.

The burning question is despite the increase in sales, how come the members of this exclusive guild are still surviving on bare minimum?

Art is not evenly distributed, artists today are obligated to art galleries to showcase their work which usually represents the well-established artists, and only a small number of new or still emerging artists have the support of art galleries.

There are only a few independent platforms available for artists to showcase their work.Majority of the revenue is made by the art galleries as they demand as much as 50% as commission.Financial transactions are slow, galleries don’t pay artists on time.If an artist does decide to go solo they seldom do make it because of lack of networking or marketing skills due to which they become dependent on the galleries for their sale.

The art industry is centralized and conservative because of which artists face consequences. Many art pieces get plagiarized and sold without the knowledge of artists as there is no system in this traditional industry that keeps a record of IP rights or the transactions taking place.

BLOCKCHAIN AND ART

The immutable nature of Blockchain technology is being widely adopted in diverse industries and one such interesting use case is Art! Merging of Blockchain technology with art has opened new horizons in the Blockchain revolution as well as opening new avenues for artists and collectors alike, it provides a solution to the problems faced by the artists today:

Artists don’t require galleries to showcase their work and to attract buyers, blockchain is open and decentralized which means anyone in the network can view the art piece and directly get in touch with the seller, thereby reducing the need of intermediaries.

Every transaction is cryptographically recorded in blockchain, it’s a transparent system which proves the authenticity of a work. Once something is copied its value decreases, so to keep the authenticity of an art piece it will be represented by a unique value which can not be copied hence preserving the art piece.

It’s an open decentralized network which puts the artists in direct contact with the buyers thereby saving the large commission they have to pay the art galleries. Despite being transparent and recording every transaction it protects the security and enormity of the buyer which helps in increasing the confidence of both the buyer and the seller.

When a tokenized painting is bought, this transaction is updated in the network which is available to everyone but the name of the buyer and the value of the token is concealed.

ART TOKENIZATION & PROVENANCE

By art tokenization, a monolithic painting is defragmented into thousands of digital tokens which are then issued to the buyers, it digitizes the ownership into tradable tokens thereby improving the liquidity of artwork.

This transforms art into a lucrative investment option by authorizing fractional ownership. It was done for the first time in 2018 by The Maecenas – they tokenized Andy Warhol’s painting “14 Small Electric chairs”. Initially, the cost of the painting was approx 1.5 million dollars but after tokenization, the painting was sold at 5 million dollars.

They organized a private dutch auction in which 100 participants took part, a total of 36 bids were received out of which two were unsuccessful.

During the four week auction, 6+ million art tokens were utilized They are now in the process of tokenizing one of Pablo Picasso’s masterpieces that will be auctioned in open Ethereum platform.

Offline assets are registered on the system which is converted into digital assets and assigned a unique token which ensures the copyright of the artist.

Digital art chain is a platform that lets artists publish their digital art on an Ethereum run platform IPFS- InterPlanetary File System, each digital art uploaded is assigned a non-fungible token which signifies the uniqueness of an art piece.

The art token (TAT) is another such platform that is linked to a collection of post-war and contemporary art. This genre has been the most stable from the past fifty years and offers the most return on investment (ROI). Physical artwork is tokenized and stored in a Swiss warehouse backed by the Swiss government. TAT can be bought using ETH, BTC, Dai, SWM, Dash or Fiat via swarm.

Money is changed into a 1:1 ratio and the physical artwork is stored in the warehouses. TAT holders can now enjoy the benefits of a historically conservative investment class with newly added liquidity. The token can be either traded on eligible exchanges or redeemed for physical artworks.

HOW DOES NFT HELP ?

When a painting is tokenized, it is given a specific value which is unique, irreplaceable and uncopyable – these values are called non-fungible tokens. They provide foolproof digital security which prevents the plagiarism of the art piece.

They are implemented on the Ethereum blockchain as ERC-721 tokens which have individual traits and identities. A fixed number of fungible tokens (ERC-20) separately represent the shared ownership of the physical painting.

Buyers have the fractional ownership of the painting which makes the physical painting inaccessible to everyone, they are sold the digitized certificate of the painting which can be used as a liquid asset. So when a painting is tokenized “Crypto-art” is structured which is a liquid asset.

Complete Architecture of a Art Tokenisation platform

CONCLUSION

Future is prolific to blockchain and art, not only this technology can protect artists by certifying the authenticity or helping artists to profit more from their creative artwork, but it’s also a new exciting source of inspiration! The art world is traditional but no industry can ignore the ascendency of blockchain.

Art is becoming more and more accessible for buyers, once reserved to the elites who collected art for its aesthetic qualities or as an investment becoming more of something everyone can afford, blockchain takes its share in the blooming of the art industry. It’s trustless, decentralised, immutable nature makes it an attractive platform for the artists, investors and art collectors.

Blockchain and art are still at an early stage, many critics claim it desensitises the art piece. There’s an invisible future ahead for the blockchain and art but one thing for certain, it is definitely going to be absorbing!

Thanks for reading. Hopefully this guide has been useful to you and also we are working on dNFT, a open source protocol to tokenize the asset like Art, Videos, Songs, e-books, Photography, Academics etc.

At QuillHash, we understand the Potential of Blockchain and have a good team of developers who can develop any blockchain applications like Smart Contracts, dApps, DeFi, DEX on the any Blockchain Platform like Ethereum, EOS and Hyperledger.