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The world's first blockchain auction took place last year.
A 31.5% stake in Andy Warhol's painting 14 small electric chairs it was tokenised and sold to bidders who could pay with bitcoin, ethereum or a native ART cryptocurrency. Each token sharing was determined by an intelligent contract on Ethereum.
Is this system of fractional ownership the future of art auctions?
The gallery behind the initiative, Dadiani, thinks like this: "For the first time ever, blue-chip art works will be available for everyone to use using uniqueness [blockchain] platform."
75% of the auction houses are examining Blockchain
According to one of the 2017 European Fine Art Fair Reports, he asked Focus on the TEFAF art market75% of the auction houses are trying to offer some sort of blockchain technology within the next five years.
The tokenisation of resources is a huge theme throughout the blockchain industry. And, next to the real estate sector, the art world is among the first to embrace the revolution.
But why Blockchain and works of art?
We analyze some statistics and think about it.
Number 1 Although art is considered a great investment, there is no consistent data on value
La Gioconda was valued at $ 100 million in 1962. More than 50 years later, in 2017, ERGO insurance specialists now estimate this figure to $ 750 million – $ 1 billion considering inflation and other factors.
But there are only a handful of masterpieces in the world. Thus, the return on the overall investment is quite unpredictable. Even data points from different market players are completely inconsistent.
For example, a well-known art expert, Melanie Gerlis, who gathered "all the research on the vast market aims at a compound average yield for investment art" has produced an annual yield of 4%.
When the Stanford Business School researchers tried to reckon and analyze data from 1972 to 2010, they found that the yield was closer to 6.5%. And the Blouin Art Sales Index, popular among the art dealer databases, estimates an annual yield of 10%. As a reference, the average annual return from the S & P 500 index was approximately 11.46% from 1988 to 2018.
Even experts are not sure of the value that changes in the fine arts. How is the common people supposed to take care of all this?
By recording auction and gallery sale prices on an immutable and transparent blockchain, we could theoretically bring some clarity to the values of art over time.
Number 2 Investing in art is not easily accessible to the general public. Selling art is easier for dead genes.
Works of 52.105 artists appeared at art auctions in 2017 according to Art Basel and UBS The art market | 2018 relationship. But only 1% of these names accounted for 64% of sales (the works are priced and sold above $ 1 million per pop).
According to the same report, almost all art works up to $ 1 million decreased in value. In contrast, the works market is priced over $ 1 million increased. The number of items sold in that segment grew by 76% together with a 50% increase in value.
Investing successfully in art is therefore limited to those who can afford millions of dollars auction prices.
In addition to the price, think about the transaction fees. There is no "fair" price for art. It's just a matter of what you agree to pay as a buyer plus taxes (sometimes negotiable), which can go up to 25% depending on the price of the piece. And do not forget the ongoing costs for the purchase of such a valuable lot: insurance, video surveillance, security systems of the first order, etc.
All of this means you have to have a couple of million dollars to spend if you're really interested in buying fine arts. And it is not clear when you will be able to sell your acquisition in case you urgently need your money. These investments are among the most illiquid.
Blockchain auctions, like those of Andy Warhol 14 small electric chairs, it could change this. By hurrying a fractional share of expensive paintings, anyone can invest in art, even with a small amount.
Number 3 Fraud and lack of transparency
The art market is not regulated as the more traditional investment classes. There is more the temptation to make things wrong. And even when you work with the most influential galleries and auction houses and pay higher taxes, there is still the risk of fraud.
We remember the case of Christie. Reportedly, Christie's sold the fakes La Horde by Ernst Max at Heinrich Campendonk & # 39; s Girl with a Swank. Beyond that, The Independent states that at least 20% of world-class museum paintings are fake.
But imagine, if there was a database with the history of the property and proof of the authenticity of all the works of art that never existed? Does not it ring "blockchain" for you?
Who drives the Blockchain evolution?
The revolution is already happening. At the moment there are two main types of players in the field:
- Those that solve infrastructural problems – for example. recording and verifying the authenticity of works of art on a blockchain, creating a service solution for those tokenizing works of art.
- Those who democratize the fine arts as an investment – for example. companies that sell fractional ownership of art works through sales of tokens or auctions.
Here are some of the biggest players:
Blockchain App Factory is somewhat ambiguous and mysterious. They provide an extraordinary number of services (due diligence, creation of a token, auditing and legal services for the assignment of a value for the token).
ArtWallet is a "blockchain-based ecosystem" that aims to verify the authenticity of works of art by tracking their property, history and provenance on a blockchain. Their whitelist will open soon.
The Monegraph, much more open and clear, allows artists to record their works on the Bitcoin blockchain, publicly verifiable. Provides users with a certificate of authenticity for tokens, which represent works of art.
Blockchain Art Collective also aims to track and demonstrate the authenticity of works of art. Tag the graphics with a certificate of authenticity enabled for NFC, complete with a timestamp, a blockchain. (Blockchain Art Starter Kit starting at $ 20).
Verisart was founded by Robert Norton, former CEO of Saatchi Art & Sedition Art. It endeavors to build up probationary infrastructure for works of art and collectibles that are verifiable by anyone based on a public blockchain.
My favorite from this list is Artory. Founded in 2016 by Nanne Dekking, former president of Sotheby & # 39; s, the company tracks the provenance of fine art and collectibles. Because of its background, Dekking has some ace up its sleeve, so in November Artory has partnered with Christie's New York to sell $ 318 million from the Barney A. Ebsworth collection and keep the transaction data recorded on its blockchain .
Mecenate is the company that promoted the sale of 31.5% of the piece by Andy Warhol last summer. Mecenate is currently working to organize a second auction, this time with Picasso. The auction is scheduled for the first quarter of 2019.
Masterworks was founded by Scott Lynn, who has been a passionate art collector for over 15 years and has amassed an impressive selection of abstract expressionism including Mark Rothko, Willem de Kooning and Barnett Newman. And now Masterworks offers a clear framework for its users along with well-researched analytical data on investment in the fine arts. The team acquired Warhol's "1 Marilyn Color (Reversing Series)," and at the time of writing 97% of it was reserved for retail investors. A minimum investment of $ 1,000 will give anyone 50 parts of an art work. Payment can be made by bank transfer (for citizens of the United States and Canada) or by credit card (5% fees applied). The next on the Masterwork sales list is Claude Monet.
The TAT was issued by Swarm, a non-profit provider of open infrastructure for digital titles. The project team already owns a pre-funded art collection worth $ 4.1 million and is currently in the process of its own token sales which will end in mid-January 2019. Each token sold represents the partial ownership of a Post War & Contemporary Art Collection It is stored in a Swiss customs warehouse and managed by FineArtDigital AG.
R.A.R.E is a company that sells digital art works. Using blockchain technology, every piece of digital artwork can have a unique identity or a limited execution. It brings scarcity and value to digital graphics that has never been possible without blockchain.
Snark is selling "atoms", which represent the fractional property of Eve Sussman's acclaimed video 89 seconds to Alcazár.
Conclusion
As mentioned earlier on BlockExplorer, the tokenization of real resources is something I'm very excited about. For now, the only thing left to do is relax and observe how all those startups will bring the technologies of the ledger distributed to a new level of adoption at least in the artistic space.
Little steps.
How long will it take to allow anyone in the world to purchase a share of an authentic Rembrandt or Van Gogh within a few clicks of a mobile device? Go ahead and share your predictions in the comments section below.
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