Cryptocurrencies Are Disrupting The Art Market — For The Better

The 2009 book, Provenance: How a Con Man and a Forger Rewrote the History of Modern Art, unravels how British con man John Drewe and artist John Myatt committed what Scotland Yard called the biggest art fraud of the 20th century. Between 1986 and 1995, the two men managed to place on the art market more than 200 counterfeit pieces posing as originals by the likes of Alberto Giacometti, Georges Braque and Nicolas de Staël, in great part thanks to Drewe’s ability to fake the paintings’ provenance. From creating catalogues for exhibitions that never took place to fabricating records for restoration work and other phony documents, these tricksters left art galleries, museums and auction houses thoroughly fooled.

Authentication and provenance are key to establishing the value of artworks, but with no singular registry or database, the chain of custody can sometimes be difficult to determine. Had the latest blockchain digital platforms existed, such fabricated chains of custody might have been impossible to fabricate.

A blockchain is a decentralised, public digital ledger used to record transactions across many computers using a peer-to-peer network. Once authenticated by all sides the record cannot be altered, hence ensuring the document is tamper-proof. The backbone of cryptocurrency transactions, blockchain technology can now be applied to the art market.

“The transparency and trust that blockchain provides to online transactions is a tremendous leap forward in technology, ensuring security to those wishing to make large online purchases,” explains Frédéric de Senarclens, founder of ArtMarketGuru, which recently released a report, How to Make and Protect Investments in Art through Blockchain Technology.

In it, de Senarclens argues such blockchain art market “may allow for the formation of more transparent art exchange platforms, reducing the need for intermediaries and high transaction costs.”

Lorenzo Ronchini, director of Ronchini Gallery, also believes blockchain can improve transparency in the art market and describes it as “an innovation which could rewrite the functioning of the art market.” When interviewed for this article, the gallery was planning to test collectors’ appetites for using cryptocurrencies at The Armory Show by accepting only Bitcoin in payment for a work by photographer Berndnaut Smilde.

Ronchini says blockchain technology offers the opportunity to address issues of copyright and ownership in the industry. Currently, transactions between a collector and a gallerist or dealer remain highly private — the details are available only to those directly involved. With the expansion of blockchain technology, this data can be collected and stored for others’ access (respecting of course the privacy). It prohibits individuals from trying to manipulate or dictate prices. “If this becomes the case universally, a previously clandestine world will become far clearer to everyone involved,” Ronchini explains.

“With the growth of blockchain technology it is possible that we may envision a future where the market for art forgeries is almost completely eradicated. If the details as to provenance and resale are stored and shared, no longer can unwitting individuals be deceived by art market fakes,” he says.

Another area where blockchain technology could have a large impact — again primarily related to creating greater transparency — is through what is often known as droit de suite, or the right granted to artists or their heirs to receive a fee on the resale of works of art. Ronchini points out: “If information on the provenance and future resales of a work are known to all, we can ensure that this right remains respected.”

According to The Art Market 2018, Art Basel’s annual report, the global art market stood at US$63.7 billion in 2017 but only 8 percent transacted online.

Blockchain technology could unlock the online market, and a few players are already putting it to the test.

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Back in 2014, the artist-run online gallery Cointemporary was the first to use bitcoin as a unit of account while it issued certificates of authenticity over the blockchain facilitated by Ascribe. Since launching, it has sold “upwards of 50 artworks,” says co-founder Andy Boot. This includes the sale of a limited-edition screensaver by Dutch artist Harm van den Dorpel to the Museum of Applied Arts/Contemporary Art (MAK), which became the world’s first museum to purchase an artwork using bitcoin in 2015.

Over the last year, a few art galleries such as Dadiani Fine Art in London and Art Porters in Singapore also started accepting cryptocurrencies, either at special events such as Art Stage Singapore 2018 or routinely.

“I’d always been curious — so when this collector whom I could tell really appreciates Naufal Abshar’s work asked me if I’d accept payment in a cryptocurrency, I thought to myself, ‘Hey contemporary art is also about contemporary ways of doing things’,” explains Guillaume Levy-Lambert, co-founder of Art Porters.

Boot acknowledges the lag in the broader adoption of cryptocurrencies, “I think it’s due to a surface-level focus on price volatility. Historically those involved in the arts had an avant-garde outlook. Perhaps that’s why the arts community has been more open to explore cryptocurrencies and blockchain technology. When we started Cointemporary, there was a lot of discussion with artists and galleries. Not all were open to working with ‘Internet money’,” he says, before adding he’s noticed a shift in attitudes towards bitcoin.

“Blockchain technology offers many opportunities to the art market, beyond an infrastructure for payments. Whether or not the art market wants to adopt all aspects is another thing,” says Boots.

Some blockchain initiatives in the fine art arena have been non-financial. For example, Ascribe focuses on providing a secure way to trace digital artworks and control how they are shared. Meanwhile, Verisart offers free permanent certificates of authenticity to contemporary artists such as Shepard Fairey, enabling them to list their works using the bitcoin blockchain.

The Codex Protocol is an open-sourced, blockchain-based decentralised title registry for art and collectibles (fine wines, classic cars, jewellery, etc) backed by Lofty, Auction Mobility and Live Auctioneers.

Codex will issue a non-tangible ERC721 token that represents the item, to which important metadata can be linked. The data itself is stored off-chain, but a link allows provenance information to be uploaded. Codex envisions the majority of tokens as issued by auction house partners. Each time a sale is made and provenance research is conducted, documentation can be paired with a token on a public, decentralised blockchain. This way the provenance travels with the artwork, serving as a store of value for its future owners.

Singapore-based Maecenas plans to launch an open blockchain platform later this year that sets out to democratise access to fine art by letting collectors buy shares in works of art, typically above S$1 million, with cryptocurrencies. By selling shares in their pieces, owners can raise money far more cheaply than they would through a bank while retaining possession of their art. Investors, on the other hand, can use cryptocurrencies to buy shares of an asset that offers the potential to increase.

Come August 18, which marks the 10th anniversary of bitcoin, Paddle8 will host Bidcoin, an online auction dedicated to money-themed fine art and collectibles. Successful bidders can use bitcoin and other major cryptocurrencies to pay for purchases.

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