Blockchain application in Art.

The market, some numbers.

The essential premise to analyze this topic is to understand that the art market today is an increasingly commercially dominated sector by economically “elevated” social classes, capable of seeing it as (or especially) a means of investment.

In technical terms, we speak of “HNWI,” or “High Net Worth Individual,” the so-called “super-rich elite.”

• Very HNWI, those who have economic availability above $5 million.
• Ultra HNWI, those who have economic availability above $30 million.

This “economic class” is certainly not to be underestimated: just think that despite the slowdown in the global economy, in 2019 alone, there was a 9% increase in the global HNWI population and their wealth, as reported by Capgemini in its reports at this link.

Deloitte, in a report available at this link, states that “it is estimated that the value invested in art and collectibles by UHNWI, which amounted to $1.6 trillion in 2016, will amount to $2.7 trillion by 2026.”

This figure alone shows how seeing the art market as mere collecting is rather reductive: it is inexorably becoming a source of investment, increasingly the prerogative of the economically higher classes.

In its own freely consultable market analysis at this link, Artslife highlights how in the only solar year 2019, the public art market reached $64 billion, with an increase in private sales.

The phenomenon of online art sales has reached $5.9 billion: this channel is the one most used by millennial HNW individuals.

• 92% have purchased online
• 36% of millennial HNW collectors who purchased online paid over $50,000 for the artwork won
• 9% of millennial HNW collectors who purchased online paid over $1 million for the artwork won.

From various sources (as Deloitte does at this link), art is defined as a market that lacks transparency, with the exception of the exchange of famous pieces, such as the case of the $450 million for Leonardo da Vinci’s Salvator Mundi.

The market is dominated by large intermediaries such as Christie’s and Sotheby’s auction houses, which monopolize 80% of the secondary market, i.e., after the first sale downstream of the creation.

Transactions: risks, problems, and figures involved.

As highlighted by Mario Mancini and Nicola Attico in their article at this link, “transactions take place through auctions and personal negotiations, and it is very difficult to estimate a fair price for more or less famous works of art.”

With transparency increasingly pushed to the limit, there are risks of fraud, illegal activities, tax evasion, and money laundering.

It should not be underestimated that in addition to the seller, the buyer, and the intermediaries, the author is also involved in the transaction since, under many legislations, he/she is entitled to a royalty, which is paid to the artist for the next seventy years in proportion to the price paid for the work.

Blockchain application in art.

It is easy to understand how for real estate assets such as works of art, this market can represent an ideal ecosystem for the introduction of innovative technology, in order to simplify transactions, make activities more visible, and democratize access to investments.

Blockchain in art is therefore indicated by many professionals in the sector as the only real solution to the aforementioned issues, but it is essential to understand what it is in order to contextualize it and put it at the service of “Art” and its operators.

After all, the Blockchain (explained technically in the link here) is nothing more (simplifying everything to the maximum) than a decentralized, distributed, and immutable registry, as Affidaty S.p.A explains in a particular video in the article at the link here.

For Blockchain in Art, three main lines of use have been identified to date.

Digital Art Blockchain

“Digital Art” is defined as that particular art created exclusively to be built entirely on a computer and reproducible only through digital media.

The added value that blockchain technology brings to it is to certify and control its distribution through the use of the inherent tools of the blockchain itself: a protection for Artists and Collectors.

Art Business Solutions

Blockchain Art Business Solutions are operational procedures to support the art world and system, concerning provenance, tracking the history of works of art, and their management, including authenticity verification.

Tokenization of artwork

Tokenization, that is, the securitization of a luxury asset, in this case, a work of art.

Securitization means the division into several parts of a unique asset: the Blockchain allows this division, the possibility of selling a single work in small ownership shares, opening up the opportunity for a more liquid and larger market, offering real micro-titles of ownership, whose goal is to create a secondary art market, similar to that of the Stock Exchange, in which it is possible to sell these securities and make ownership transfers.

Blockchain in Art: a means to an end

The above three aspects encapsulate the entire art ecosystem.

Beyond the technical aspects, Blockchain in art can be a solution for the protection of artists and copyright, as well as a security for collectors in the management of their collections and a valuable tool for sector operators.

Blockchain in art could be a solution to different problems, a valid tool that deserves study and deepening.

A solution that must not be approached unprepared, as often happens, it is not the tool in itself that makes the difference, but “how it is used.” The blockchain, despite being an extremely disruptive technology, must be used and set according to the ecosystem in which it intervenes and the purposes it must pursue.

Andy Warhol, who has a good quote for every occasion, said, “Art is anything you can get away with.” Some translate the phrase as “art is something that allows you to always get by.”

Others translate it less literally with “art is anything you can sell to the ‘suckers’ as such”… without serious use of Blockchain, which side are you on?