Blockchain and cryptocurrency enthusiasts gathered alongside renowned art collectors, billionaire investors, and colorful fashionistas during this year’s Miami Art Week.
Kicking off the slew of weeklong discussions was The Art of Blockchains, an event hosted by billionaire Adam Lindemann, an avid art collector who has been studying blockchain technology for over a year now. Lindemann also serves as an investor in multiple blockchain ventures, including Artblx, the company that organized the conference.
Discussions during the event focused on blockchain technology’s growing role in the billion dollar art market, specifically in terms of the ability to tokenize artwork and offer investments to multiple stakeholders through fractionalization.
Technically speaking, you can tokenize any asset,” explained Chris Eberle, Chief Operating Officer of Swarm, a platform used to tokenize real-world assets. “However, the design and most common use case for tokenization is for assets that have real world value, such as artwork. Once these assets are tokenized, which is the process of converting their ownership into digital tokens that can then be purchased, traded or simply held, these items can be made available for fractional ownership. This is a big trend we are starting to see in the art community.”
Lindemann also made it clear that he believes tokenization and fractionalization “are obvious next steps” for the management of art assets, a class that has already earned him millions. During the Art of Blockchains, Lindemann explained the potential in collaboration, as well as the parallel between how value is created in both art and cryptocurrency.
“Art Basel and all the galleries in it, they’ve made art an asset class by promoting it jointly into these very expensive things,” Lindemann said in a Vulture article. “I mean, art is already a cryptocurrency at this point.”
Tokenization and fractionalization of ownership were also heavily discussed at Art Decentralized, an event hosted by Alexis Johnson, Founder of Light Node Media. Panel discussions took place inside the Pearl Lounge on Nikki Beach, a chic venue decorated with artwork created by VESA, the well-known crypto artist and Founder of Artforcrypto.com.
“Tokenization in the art world, and in any industry really, is a powerful administrative and financial tool. Tokenization refers to the ability to create a secure, unique, and digital identity and assign related terms to that identity, all of which are enabled via encoded smart contracts and data encryption,” explained panelist Jacqueline O’Neill, Founder and CEO of Blockchain Art Collective, a platform that leverages blockchain and tamper-evident, NFC-enabled certificates of authenticity to secure physical art and artifacts.
For example, if an artist or a museum wants to have a liquidation event to fund the creation of future artworks or to fundraise for future capital projects, they can leverage their art assets by assigning terms to them that allow for the distribution of fractional ownership to interested investors. Instead of having to wait for a gallery or auction house to sell an artwork in its entirety, or having paintings sit in a warehouse or on a museum’s walls, you can now grant investor access to portions of those expensive art objects. Why is this good for investors? They can enter the art market at much lower price points, allowing them to diversify their investments and not be prevented from doing so due to prohibitive costs of buying full, as opposed to partial, ownership of an artwork. More liquidation is good for artists, galleries, and museums,” O’Neill said.
Yet while some members of the art community seemed excited about the benefits of tokenization and fractionalization of ownership, others remained wary. The former chairman of Sotheby’s, Nanne Dekking, who is now the founder of Artory, a blockchain-based company being used to record transactions and verify the authenticity of artworks at auction houses like Christie’s, expressed a differing opinion.
“Is it really good for an artwork when all of the sudden there are 2,000 people involved? I’m leaning towards no,” Dekking stated.
Moreover, artists conveyed skepticism around third parties tokenizing their artwork. Independent artist, Johnny Dollar, shared his concerns.
“Artists should tokenize their digital art themselves, without the need of third party gatekeepers. I also think that physical objects cannot be tokenized, because this would require the trust of a third party to verify the validity.”
The Proof Is In The Data
While many discussions around tokenizing artwork tended to focus on financial gains, a few blockchain enthusiasts made it a point to mention the role that data plays in all of this.
Carrie Eldridge, Founder and CEO of ATO Gallery, the gallery division of the ATO platform that is referred to as a “stock market for artists,” pointed out that while tokenization is revolutionary, the data collected from artwork on a blockchain network is extremely useful.
By using data to quantify an artists career, we’ve created a way to tokenize their collections which gives artists access to new liquidity, a patronage community, insight into their fan base both geographically and demographically, and a number of other benefits. For the first time, collectors will have the ability to know at any moment’s notice what is the true value of an artist’s works resell value for entire collections that they purchased a piece from, as well as a way to experience some of the residual gains from appreciation. Yet none of this would be possible without data collected across a blockchain network. Blockchain is a trustless system and there is transparency when data is saved. In other words, you have millions of people agreeing on information being saved and preserved. And once data is saved, it can’t be easily changed. This is one of the greatest factors that blockchain really provides.”
However, challenges remain. According to Zike Wu, Co-Founder and CEO of ArtVenture, there is a lack of structured data, which makes it difficult to form art-market data.
Currently, only auction houses have made their auction sale data publicly available, but this is just the tip of the iceberg. Most transactions are still going through the primary market, and their data is impossible to access. Also, there is a lack of regulation. The opaque nature of the art market has given privilege to important dealers or institutions to fiddle the market, and this behavior is impossible to measure. I believe the next revolution to hit the art market will come with an analytical approach. Like Deloitte identified, ‘Today, the Art and Collectibles Market is in need of analytical and managerial tools increasingly precise, able to cover the lack of standards and uniform regulations.’”
Is The Art World Ready For Blockchain Technology?
While the speakers at Art Miami’s blockchain-focused events discussed how blockchain technology is disruptive, many members of the art community remain curious as to how blockchain will actually impact this market.
During his panel at the Art of Blockchains, Nanne Dekking mentioned that he knew of “only one company with a successful blockchain use case” to date – the shipping titan Maersk, which uses the technology to verify its supply chain.
However, Dekking’s co-panelist, Emmanuel Aidoo, Credit Suisse’s Head of Distributed Ledger Technology, mentioned that he personally runs seventeen blockchain projects. Yet he could not go into further details, stating, “We are not public about everything we do.”