Recently, we provided a brief introduction into the still-evolving world of blockchain technology and its uses in the modern age. For a quick recap, please read our previous blockchain article.
By way of a high-level summary, blockchain operates as a decentralized database of transactions, shared across a vast network of computers. Blockchains are used, most commonly, to transfer cryptocurrencies between contracting parties and to manage records of these transactions. The unregulated nature of blockchain technology has led to rapid growth in the industry and revolutionized the way that daily transactions can be made.
While blockchain was initially developed for and is still primarily associated with, cryptocurrencies such as Bitcoin, it has been developing a foothold in the art community. This article provides a short introduction into a select few examples of how blockchain has been and can be, developed by artists and art collectors.
- Galleries and Auction Houses Partnering with Blockchain
London gallery Dadiani Fine Art partnered with blockchain platform Maecenas to offer a variety of Andy Warhol works for sale in cryptocurrencies and on a “tokenized” basis. “Tokenizing” a work is, broadly, offering an item for sale in portions and allowing individuals to own a “token” (i.e., percentage) of the piece. Therefore, numerous individuals collectively can own all, or part of, a piece of art. Dadiani offered tokens for a 49% stake in Andy Warhol’s 14 Small Electric Chairs (1980).
Shortly thereafter, Christie’s New York partnered with blockchain registry Artory to record the entirety of a $318 million sale via blockchain. Artory purports to track the provenance of artworks while also allowing the owners to remain anonymous. Moving forward, if the works of art from the $318 million sale are subsequently offered at another auction in the future, the prior transactions would be verified via Artory’s blockchain ledger.
- Digital Art – Created and Sold on the Blockchain
Beyond the sale of physical, real-world artworks, a market of digital art has also gained steam concurrent with the rise of blockchain transactions. Digital art is made and presented using digital technology, and, as a digital product and asset, the art can be stored and shared exclusively on the blockchain.
Therefore, digital artists can design and sell products via the blockchain, which has led to the creation of a passionate market of fans and collectors. Further, because digital art exists purely within the blockchain (as it was created using blockchain data), it can be traded and sold to other collectors on the blockchain in a secured transaction.
Digital art collectors consider the same fundamental factors when valuing digital art products, such as the intrinsic and extrinsic value of the work, its utility, and whether it will hold its value. While these digital works can be duplicated and pirated, blockchain has introduced the idea of “provable scarcity” by limiting the number of digital works available by associating each with a unique “token” to identify it. Collectors can now know what limited number of works were offered, which number they have, and whether the one that is offered for sale is authentic.
For example, two notable digital art markets are “Cryptokitties” (cartoon cat images) and “Rare Pepes” (artwork of Pepe the Frog), which have sold for tens of thousands of dollars on the blockchain and have a passionate following.
- Title History and Authenticity
As detailed above, Blockchain can offer ways for sellers, purchasers, and auctioneers to verify title history, ownership, and authenticity. This can also have retroactive benefits, as blockchain can potentially assist in the regulation of the antiquities market which, unfortunately, suffers from theft, looting, forgery, and under-regulation.
Such a system, assuming orderly operation, would render lengthy, opaque investigations into the provenance of antiquities effectively unnecessary, as blockchain could, ideally, offer the full provenance of a particular work. Accomplishing this would require the cooperation and coordination of nearly every known art market, art organization, collector’s organization, and art interest group. While this would be a very burdensome and difficult task, the benefits could be vast and could offer much-needed security to purchasers in an industry notoriously plagued by improprieties.
As blockchain continues to expand and encompass new commercial areas, it will be imperative for the legal community to modernize and, in some cases, develop new doctrines for understanding the relationship between blockchain, its users, and the content shared on it.