Can blockchain revolutionise the way we buy and sell art?

Last year The Wealth Report investigated the impact of blockchain on property markets. The verdict? No significant disruption – so far. We shift focus to an area that could offer a clue as to what’s coming next: the world of art and luxury investments.

Words: Sophia King, Knight Frank

At a glance

Can blockchain redefine our perception of value? As any collector will know all too well, value is inextricably linked with authenticity – and the latter can be incredibly hard to prove. But its proponents believe blockchain could help change that.

  1. In November, Christie’s recorded the most valuable art auction ever on a blockchain: the record-breaking sale of the Barney A. Ebsworth Collection for US$317,801,250, was described by the auction house’s Chief Information Officer Richard Entrup as reflecting a “growing interest within our industry to explore the benefits of secure digital registry via blockchain technology”.
  2. Bridging the gap between art investment, cryptocurrency and Blockchain is Codex Protocol, a dedicated, industry-backed decentralized title registry for art and collectibles founded in 2018. The company stores and verifies ownership and provenance - for new assets the opportunities are significant - while ensuring complete privacy. Each member of the Codex network has a unique digital signature that ensures authenticity without compromising anonymity.
  3. Following a successful pilot at the start of 2018, diamond producer De Beers announced plans to launch the first diamond blockchain. By tracking the journey from miner to retailer to end-user, the blockchain can guarantee diamond purity and provide greater efficiency and visibility into the entire process.
  4. Blockchain creates a viable process for the fractional ownership of fine collectibles, lowering the barrier to entry and inviting a far more diverse audience into a traditionally exclusive world. Last year, bidders on blockchain-based art investment platform Maecenas used cryptocurrency to purchase 31.5% – equivalent to US$1.7 million – of Andy Warhol’s 14 Small Electric Chairs.
  5. TEND, a blockchain-powered investment platform founded in 2017, tokenises high-end assets to enable its clients – mostly affluent 30-somethings – to co-own and experience aspirational items. A fine wine portfolio includes tasting sessions at French vineyards; a Porsche can be taken for a spin at weekends; and a thoroughbred horse can be cheered on from the VIP lounges of world-famous racecourses. 
As any collector will know all too well, value is inextricably linked with authenticity - and the latter can be incredibly hard to prove. But its proponents believe blockchain could help change that.
The full read

Despite a name laden with structural possibilities, you can’t create a building from blockchain. But when it comes to investments of passion the so-called distributed ledger is already breaking new ground as a medium for art in its own right.

Conceptual artist Kevin Abosch grabbed headlines last year with his IAMA Coin project, comprising 100 physical and 10 million virtual artworks. Mr Abosch – who sold a photograph of a potato for €1 million in 2015 – stamped the physical work with the Ethereum blockchain addresses of the virtual pieces in his own blood to proclaim himself “a coin”.

A few months later, he was at it again, selling Yellow Lambo  – 42 neon alphanumeric figures representing the blockchain contract address for crypto token YLAMBO – for US$400,000. That’s approximately double the price tag of an actual Lamborghini.

Uploading information to blockchain is not without its challenges. Sourcing the relevant documentation for collectibles that in some cases will have provenance reaching back thousands of years could be an insurmountable task – but for new assets the opportunities are significant.

If that doesn’t sound abstract enough, members of CryptoKitties, one of the world’s first games on the blockchain, breed and trade unique digital cats while monitoring their value as you would a traditional collectible.

One kitty with rare “cattributes” reportedly sold for approximately US$170,000 and, to date, the game has received US$27.9 million in funding, with Samsung Next and Google Ventures among its investors.

While this may prompt eye-rolling, such work presents an interesting insight into how blockchain could redefine our perception of value – and highlights that it’s certainly catching the attention of some very wealthy individuals. However, for most collectors, the technology will offer more prosaic uses.

The luxury goods market is worth more than US$2 trillion, yet is fraught with challenges. As any collector will know all too well, value is inextricably linked with authenticity – and the latter can be incredibly hard to prove. But its proponents believe blockchain could help change that.

Last year, Deloitte dedicated its Art & Finance conference to innovative technology, while Christie’s Art+Tech Summit explored blockchain’s potential applications within the art market.

In November, Christie’s recorded the most valuable art auction ever on a blockchain: the record-breaking sale of the Barney A. Ebsworth Collection for US$317,801,250, was described by the auction house’s Chief Information Officer Richard Entrup as reflecting a “growing interest within our industry to explore the benefits of secure digital registry via blockchain technology”.

“We have public registries for assets such as our homes and cars, but there’s nothing like that for most art collectibles,” explains Jess Houlgrave, co-founder of Codex Protocol, a registry for unique collectibles. “Blockchain provides an easily consultable public record. From an investment and finance perspective, that’s really interesting.”

Promising to “simplify ownership of a whole world of different assets”, Codex Protocol enables members to record details such as provenance, ownership and appraisal notes on the blockchain and ultimately contribute towards a more efficient market.

Importantly too, given the significance of privacy to many of the world’s wealthy, each member of the Codex network has a unique digital signature that ensures authenticity without compromising anonymity.

But uploading information to blockchain is not without its challenges. Sourcing the relevant documentation for collectibles that in some cases will have provenance reaching back thousands of years could be an insurmountable task – but for new assets the opportunities are significant.

Following a successful pilot at the start of last year, diamond producer De Beers announced plans to launch the first diamond blockchain. By tracking the journey from miner to retailer to end-user, the blockchain can guarantee diamond purity and provide greater efficiency and visibility into the entire process.

The public and immutable nature of blockchain also creates a viable process for the fractional ownership of fine collectibles. Last year, bidders on blockchain-based art investment platform Maecenas used cryptocurrency to purchase 31.5% – equivalent to US$1.7 million – of Andy Warhol’s 14 Small Electric Chairs.

TEND, a blockchain-powered investment platform founded in 2017, tokenises high-end assets to enable its clients – mostly affluent 30-somethings – to co-own and experience aspirational items. A fine wine portfolio includes tasting sessions at French vineyards; a Porsche can be taken for a spin at weekends; and a thoroughbred horse can be cheered on from the VIP lounges of world-famous racecourses.

In a world where most masterpieces are accessible only to a very select few, fractional ownership lowers the barrier to entry and invites a far more diverse audience into a traditionally exclusive world. “Blockchain enables us to open up an entirely new market and give people access to exciting things,” says founder Marco Abele. “It’s amazing to see people’s faces light up when we show them what we can do.”

But whether you’re a collector of traditional Old Masters, a technophile keen to embrace this emerging digital world, or somewhere in between, one thing is clear: blockchain has the potential to solve many of the challenges faced by the art and luxury collectibles market. Only time will tell just how sizeable its impact will be.