Blockchain and the Art Market

Author: Huang Jun, Professor of the School of Economics at Renmin University of China and Deputy Director of the Institute of Art Finance at Renmin University of China.

In the past two years, the emergence of blockchain has brought new development momentum to many industries, including the art world. As more artworks are traded, there is a huge market demand for authenticity verification.

Artwork authentication is a focal issue in the art market. A research report estimates that the global market size for counterfeiting and fraudulent art and collectibles is as high as $6 billion per year, accounting for almost one-tenth of the total art transaction volume. Disputes, non-payment and claims caused by the authenticity and origin of artworks are common.

"Eye science" is the most common method of art appraisal at present, that is, to use the knowledge, experience and eyesight of experts to distinguish the authenticity of works of art. As the level of modern reproduction technology is getting higher and higher, appraisers may also have moral risks for the sake of profit. In this case, more objective scientific and technological appraisal came into being. Scientific and technological appraisal mainly uses modern scientific and technological detection methods to lock the microscopic information of the material form of the artwork from the aspects of dating, structure and chemical element analysis, and then stores it in the database for certification and filing.

Blockchain is the underlying technology of Bitcoin. The timestamp and proof of existence generated by its data block information can record and fully save all transaction records in real time. The advantages of blockchain are mainly reflected in the fact that it does not require the participation of intermediaries, the information is open, transparent and cannot be tampered with, the data is secure and the cost is very low. The most important thing about it is that it solves the problem of intermediary credit, provides a new channel for anti-counterfeiting and anti-fraud of artworks, and systematically protects the intellectual property rights of artists. This hits the pain points of the art market, such as the lack of appropriate record retention methods and real-time verification of the source of artworks. The art market has thus become one of the five industries most suitable for the application of blockchain technology.

Both domestic and foreign institutions are involved in using blockchain technology to serve the art market. Verisart, headquartered in Los Angeles, is the world's first technology company to provide blockchain certification for the physical art market. Verisart is committed to building archives for all artworks and using blockchain technology to help the art market build trust and improve liquidity. Verisart's CEO Robert Norton was previously the CEO and co-founder of Saatchi Online and Sedition Art. Verisart was founded with seed funding from Israeli venture capital.

Verisart uses widely accepted standards for cultural asset materials (CIDOC-CRM) and open data (LIDO) to build a platform. Verisart certification generates an ID, which means it meets international standards for artworks and antiques. Verisart certification is part of a broader metadata and semantic framework. Anyone who owns a work of art can add the information they know to the historical record of the work. Verisart will use the blockchain's distributed data network and unique image recognition software to collect complete archives of each artist's lifetime artistic career, such as catalogs, circulation, and exhibitions, aiming to establish a permanent classified information of world art and collectibles.

The content on the blockchain can be used by collection management systems and catalog databases around the world. Insurance companies, museums, law enforcement agencies and other institutions can verify it in real time. The whole process is convenient and has a wide range of use value. For example, art theft insurance requires a shared tracking mechanism. Blockchain can not only provide artists with a free inventory management system, notify galleries and art museums and other related institutions when the ownership of artworks changes, but also help collectors find virtual asset information such as prices and identities that are not publicly disclosed. Blockchain can become an intermediary between art galleries seeking artworks and private collectors who hope to increase the value of artworks through exhibitions, putting the complete ecological chain information of artworks on the blockchain and providing a reliable information platform support for museums, private collectors and others. As a permanent record that is easy to share, discover and disseminate, if it develops smoothly, it will promote the transfer of the art market to private peer-to-peer transactions and online transactions.