Blockchain for arts and artists: how to use it

Blockchain for arts and artists: how to use it
Blockchain

Blockchain is one of the emerging technologies and is considered to be the one of the key drivers of the next industrial revolution.

Blockchain technology and cryptocurrency are used by leaders in technology, finance and humanitarian aid because of its decentralized ledger. Like other industries, the art market is getting revolutionized by the blockchain technology. It is introducing new ways of buying, selling and owning an art work. The blockchain technology is not only helpful in thwarting fraud and replication of art work, it is also being considered for tax evasion. It is supposed to reduce friction during the auction process that is also a potential benefit of blockchain in art market.

Potential Users of Blockchain

There are three potential users of blockchain technology. They are:

  • The artists who want to have the authorship of their work of art.

  • The Art acquirer or collector who wants to invest in the work of art that is authentic.

  • The Auction Houses that are concerned for long term data security and transparency and provenance of the work of art.

In order to understand how blockchain technology in the world of art is different from traditional method, one needs to understand the pain points of the users. Let’s consider the above-mentioned user types.

  1. Artists

In the digital age, quite a number of artists are producing computerized or digital art. This type of art sometimes does not have any type of physical presence. Due to this one of the main concerns that arises is that the digital work of art can be reproduced or replicated without the permission and knowledge of the artists and likewise it can be distributed. The artists do not have any proof of ownership.

  1. Art Acquirer

Art acquirers usually invest large amounts of money to acquire an art work. Since forgeries are common in art world, it is hard for art acquirers to investigate the authenticity and genuineness of the work of art before they pay the price.

  1. Auction House

The auction houses need to keep records of the art work description and price. They also have to monitor the provenance of the art work for buying or selling. For this case they face a problem similar to the art acquirer to authenticate the legitimacy and genuineness of the work of art that it is not replicated or altered and is not a forgery.

The Uses of Blockchain technology in the art market

Democratization of the Art Investment

The art market is considered as the one where usually very rich people invest. However, artworks are getting tokenized allowing art lovers and shrewd investors to buy the art work in segments. This is allowing more people to buy and sell the work of art including those who do not have large amounts of money to buy the whole work at once. These micropayments through the blockchain smart contracts are allowing more people to invest in a work of art that might potentially raise the price of the art work. This allow offers more investors or art lovers to buy a painting or art work with this democratized system with the hope that the value of the art work will increase.

Decentralization of Art Exchanges

Auction houses have started to sell the art works online. In the meantime, blockchain is allowing the decentralized art marketplaces to rise and increase legitimacy of online platforms selling art. This way the auction houses need not to have a physical collection of art works rather they might not need any physical space at all. This saves the overhead related to maintaining a physical art gallery and looking for authentication and provenance of the work of art in trade.

Monetization of Digital Art

The platforms that are based on blockchain offer the artists the feasibility of selling their work of art after getting a blueprint of their digital work. This means that any form of art work whether it’s a video, illustration, graphic or typography it can be monetized through blockchain platforms. Artists get a commission when the buyers pay the price for their art work. Artists can also increase the number of people see their content.

Crypto Collectibles

cryptokitties

Cryptokitty

These are a special type of cryptocurrencies, which are unique and intangible digital assets. Each collectible crypto is in limited quantities, and each token is unique (unlike cryptocurrencies, which require tokens that are all the same). These are used to buy, sell or exchange works of art. They are “digital works of art” created with the blockchain.

An example? CryptoKitties, based on Ethereum. As the authors themselves describe it, it “is a game centered around breedable, collectible, and oh-so-adorable creatures we call CryptoKitties! Each cat is one-of-a-kind and 100% owned by you; it cannot be replicated, taken away, or destroyed”.

Collectibles 2.0?

Scarcity of Digital Art

Crypto collectibles with their unique identifiers do not allow replication of art. This is a reason why digital art, in spite of being on internet is not replicated and remains scarce. This ensures that the art is one of a kind which provides security to the digital art and makes it more popular.

Authentication and Provenance of Ownership of Artwork

Authentication describes the correct authorship of the artwork while the provenance describes the chain of ownership. Artworks are authenticated based on certificate of authenticity, scientific analysis to personal expertise but this type of authentication can be contested. The blockchain records work as a seal of approval and a s a trusted library of the art works.

Fair Blockchain Auction Houses

Auction houses are concerned with selling or buying the works of art. Meanwhile they need to authenticate the artwork and its provenance before buying it. Auction houses may make error in authenticating an artwork if it is replicated very well. Therefore, when auction houses store their sales and ownership records on a blockchain ledger, it secures their sales data and augments their provenance systems.

Proof-of-concept

The journey of an artwork can be traced through the blockchain distributed ledger, from its creation to the current owner. This allows tracing the life cycle of an artwork and saves from ‘fragile documentation’.

Digital Assets

Investors have started considering art works as digital assets with the emergence of blockchain based platforms for artworks. They can buy digital assets using cryptocurrencies. They can also buy the artwork from one marketplace, and sell it to the other.

Art market vs Stock market

Art market vs Stock market

If you prefer to listen:

The Art market or the Stock market? Arts are under-estimated assets, and the art market is quite under-reported. However, investing in art presents investors with several benefits. In fact, the art market might be comparatively better than the stock market.

Introduction

When people talk about investing, they talk about asset classes. They then give examples of items such as stocks, bonds, real estate, cryptocurrencies, and a host of others. However, these are not all there are to investing. And there are a lot of other, potentially more rewarding, options.

Most likely, you do not know about the market for creative works. And even if you do, there are chances that the only idea you may have about it is that of a billionaire purchasing another of Picasso’s legacy works. But the market is much richer, more exciting, and more rewarding than you may think.

In fact, you may be shocked that it may even be better than the stock market for investing. Here, we will introduce you to the world of the art market, comparing it to the famed stock market.

The Stock marketpuppet with money

The stock market needs no introduction. However, we cannot assume, so let us give an overview.

What exactly is a Stock?

Let us start with the scenario of a typical computer science grad who lands a software developer job at a big firm. Soon, he notices market demand for a particular software service and decides to fix it. Not only that, he is fed up with everything – the pay, the bureaucracy, the lack of career growth, amongst other things.

So, he decides to set up his own startup. In the beginning, he wholly owns his business. However, as the business grows, he needs more capital to fund expansion – capital that cannot be generated from the business operations alone. So he has to seek it from outside, from others.

He meets a group of persons who want to commit funds. In return, he gives bits of his ownership of the company to each of the persons according to the amount of capital contributed by each of them. These bits of ownership are known as shares. A group of these shares in a particular company is called a stock.

Then the business grows big and, in search of even much more capital, subsequently lists on a stock exchange. Now, the general public can purchase shares in the company. Also, members of the public can sell the shares between one another. The place where this buying and selling occurs is the stock market.

In essence, when you purchase stocks in a company, you are purchasing ownership in that company. And that comes with some perks.

Benefits of Investing in Stocks

By far, stocks are the most popular assets in the world – in fact, more popular than real estate. Thus, the stock market is the most popular asset market. This is so because of several reasons, which include:

Liquidity

Liquidity in finance and investing terms refers to an asset’s ability to be bought or sold easily. A (highly) liquid asset is one which market participants can buy and sell without causing much change in its price.

The stock market is very liquid. A person looking to purchase stocks can do so relatively easily and fast without any price changes. Likewise, sellers will always find buyers. However, that is not the case with many other asset classes.

This liquidity of the stock market also makes it volatile. The price of stocks can move quite fast over a short time.

Easy to invest

Another benefit you get from investing in stocks is that it is relatively easy. In the past, you could only trade stocks by calling a broker and placing orders. However, with technological advancement, you can now purchase stocks from mobile apps in minutes. This is against many other asset classes for which you need to undergo rigorous processes before you can invest.

Capital Appreciation

The stock market can deliver dramatic capital appreciation. We have seen certain stocks give high returns in hundreds of percentages within a few months. This is one of the reasons many investors go for stocks. However, we must note that the dramatic returns in the hundreds of percentages are quite untypical and not so common.

Dividends

Let us recall that a stock symbolises ownership in a company. As an ‘owner’ of a company, you are entitled to a part of its income, depending on the value and number of shares you own. This is known as dividend. So long you have not divested your stake in the stock, you will continue to earn from time to time.

However, not all companies pay dividends.

Voting Rights

When you own shares in a company, you enjoy the right to have a say in its affairs. This is especially true of crucial company decisions. However, again, not all types of stocks give the right to vote and participate in decision-making.

Downsides to Investing in Stocks

Having discussed the benefits of investing in stocks, we should also mention its potential downsides. By far, the biggest downside with stock investing is the potential for losses. Just as stocks can deliver good capital appreciation so can the reverse also be the case. In fact, there have been cases where stocks have experienced rapid drops in just a single day of trading.

Another is that stocks and the stock market are susceptible to market manipulations and fraud. Here, certain entities can engage in practices via which they profit at the expense of the market.

paintThe Art market

Well, here we are. The art market is the place for the purchase and sale of works of art. In this market, you get to buy and sell commodities and services relating to art. Its participants include artists, art collectors, as well as investors – both large and small. The art market is worth over $70 billion and is growing at an average of 8% year-on-year.

This market has a lot of potentials, a lot of which you probably have not discovered.

Benefits of Investing in the Art Market

Investing in art has many benefits. Some are outlined below:

Steady, consistent returns

Art has been known to deliver sure returns year after year. Figures put the annual average returns at 9%. Blue-chip art prices have increased by over 1,000% in the past 25 years. Well, you may say, “The S&P has returned more than that.” However, you know those years also include years of losses? Would you instead invest in something that delivers steady, sure returns every year, or in that which is highly uncertain?

No market fluctuations

While the stock market’s liquidity might seem like a huge benefit, and rightly so, it can also be a massive downside. Prices fluctuate wildly. However, with artworks, you do not have those wild fluctuations.

Tangible Asset

Okay, you invest in stocks and bonds or mutual funds. These are investments that you necessarily do not have control over. However, with artwork, you have maximum control over what you invest and are fully responsible for it, rather than potentially losing it to market manipulations.

Ability to “Enjoy” your Investment

As an investor in art, you are first a collector before an investor. When you get to invest in art, you get to display and enjoy the aesthetic and symbolic value of your “investment.” We do not think there is any way you can do the same for stocks or bonds.

Intrinsic Value and Value Preservation

Artworks have objective and intrinsic values, unlike assets such as stocks and bonds, whose values only increase or decrease based on the prevailing buying or selling activity level. It is often the bandwagon effect that makes people rush into the stock market without any real reasons. However, you don’t have this with arts whose values are usually objectively determined.

Diversification

Since artwork prices rarely go down, they can serve as buffers, and a means for you to diversify your investment portfolio.

Myths around Investing in Art

You may ask: if the art market has so many benefits, why is it not popular? Well, that is because so many myths still surround investing in it.

Investing in Art is expensive

Not all art pieces are expensive, and the fact that “small” investors are now flocking into the art market should be a pointer to this fact. Nevertheless, with technological advancement, it is now possible to invest in art units rather than whole art items. Well, you may also purchase “stocks” in artworks.

That is, if the artwork is expensive, you can contribute just a part of the cost to be an owner. One of the organisations making this possible is Masterworks.

There is not so much activity

Well, people are wrong on this too. Do you know that the market consistently does over 35 million transactions every year?

Not liquid

While you may not expect the same level of liquidity as you find with stocks and bonds, artworks are much more liquid than you may think. You can make purchases quite easily on many online auction and display sites.

Difficult to invest

Technology is fast making it easy to invest in artworks. So, this myth may not stand anymore. Arts are quickly becoming an asset class to reckon with, and as with every asset, the earliest participants often tend to take the biggest chunk of the pie.

Thus, it will be great for you to get into arts – and to get in, now.

Invest in art

Invest in art

Art nourishes life, improves the economy, develops the social tissue of a territory. Art is a sustainable and responsible form of investment. A way of investing in culture, and therefore in the development of the spirit. For entrepreneurs, art creates networks and alliances. It introduces new possibilities for the development of the business. Improves offices, shops, places… In short, the advantages of art are innumerable.

So, is it worth investing in art? Let’s start with a simpler and more general question: why invest. The discourse begins in our way of thinking: it can be projected to wealth, or to poverty. It is not our money or our assets that put us in one or the other category. A person may have nothing but be rich. Because it is the mind, it is the ability (and strength) that we have to think about a future of economic freedom, to classify ourselves as “rich”.

People like the usual Bill Gates, Steve Jobs, Jeff Bezos, Warren Buffet, Sergio Marchionne were born into normal families. But their mentality made them “rich”. It was then time, to prove it to others.

N.B. The information contained herein is for informational purposes only. the usual neXt is not a professional financial advisor. Read the Disclaimer at the end of the article, and never invest money that is necessary for your livelihood.

The history of Sharon Tirabassi

Lotteria

The contrary cases, of poor people with a lot of money, are even more widespread. We know Sharon Tirabassi. This 35-year-old US girl, a single mother who survived with state subsidies, won a whopping 10.5 million Canadian dollars from the Ontario Lottery and Gaming Corp. 10 million in the lottery. Who has never dreamed of it?

Unfortunately for her, however, her mind was not ready. A rich person would have spent a small part of the winnings to take off small whims, and then invest the rest and live forever in peace. A poor person, Sharon, no. She immediately threw herself on a very luxurious villa, fashionable cars, expensive brand clothes, unlimited travel, luxury parties. He lent money to friends, gave it to relatives …

“The moment I got it, I divided it among my family,” $ 1 million to her parents, and nearly 2 to her four sisters. She was generous, no one denies it. He bought apartments to rent below cost, paid rent to those who couldn’t afford it, offered loans without any guarantees.

Less than 10 years later, the entire winnings ended. And she found herself to work part-time on the city buses to pay his small rented apartment.

 

From the usual blog
Blockchain

Blockchain is one of the emerging technologies and is considered to be the one of the key drivers of the next industrial

coins

The Art market or the Stock market? Arts are under-estimated assets, and the art market is quite under-reported. However, investing in art presents investors with several benefits. In fact, the art market might be comparatively better than the stock market.

Money

Invest in art

Art nourishes life, improves the economy, develops the social tissue of a territory. Art is a sustainable and responsible form of investment.

It depends on the head, not on the money

What does Sharon’s story teach us? What could you and the company have done to avoid this financial meltdown? And what can you do? Training. Have a rich mind.

Libro: Padre ricco, padre poveroI also mentioned the society, because it has a very serious fault: in decades of school, children are never taught the basics of personal finance. About myself, I had to wait almost 30 years of life to learn about it. In addition, by chance… Ancient history, philosophy, Latin are perfectly known. Notions are learned mnemonically, without even training the intelligence. You can do the job of Google or Bing perfectly, but you don’t know how to live in today’s world.

I can recommend reading Robert T. Kiyosaki‘s book, “Rich Father Poor Father“. An international best seller, which in simple words explains us how Robert became rich, economically, starting from nothing. Comparing the mentality, the lifestyle, of his biological father, poor, and the father of a friend of him, rich. Which he used to consider a second father.

The rich mind invests for the future

We then understood how the mentality decides our future wealth. The rich mentality, compared to the poor one, has only one big difference: it does not waste money today, but looks at a part of it for the future. Better the hen tomorrow than the egg today.

And the benefits are amazing. An equity investment, even of a few euros a month, will allow us to take advantage of compound interest and therefore to have enough liquidity after a few years to be able to reduce, or totally eliminate, the need to work for a living. We will make money work for us, which is what most wealthy people do.

We do not dwell too much on the subject, perhaps we will return in the future but in the meantime I invite you to read reliable books and websites. Personal advice, to be taken for what it is (I’m definitely not a financial consultant): stay away from promises of earnings that are too quick, and promises in general. If it’s too good to be true … It’s not true. As well as trading: if you are not a professional, it is equivalent to playing the lottery. Most, I would say almost all, of those who try end up losing their entire capital.

Finance and Art: diversification

This is where we get to the heart of the matter. Is it worth investing in art?

If we think of art as a form of investment, it’s a great way to diversify. Henry Markowitz, Nobel laureate in economics in 1990, said: “don’t put all your eggs in the same basket“. This is to avoid black swans (impossible-to-predict events that shake the global economy and can cause us momentary losses, such as the Covid-19 epidemic). Diversification is what allows us not to eliminate, which is impossible, but at least to reduce the risk that will characterize our final investment. How does diversification work?

Having X capital available, you start by deciding which part of this money to use for the different investment classes: stocks, bonds, cash, commodities and real assets (including works of art). Within the individual classes, it will still have to diversify in geographical terms (Europe, Asia, America etc…), sectoral (for shares, for example one part in technology companies, another in automotive, then banks and finance etc…).

We also need to understand the temporality of our investments: how soon will we need capital. Here too, diversifying between short-term investments (we will need the money in the coming months / years) and other medium / long-term investments (at least 10 years, preferably 20 or more).

Why invest in art

Investments in art can be characterized in the category of “real assets” and “long-term investments“. This is because it will be a long time before an artist will improve his “career”, and therefore the value of the works. We have to be careful, because unfortunately the opposite is also possible. And you have to be careful that the purchase price is the right one.

The art market is not heavily affected by the economic trend. The value of the artwork remains the same as the value of the stock market changes. This is one of the advantages of this kind of diversification. Obviously, in the event of severe global crises, what decreases is the liquidity of the investment: if no one has money, no one will buy back your work…

Steps to invest in art

Conosci il tuo budget
Prima cosa, comprendi quanti soldi destinare all'investimento in arte. Questo va rapportato anche al capitale investito in ogni altra forma.
1
Conosci gli artisti
L'arte non è una scienza esatta. È importante conoscere chi c'è dietro un'opera. Scopri chi sono, cosa fanno e da dove vengono.
2
Visita luoghi d'arte
Abituati ad entrare in gallerie, mostre, esibizioni. Online e offline. Parla con curatori, nelle community online, con gli artisti...
3
Conosci le opere
Inizia a scoprire il mercato dell'arte. Non esistono solo i quadri... È variegato, e con varie possibilità di investimento.
4
Conosci il mercato
Il mercato si divide in due grandi gruppi: primario e secondario. A loro divisi in tante figure. Impara da chi ti convenga acquistare (o vendere).
5
Acquista la tua prima opera
Inizia ad investire. Parti dal basso, non entrare con troppo capitale. Sarai ancora un principiante, potresti sbagliare. Ma goditela.
6
Inizia a differenziare
Intendo, oltre alla differenziazione tra vari tipi di investimenti. Differenzia anche nell'arte stessa... Acquista varie opere. Conta che più ne hai, più è probabile che avrai guadagni in futuro.
7

How much money does it take to invest in art?

To invest in art, we don’t have to be a millionaire. Certainly, works by Picasso, Gauguin or Leonardo have costs that are unattainable by the general public. But minor artists, such as those present here in the usual neXt or many others, propose works with a good chance of increasing their value at figures that are definitely within everyone’s reach. With a few hundred euros, you can already buy paintings or sculptures that will enhance the beauty of your places, make you feel better and potentially earn you money in the future.

In the last 10 years the market has changed a lot thanks to social networks and the internet. Therefore, it is much easier to see artists who were nobody until recently, immediately become very popular and highly rated.

Buy the art you love

We said they will make you feel better. Oh yes, because this is the first rule of the art investor: buy the art you love. And love the artists who made those artworks. It is perhaps the only branch of investment in which the heart, and the eye, want their share. Art is an investment, and as such it has all its associated risks. Potentially you will earn, but just as easily you may never resell that work and lose all its economic value. Therefore, buy art for yourself. Think of a first work as a beautiful and pleasing object, which makes you feel proud to own it, and only later as an investment asset. Does this mean buying a beautiful painting at any price? Of course not. We must like the work. But it must also be affordable.

Characteristics of the art market

In recent years, the art market has been in constant growth and evolution. Signs of slowdown came only after 2018, as evidenced by the authoritative Art & Finance Report 2019 created by the consulting firm Deloitte. The probable cause of the economic growth of art lower than that of the financial markets (and in contrast with the strong growth of wealth that, on the contrary, has registered the planet), is the lack of transparency.

To overcome this problem, many states are implementing ad-hoc laws and, above all, technology is starting to be strongly present. The blockchain, in detail, promises great things. As well as the availability of more data, better analyzed, and artificial intelligence.

How to invest in art

But, well… How can I start earning with art?

First, you need to evaluate your capital. How much you can / want to spend to enter the market. Like any investment, it has to be money you can afford to lose. They will be blocked for a long time, and no one guarantees us that one day they will be recovered in whole or in part.

Do not forget to consider the ancillary costs for maintaining the work, which may be bank safes, insurance, restorations or other…

Get to know the artists

Before spending a single dollar, get to know the artists well. In this, it will be useful for you to follow the usual neXt for a while, as well as go to galleries, exhibition openings and be present on every occasion you can talk to artists and gallerists.

Before spending a few hundred or thousands of Euros on a work, let’s at least try to study the past of that artist. Do not invest large sums in artists who do not have at least 5/10 years of activity behind them. You will never know if they will continue their business, or if they will have painted only for a passing fashion. You are investing money earned from your work on someone, and it is important that this someone does not betray you.

Study the value of past works. Knowing at what figures they have been sold, preferably constantly increasing, is a good way to increase the chances that yours will be sold in the future too.

One piece of advice, to not take at face value, is to buy works by artists still alive. This for various reasons: they are less expensive, and will continue to create, to change style, to visit exhibitions and places. And, therefore, to increase their market value. There is also a sad reality: many artists are only appreciated after their death.

An interesting website, in addition of course to this, to meet artists from all over the world is artcollectorz.com.

The Magnus app is very useful. With a photo of the work of your interest, you will know how much it is worth.

Kinds of artworks

In the art of painting, there are 3 major types of investment:

Originals

The purchase of the original of a work represents the most classic of investments in art. It is the work with the greatest value for each individual artist. Its rarity, its uniqueness, represent its value.

Prints

The print of an artist has value, even if it is not a unique work. This depends on various factors, which mainly concern the quality and the print run itself. Some artists are used to autograph their prints, which causes a net increase in the rating.

It is important to remember that not all prints increase their value over time. It’s just a cheaper way to enter the market, as well as to appreciate an artist’s work.

Gicleés

Gicleés are the best quality prints. Sometimes they are accompanied by a certificate of authenticity, and are classified by many as “museum quality”. Don’t forget that, regardless, it’s still a copy.

Reproductions

Copy sometimes rhymes with forgery. But this is not always the case, although almost all reproductions, such as posters, of works of art are more suitable for having a Mona Lisa in the living room without spending a few billion euros, rather than as an investment.

Primary market and secondary market

Before buying your first work, let’s understand the difference between primary and secondary market. The primary market represents works that have never been sold before. You are purchasing a subject directly from the artist, or at most from an intermediary such as an auction house, a gallery or the usual neXt.

Buying in the secondary market, on the other hand, means buying works already owned by someone. Who, hoping that the value of the work has grown in the meantime, offers it to you in exchange for money.

How to find out who is an artist

How to discover the value of an artist? Let’s start by saying one thing: each artist has his own coefficient, also called the artist’s coefficient, which causes the value of his works. This is based on the age of the artist, exhibitions and personal exhibitions (quantity and above all importance), publications and history (works sold in the past, to whom and at what price).

We therefore understand that, to know if the value of the work is correct or if they are taking advantage of us, we must know it. One way to get to know the artists is obviously the usual neXt. One of our “side effects”, in the struggle towards a more offline world, is in fact that of putting artists in communication with the public.

Follow our blog, our social channels, and above all participate in our events. You will discover beautiful things and, I am sure, you will fall in love again.

Disclaimer

Article for informational purposes only

It should not be mistaken for professional financial advice. The author, nor the usual neXt, is not a professional financial advisor.

You should consider seeking legal, financial, tax or other advice from a professional to see how the information on the website fits your conditions.

the usual neXt, nor the author of the article, are not responsible for any losses caused by the information provided on this website.