At auctions, individual works of art often sell for staggering amounts of money. The famous Mona Lisa painting by Leonardo Da Vinci has a value of more than 2.5 billion USD. Normally you could expect such transactions to occur on a secure and stable platform; however, that is not the case. Till today, the industry relies on outdated processes.
Another significant problem the art industry faces is the issue of centralization. The art industry is locked off to the public and remains accessible to a few significantly wealthy people. These people can pay enormous sums of money for works of art.
There is a growing need for a lower entry barrier to this exclusive market and a broader audience. The new audience will bring in additional investment and enrich the industry. If a person gains partial ownership of an artwork, this overcomes the typically exorbitant sums involved in art sales.
This idea could open up a chance for investors to diversify their portfolios. Enabling such thoughts requires blockchain technology to optimize the transaction process and make art accessible to the audience.
What is Art tokenization?
Art tokenization refers to the process of making digital tokens that represent real-world art. The artwork tokenization process requires blockchain technology and enables users to store and trade their tokens when needed.
An artist can create an online gallery through artwork tokenization, certify their art, and sell it on online auction houses. An online gallery establishes a place for artist to showcase their creativity and attract a broader audience. Certifying their art means that investors will never worry about buying forgeries. Selling it online means the artist reduces several overhead costs and reaps significantly higher benefits.
The question now is how to tokenize artwork or how do you tokenize your art?
Overview of the art industry
There always existed trade-in objects made by people for aesthetic purposes. Since the first drawing on a piece of paper, art products were always bought and sold. It is hard to estimate the market’s value today, thanks to its lack of transparency.
There is a diverse spectrum of fine art and applied art. This spectrum ranges from traditional sculptures and paintings to film, graphic designs, animation, photography etc. While art remained forever locked away and accessible to ‘high culture’, recent developments aim to change this paradigm. There is a growing need to make art accessible to the masses.
Problems faced by the art industry
The first problem plaguing the art industry is that it is a highly illiquid market. The issue relates to the arts and how elite circles get exclusive access to specific art pieces. Also, there is significant bureaucracy required to obtain and distribute the drawings.
The next problem lies in transporting and storing these assets. The storage and insurance costs are what keep the art industry from becoming a valid asset class. This issue is the driving force behind art dealers, galleries and auction houses implementing better systems and protocols.
The last but equally troubling problem in the art industry is the rampant forgery. For example, Sotheby’s, in 2011, sold a painting for more than ten million USD. In 2016, an analysis indicated that the supposedly seventeenth-century artwork underwent synthetic alteration, making it a fake.
Also, investors in this market are high net-worth people. This exclusivity locks out small investors from participating.
Integrating blockchain and art
Blockchain in the art industry can provide several benefits to every party involved. This section explains the benefits for each market player.
Artists can use blockchain’s time-stamping capability and verify their artwork. They also benefit from including historic art ownership and sales data by adding blockchain technology to their business. Online auction houses with blockchain-enabled authentication lead to greater exposure for the marketplace. The exposure also helps the auction house net a reasonable price for their product.
To collectors, blockchain features like traceability and transparency significantly reduce the chance of fraud. Investors also benefit from integration blockchain through instant ownership transfers when they sell their art.
Auctioneers benefit from adding blockchain into their existing verticals. Typically, an auction house has to compile, store and maintain an artwork’s historical records. The auction house also has to secure the data, track the piece during transport and keep it in a safe location. Blockchain can overcome these obstacles as well. In this instance, smart contracts can automatically execute the delivery and automated payment receipts. They can also store the data in secure locations the user can access anywhere.
However, the most significant benefit to integrating blockchain into art is artwork tokenization or art tokenization.
Artwork tokenization process
Many artists wonder how to convert their physical art into a digital token and sell it on the blockchain. The rise of NFT marketplaces makes it possible for anyone to turn an asset into a digital token. These marketplaces are where users can set up their art galleries and start selling their work.
Here are the most prominent NFT marketplaces where you can tokenize your art
- Nifty Gateway
The role of art galleries in a world of art tokenization
NFT marketplaces are an enticing opportunity for budding artists to sell their work and earn a reputation. It is an excellent way for them to connect with their customers. Social media enhances that connection; however, not every artist will pursue marketing activities or handle the formalities required. Art galleries can step in here and manage the various tasks while the artists are free to pursue other activities.
Why buy tokenized art?
The biggest question many people have about art tokenization is why buy it off a website when you can download it and store it on a computer?
The tokenized art exists on the blockchain as a unique code. The code houses the transaction history and makes the data available to everyone. Having that code makes the user the unquestionable owner of an art piece. It also means that they can sell the art to another user.
Many investors consider art a type of wealth investment with the value likely to increase over the years. These investors sell the art for more excellent value and enjoy the profit. It is also a perfect way to support artists as they earn a commission for every artwork they sell.
Purchasing tokenized art removes any questions about the artwork ownership, trade restrictions, possible copyrights and additional issues. The blockchain stores the essential information and ensures the buyer can access that information when required.
In Conclusion, The year 2020 saw an NFT boom as several NFTs sold for high sums. Several auction houses caught up to this trend as Sotheby’s and Christie’s increased their online sales by 255%. The sudden interest in NFTs indicates the art tokenization movement is here to stay.