This piece is the first in a two-part series that explores the potential art-world impact of blockchain, followed by Part II which will discuss legal compliance, provenance, artist’s rights and copyright issues.
The onset of Covid-19 saw art galleries, fairs, museums and auction houses sprint to adopt augmented reality (“AR”) for online-only sales, virtual viewing rooms and exhibitions (note the bizarre success of a Sotheby’s cyber auction which sold Michael Jordan’s old Air J’z for $560,000 despite a global health crisis). A significant number of beta stage art tech companies are now capitalising on the market’s technological advancement using blockchain-assisted methods.
BLOCKCHAIN – WHAT IS IT?
In simple terms, blockchain consists of a database that contains the history of all exchanges between its users since its creation. The information on this database is decentralized: the records exist across several locations or among multiple participants, and; any changes to records require the consent of all users. This is also known as Distributed Ledger Technology (DLT). Blockchain, a subset of DLT, forms the bedrock for cryptocurrencies like Bitcoin. The records on blockchain are only ever added to and cannot be edited or removed – something the tech kids call ‘append only’ – creating an immutable record of, well, basically anything.
STREAMLINING PROCESSES, WITH PIZZAZZ
The art world is restless and it was only a matter of time, at least in New York, before novel excitement turned into “utter exhaustion [from the] onslaught of digital art offerings” for consumers. “2D or 3D online art viewing rooms [don’t provide] an immersive reality” explains Sam Miller, corporate finance attorney, fine art collector and founder of California-based start-up The Fine Art Ledger (FAL).
The blockchain-based FAL platform is able to bring mobile fine art experiences into a virtual reality (“VR”) space, enabling art galleries, fairs, artists and other market promoters to heighten client engagement while tying the physical artwork to its own digital repository of information. Specifically: while art patrons are wandering a physical, online, or even VR exhibition, the app provides instant access – as shown here – to digital catalogues stored on the blockchain, as well as proof of ownership, providing added comfort that the work is what it purports to be.
Establishing proof of ownership is often a complicated process in the art world. However, the decentralized nature of blockchain – while not fail-safe by any means – provides an immutable record of authentication and provenance for artworks, which is more reliable than one open to manipulation by a centralized controller. At the genesis of repositories of this data is FAL. The platform also uses one of blockchain’s most promising technologies for traceability in the art market: Near Field Communication (“NFC”).
INTRODUCING: “NFC”
Functioning in the same way as Apple Pay (which also uses NFC-tech), users scan the NFC tag affixed (or near) to the art and are able to generate or transfer a real-time blockchain authenticated Certificate of Authenticity (“CoA”) on their phones, including the work’s provenance. By combining blockchain, NFC technology, and, coming soon to FAL, image recognition tech, art management and cataloging is made digital – and therefore easier. This eliminates the paper-based system for certificates, and speeds up processes [think: transactions, insurance quotations and renewals] for collectors. The authenticated record also benefits artists as they can literally stamp their works as theirs and provide patrons with a digital catalogue.
But, aside from the relatively short distance a NFC tag user must stand to an artwork, a report by UK-based right’s organisation DACS in 2018 points out that this technology is not infallible since competing interests exist in the art market. That is to say – aside from secondary-market dealers just flat out not wanting to share details of their clients – while artists want the transparency and security physical identification tags bring, a fraudster could manipulate the tags by switching them, so the original artwork stays in a basement while its counterfeit is sold to an unwitting buyer.
“This is possible” Miller says, although he tells us that FAL uses “specialised technology, to associate tags with the artwork, and which enable it to keep tabs, for example, on the location of the tag”. Ultimately though, as Miller agrees, the success of NFC tech “depends on there being faithful actors”.
SEPARATING THE REAL FROM THE FAKE
Collectors may benefit largely from blockchain since the liquidity of contemporary art means that each time a work changes hands, the ownership is recorded and updated. Yet, this high volume of activity within the market is simultaneous with the level of counterfeits, particularly as contemporary art is easily reproduced.
One artist subject to constant imitation is high-profile Japanese illustrator Hajime Sorayama. In a bid to safeguard ownership for collectors, the creative behind the Dior-commissioned 39 foot tall Sexy Robot statue teamed up with Hong Kong based digital art authentication app ZHEN. earlier this year for the lottery of Sorayama’s limited edition Sexy Robot Floating collectible. Like FAL, ZHEN. has embedded an NFC tag in the collectible, which is subject to a three-year resale ban upon purchase and is enforced on a blockchain called Ethereum.
The start-up is on a mission to transform the cumbersome vetting process auction houses use when authenticating collectibles. This will “benefit all stakeholders in the market” and provide transparency to the ownership process for sought-after limited edition works. Users’ data on the platform is also stored on a secure server and encrypted with an algorithm – a welcome security measure considering recent concern from both regulators and the public over data misuse by corporations [think: EU General data Protection Law (GDPR) and equivalent international laws].
Although blockchain is efficient for contemporary and digital art, CEO of MutualArt Zohar Elhanani points out that the closed nature of provenance-tracking on blockchain – which doesn’t allow for amendments – makes blockchain authentication uncertain for non-contemporary works like Old Masters, whose attribution is sometimes vague and subject to later re-attribution. The immutability of the ledger would “limit audit and correction over time” for these works, and any inaccuracies would be indelible.
This piece is the first in a two-part series that explores the potential art-world impact of blockchain, followed by Part II which will discuss legal compliance, provenance, artist’s rights and copyright issues.
Edit: this article has been edited to clarify that FAL does not incorporate blockchain into the VR, but rather is a blockchain-based platform that is able to bring mobile fine art experiences into a virtual reality space.
