Influence of Blockchain-based Tokenization in the Art Industry

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art tokenization


The ingenious blockchain technology and its immutable nature has been widely adopted and have revolutionized a diverse range of industries. One such interesting use case from this list of industries is art. The implementation of blockchain technology into the art industry, known as “Art Tokenization,” has paved the way for artists with possibilities like never before, and has provided solutions to the hardships faced by them.

If you’re a part of the creative art sector, this blog will help you understand how blockchain-based tokenization can transform your business into a whole new phase. But, before going deep into that, let’s first take a look at the problems involved with the traditional art industry.

Obstacles faced by the traditional art-based businesses

  • Artists in the traditional art sector are dependent on art galleries to showcase their artwork and get ahold of potential buyers. In most cases, such art galleries represent only the artwork of well-established artists, and only a small portion is dedicated to newcomers.
  • Art galleries charge hefty commissions of upto 50% of the art revenue.
  • There is a lack of networking and marketing opportunities with art. Thus, the artists have no choice but to depend on art galleries for their work to be recognized.
  • Artists are not paid properly and on time.
  • Lack of regulation creates many disputes
  • There are issues of art pieces being plagiarized and sold without the artist’s knowledge.
  • Preserving valuable artwork is quite challenging considering aspects like unstable climatic conditions, maintenance and conservation problems, etc.
  • Modern arts are overpriced, and investors find it difficult to acquire them even if they’re interested.

What is Art Tokenization? How does it rectify these issues?

Tokenization of art means converting the value of an art piece into thousands of digital tokens and sold to interested buyers. By this, the investor doesn’t have to purchase the art for its exorbitant price.  Instead, tokenization allows the fragmentation of ownership, which means a set of investors can pitch in together, and the ownership is divided in proportion to the number of tokens they purchase. The first piece of art was tokenized in 2018 by the agency, Maecenas. They tokenized a painting by Andy Warhol, a popular American artist. The painting titled “14 Small Electrical Chairs,”  was valued at $1.5 million dollars. After tokenization, the same painting sold for $5 million dollars, with 100 participants and 36 bids.
To clarify the concept of art tokenization in a simpler way,

Here’s how tokenization works,

  • First, the artwork is analyzed by a curator, and its value is determined.
  • Then, the art is converted into numerous digital tokens, and are issued for investors to purchase.
  • The investors can then purchase the number of tokens they want, represent ownership accordingly, and diversify their portfolios.
  • The investors can also sell/ or exchange the tokens as per their requirements.

Blockchain And Art- How does it remold the traditional model?

As we discussed before, blockchain technology is considered one of the most advantageous technological innovations there is, and it has transformed several industries. The art industry is a significant one of them. Let’s see how blockchain influences or transforms the art industry and the solutions it offers;

  • Art Asset Tokenization underpinned by blockchain technology eliminates the need for art galleries. It is a completely digital, decentralized network. This means anyone involved with the network can view the art piece and get in touch with the seller to purchase their desires shares.
  • Tokenized art platforms eliminate the involvement of intermediaries. In a blockchain-based tokenization platform, buyers and sellers can directly connect with each other and conduct transactions, therefore eliminating the need to pay big commissions to art galleries. Also, as the transactions are direct, they are more speedy, efficient, and secure.
  • Blockchain helps record, control, and verify every transaction happening on the platform, and the information is stored in a chain of blocks encrypted with strong cryptography. Blockchain also offers transparency and immutability, i.e., the information is distributed all over the network to the involved parties. And transactions once recorded cannot be erased or interchanged. This brings in more authenticity and eliminates fraudulent transactions.
  • Despite the network is transparent, the details of the buyer or the value of the asset are completely kept confidential, and only the transaction information is updated on the network.
  • Fractional ownership removes the barriers of entry to small-time investors and opens up a wide range of opportunities for them to be a part of a lucrative art asset.
  • Tokenized platforms offer improved liquidity to art owners that help them with quick and efficient buying and selling or converting art value into fiat money.

Now, if you plan to tokenize your art, there are a few key attributes that you need to know about. Let’s discuss them below.

Checklist for a tokenized art platform

  • Compliance – The platform should be legally compliant, properly followed the necessary legal procedures and auditing before creating the tokens.
  • Cutting-edge blockchain and smart contracts – For smooth operations and transactions, it is essential for the platform to integrate with cutting-edge and reliable blockchain and smart contracts solutions. Once the legal and other essential formalities are completed by the asset owner, the tokens are created with smart contracts.
  • Escrow System – It is crucial for the platform to be associated with a reputed Escrow system agency to enable smooth transactions, release payments in a timely manner, and safeguard the investments.
  • Listing – You need to make sure the platform has completed every legal procedure properly before listing the tokens. The exchange in which the tokens are to be listed will analyze the legal aspects, escrow information, and then approve the tokens for listing in the exchange and for trading them.

Key features for a tokenized art asset platform

  • GDPR (General Data Protection Regulation) compliance
  • Legal Compliance
  • Robust admin panel and display of dividend payment cycles
  • Investor dashboard and expense report tracker
  • Marketing modules
  • Display of Token distributed ratios
  • Multiple payment gateways

Art Tokenization Today and The Future!

Following the “14 Small Electric Chairs”, The top global auction houses sold more than $12 billion worth of art in the year 2018. And, with tokenization coming into the picture, it has opened up the art market to an extensive range of people who can’t afford or don’t want to risk thousands of dollars on a single artwork or painting.

Fine arts have always been illiquid or inaccessible to a diverse set of investors. But with the help of a tokenized art platform, even small investors are given the opportunity to expand their investments and own a share of valuable art assets.

Tokenization of art has definitely impacted the art industry in a positive way, and it is getting more and more traction as more investors have started realizing its benefits. It is definitely a lucrative investment that transforms the industry into the next level, and there is no doubt that it is going to be the next big thing. If you want to benefit from this revolutionizing sector and obtain your own art tokenization platform, reach out to our experts. With thorough knowledge in the blockchain industry and from gaining mastery and solid experience over helping several clients across the globe, we assure you, 100% quality and security, and reliable solutions. Initiate a conversation with our team to know more information.

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