Blockchain and the World of Art

While art is widely known as a dynamic and enticing market for creators and investors alike, it is also challenging to navigate. This is in part due to the perceived connection of the art market with wealth and the “high-end”. It is also due to the vastness of the art market, which is marked by issues involving the value, provenance, and forgery of art pieces. The integration of blockchain technology into the world of art has created new tools and platforms which have undeniably changed the art market by revolutionising the sale, collection, authentication, and even creation of art.

In order to understand how blockchain has revolutionised art we must first understand what blockchain is, and subsequently what NFTs are. A blockchain is a series of data blocks wherein each block in the series contains three things: data, the block’s hash, and the hash of the previous block in the chain. The block’s data relates to its application. The block’s hash is a series of numbers and letters which are created by an algorithm and is unique to that individual block. This means that hash is used to identify a specific block. This hash will change if something in that block changes. Each subsequent block also contains the hash of the block before it, forming a “chain”. If the hash of a previous block changes (for example, if someone manipulates it), the old hash in the subsequent block will no longer correspond to the new, and will render the chain inactive. This makes blockchain more secure.

So then, what are NFTs and how do they relate to blockchain? An NFT stands for a “non-fungible token”, which is a unique digital item that cannot be interchanged. NFT’s can be anything which is digitised such as music or even a tweet. This includes digital art such as images, videos or GIFs which are turned into NFTs  through blockchain technology. Through tokenization, the art work is issued a unique series of numbers which digitally represent an asset, similar to the creation of a hash on blockchain. This way, they can be sold, bought and traded as if they were physical goods on platforms such as SuperRare. Examples of this include RarePepeWallet, CryptoPunks, and CryptoKitties among many, many others.

So what are the benefits of blockchain in the art world? Firstly, because the art is tokenized as an NFT, a  unique and limited number of pieces exist. As with any collector’s item, for the art to have a high value it must have a proven and quantifiable scarcity. The use of blockchain creates a digital scarcity, where only so many copies of the art are issued through NFTs on blockchain. This idea of induced digital scarcity is the same concept that enables tokens like Bitcoin and Ethereum to function as currency. Furthermore, once an NFT is created using a blockchain, it cannot be copied or altered. This creates digital art which cannot be forged which resolves the problem of duplication and piracy, which devalues the piece. Through platforms such as Blockchain Art Collective, artists register their art, both digital and non-digital, using blockchain technology which certifies art work. These certifications create a secure, almost un-hackable database of transactions so that the history of the file’s movement is forever stored in the blockchain for anyone to view and verify. This gives artists the possibility to receive royalties from the resale of their art and brings transparency to the art market. One challenge is when the authenticity and provenance of a piece of art cannot be proven. In 2014, The Fine Arts Expert Institute (FAEI) in Geneva estimated that between 70-90% of the artworks it had examined were forged or misattributed. Blockchain provides a way in which to record and share tamper-proof, authentic certificates of origin and provenance for artworks which are time stamped and secured using cryptography. Lastly, blockchain has no central information center making it more secure from hackers and a safer way to hold data. This lack of central authority and secure exchange also means the market for NFTs is more fluid than traditional markets, which are heavily impaired by reliance on middlemen.

Blockchain’s decentralized nature reduces the influence of traditional intermediaries in the art world, enabling new means of interaction and patronage between artists and collectors. As concepts such as NFTs and the tokenization process become more popular, we can expect to see more platforms, artists, and collectors start to take advantage of this technology. The use of blockchain in the art world presents new opportunities for types of art and the collectible market.

Image courtesy of NFT MCH+, ©2019, some rights reserved.