At auctions, individual works of art sometimes fetch prices in the millions, which can leave one, as an outside observer, speechless. The world-famous Mona Lisa alone has an estimated value of over 2.6 billion dollars. When dealing with such sums, one would expect transactions to rely on an efficient and secure standard in the background. Yet the industry continues to rely on outdated processes. And not just for paintings that are offered on the market, such as Da Vinci’s Salvatore Mundi. This particular work of art sold for more than $450 million to Saudi Arabia’s Crown Prince Mohammed bin Salman in 2017. This reveals another problem with the art industry: its centralization. Only a few, very wealthy individuals are able to pay the sometimes astronomical sums for art objects. As a result, this world remains closed to the majority of people, and the question of cultural value for society arises. Art has to be financed and not every work of art can be exhibited in a museum and made accessible to everyone. But shouldn’t it be possible to lower the access barriers to this very exclusive market and allow more people to invest in art objects of their choice? After all, up to now the majority has not been able to profit from the sometimes large increases in the value of individual objects. However, if one could acquire partial ownership of a work of art, this would open up interesting opportunities not only for private investors. It could also be a way for investors to achieve more diversification in their portfolios. For this and for the optimization of transaction processes mentioned at the beginning, blockchain, and especially the tokenization of assets that it enables, offers an elegant solution. Pioneers such as Amazing Blocks already offer their customers matching solutions. This article details how blockchain technology can be used to sustainably improve the way we trade pieces of art for the better. — Author: Nicolas Weber

Introduction to the art industry

There is a diverse spectrum of applied arts and fine arts, which range from traditional sculptures and paintings to film, photography, graphic designs, performance (though it will be quite hard to tokenize this), animation and even video games. The average sales of art by sector worldwide from 2017 to 2019 are illustrated in Figure 1 below. The history of mankind is depicted as a chronology through masterpieces. Each period of civilization had its own specific trends. While it used to be a story of “high culture”, more recent developments change this paradigm toward a far greater exposure to the masses.

Figure 1: Average Sales of art worldwide from 2017 to 2019, by sector

Problems of the contemporary art industry

Also, physical storage and transportation represent additional expenses. The enormous storage and insurance costs are other aspects of why the industry is still far from being a true asset class. As a result, art galleries, auction houses, and art dealers are seeking to resolve these issues by implementing improved structures.

Another well-known problem area in the art world is that of the forgery of works of art. In 2011, for example, a painting purporting to be from the 17th century was sold at auction by the renowned auction house Sotheby’s for around $11 million. It was not until 2016 that it turned out that the painting had been synthetically altered and was thus, instead of a valuable historical representation, a fake.

As mentioned above, this unique market is dominated primarily by high net worth individuals. Small investors are therefore often denied access.

Blockchain and art

Tokenized art

Future outlook: Tokenizing art with Amazing Blocks

Once selected for tokenization, an accredited curator can appraise the art and determine the value. Now the tokenization process can begin. This can be executed with the lowest degree of work possible through the unique Tokenpad of Amazing Blocks, a customer oriented software serving its clients. The Tokenpad delivers a delightful user experience and outshines competitors with its highly secure and reliable token management features. This leads to a completely automated and digitized process. The compliant Know Your Customer (KYC) solution meets all regulatory requirements and supports the automation of business processes. Further it is designed with a modular software architecture shooting for maximum flexibility and implementation speed to allow updates and new features. It is also a form to collect relevant tokenholder’ data and receive legally mandatory consents. Lastly, APIs to comply with Anti-Money-Laundering (AML) regulations if needed are integrated. Additional attributes of Amazing Blocks’ software can be seen in Figure 3 below.

Figure 2: Why tokenize art as a digital legal entity?

After successful tokenization, a potential buyer now can purchase tokens for multiple artworks and create a diversified portfolio. This can be conducted through the Investor Suite which Amazing Blocks offers its clients. In overall, this will lead to a larger network of investors in this space. Moreover a democratization of the art industry will follow suit by breaking up the single ownership principle thus far present.

Remarks

Amazing Blocks offers a tokenization solution that enables its clients to tokenize various assets according to the Liechtenstein Token Act (software-as-a-service). The software covers both the issuance of tokens and investing in tokens. It suits the needs for tokenizing all kinds of assets (e.g. machines, cash flow generating contracts, trademarks, real estate, cars). Imagine that some asset should be tokenized. For this asset various tokens would make sense: Equity tokens, debt tokens, participation rights as tokens, ownership tokens, or any mixture of these tokens. The software of Amazing Blocks helps issuers to handle multiple assets and to issue multiple tokens for these assets. This is possible by integrating blockchain technology with the law (that is, the Liechtenstein Token Act). At the core, there is the “digital legal entity in Liechtenstein” based on “tokenized shares” which allows a very efficient foundation, a very efficient operation of the company and, thus, an efficient and flexible possibility to tokenize assets. This should now make a wide variety of tokenization projects possible, because the costs for tokenization are significantly reduced.

Interested? Then, contact us! Are you interested in what Amazing Blocks is doing? Visit our website, write an email to hi@amazing-blocks.io, or follow us on LinkedIn or Twitter. Or provide your email address here and we will immediately send you more information.

Author

Nicolas Weber is Head of Business Development at Amazing Blocks and is your direct contact for any regards. You can contact him via email or connect with him on LinkedIn.

Digital legal entities in Liechtenstein based on true equity tokens to tokenize any asset in a standardized way to save time and money. - www.amazingblocks.io