This article is written in conjunction with the IE Law Society.By Iona Steger
The concepts of “non-fungible tokens (NFTs)” and “blockchain” have been an ongoing craze for the past few years. Particularly NFTs such as the “Bored Ape” have garnered lots of attention, with even Justin Bieber deciding to join in by purchasing a token for $1.3 million dollars. Individuals, brands, artists, and crypto-fanatics continue to create, sell, and buy NFTs in hopes of securing a profit, while others simply want to be involved in the craze. But we often overlook the other potential power that can be harnessed through NFTs and blockchain: their use in the art market.
Understanding the basis of blockchain and cryptocurrencies
Blockchain technology could revolutionize the authenticity and traceability of the art world and give greater protection to both the art and the artists. To understand how this is possible, we must first examine Blockchain technology. At its core, blockchain is a digital ledger that records transactions across a network of computers. Each transaction, otherwise known as a “block,” is linked in a chronological chain.
In its infancy, blockchain was primarily used to support technology such as cryptocurrencies like Bitcoin, but its potential further uses are now being explored due to a decentralized network and a reduced risk of tampering. Moreover, NFTs are unique digital assets on the blockchain, which enable a clear establishment of ownership for digital art, with each NFT being entirely unique.
How do we integrate such technologies in the art market, and why?
In the past, when art was purchased, it usually relied on an intermediary and a heavy pile of documents for authentication as well as certification of the new owner. These documents and the art itself could be easily duplicated, forged, distributed, and sold to clueless individuals. The consequences of such fraudulent behavior include great financial and reputational harm to the artist.
Blockchain technology offers a transparent and unalterable record of transactions, which allows the buyer to hold a certificate of authenticity and allows others to see who the sole purchaser is.
Moreover, blockchain technology facilitates the use of smart contracts, which eases time and monetary costs and lowers the need for intermediaries for artists. These contracts not only automate and streamline the transfer of ownership and payment, but also make the transaction more transparent and secure. Additionally, artists can also “tokenize” their digital creations through the use of NFTs which represent ownership as digital assets on the blockchain; this technology permits artists to monetize their work in a way that was not previously possible. Such technology is also instrumental in the higher protection and guarantee of intellectual property, as it can be applied to the area of copyright to further protect artists.
Who is leading the race?
The trend of using blockchain and NFT technology for art transactions is steadily growing. In 2018, blockchain platform ‘Maecenas’ partnered with ‘Dadiani Fine Art’ in London to offer fractional ownership of Andy Warhol’s 1980 print 14 Small Electric Chairs payable in crypto currencies with a total value of $5.6 million. In November of that same year, the auction house Christie’s New York also partnered with blockchain-secured registry ‘Artory’ and recorded all the Barney A. Ebsworth Collection’s transactions in 2018– worth $318 million on the blockchain.
Nevertheless, such incredible technologies do not come without a price. Leveraging such technology presents sustainability concerns due to high energy consumption and scalability issues, which will need to be addressed due to high carbon emissions produced by NFTs. Moreover, legal and regulatory compliance is still not fully up to date as the digital art industry goes through constant shifts. Nonetheless, due to its infancy, many leading experts in both technology and art continue to flesh out the possibilities of blockchain and NFTs in the art market to offer greater protection to art and artists alike.
Featured image courtesy of Unsplash.com
