Blockchain For Art: 9 Possible Use Cases

  • 20 November 2018
  • Sam Mire

In 2017, the market for art grew to a massive $63.7 billion. If you think that is a hefty price to pay for some oil and canvas, you are underestimating the massive value for historical artifacts, creative genius, and the exclusivity with which art connoisseurs view themselves. And the combined value of High Net Worth Individuals in the art marketplace is a staggering $63.5 trillion.

The issue with all of this multifold. For one, forgeries are still a massive issue in the fine art marketplace. 2016 saw several forgery scandals with high-priced implications, from a Korean master forger pawning as many as forty works — some priced at $260,000 or more — onto an unsuspecting couple, to speculation as to whether a $137 million Caravaggio “masterpiece” is even authentic. Additionally, art remains an extremely insular marketplace in which even the moderately wealthy can feel boxed out. Considering the personal valuations of the richest individual art collectors, it’s no wonder why many pieces can seem unattainable.

Some hope that the blockchain will allow greater oversight into specific art pieces, documenting their ownership and transfer history on an immutable ledger to minimize the chance that fakes enter the legitimate marketplace. And with the development of phenomena such as micro-investments and purchases, some envision a future in which the blockchain can imbue art collection with a measure of democratization that it currently lacks.

Blockchain for Art - 9 Possible use cases

Keeping Digital Art Scarce

Blockchain use cases in the art industry - Keeping Digital Art Scarce

Digital art continues to take on a more substantial space in the broader art world. In 2014, the inaugural “Paddles ON!” digital art sale in New York raised $90,600 from 20 works, with one work selling for $16,000. The Arrival of Spring is a series of iPad-drawn works by David Hockney that were downloaded, transferred to aluminum pallets, and priced at $28,000 each. And when Cory Arcangel used a modified video game chip to create a moving, projected work of graphic art called Super Mario Clouds, he likely did not expect that it would eventually sell privately for $200,000.

Each of these instances illustrate the viability of digital art in all of its forms, even forms that have yet to be discovered. Crypto-art projects such as CryptoPunks have shown the potential for the blockchain to maintain genuine scarcity of digital artworks in an era when the internet has made scarcity seemingly impossible for most things. These works have been likened to digital trading cards that are 1 of 1 copies. And this blueprint of utilizing blockchain technology and unique digital codes to ensure that art is one of a kind may be the ideal security base to augment the rise in digital art’s popularity.

Crypto collectibles are manifested as digital works of art built on the blockchain. They can be bought, sold, and traded, but due to their unique identifiers, cannot be replicated. If this system can be adapted to other unique forms of digital art, those seeking to own a work without compensating the artist will face a new kind of headache.  

Companies Trying to Solve This Problem

  • Cryptokitties First notable crypto collectible.
  • Cryptopunks Example of a later iteration, broader crypto collectible network.
  • Verisart Using blockchain to verify authenticity and ownership of art. 

Decentralizing Art Exchanges

Blockchain use cases in the art industry - Decentralizing Art Exchanges

Online art sales in the United States were estimated to total $4.22 billion in 2017, a 12% rise from the previous year and a testament to how massive the online art sales industry has become. According to the 2018 Hiscox online art trade report, 74% of online art buyers purchased more than one art object online in the past year, and confidence in online art sales platforms has grown, with the percentage of buyers who paid an average price greater than $5,000 increasing from 21% in 2017 to 25% in 2018.

There is ample room for blockchain growth beyond the acceptance of cryptocurrencies. Though 60% of online platforms believe that Bitcoin acceptance will be the initial means by which blockchain enters the sphere, only 7% currently accept crypto as payment, and only 8% have already embedded blockchain technology in their operations.

However, decentralized art marketplaces built on the blockchain continue to emerge, and upward trends in online art sales helps explain why this is the case. Some see it as a matter of time until the majority of traditional auction houses resort to selling works online — and many already have. In February, Forever Rose, a crypto artwork created by Kevin Abosch, sold for $1 million, a sum that was split between 10 buyers paying in cryptocurrency. The sale was executed on GIFTO, a blockchain-based gifting platform.

More art-specialized blockchain-enabled sales platforms will continue to reduce the overhead associated with maintaining a physical gallery. While systems of artwork certification and payment will also need to be hammered out, these are not obstacles large enough to prevent the proliferation of blockchain-based marketplaces for the purchase and sale of physical art in a manner similar to what we’ve already witnessed for digital works. 

Companies Trying to Solve This Problem

  • Maecenas Art investment without intermediaries.
  • An Ethereum based decentralized gallery that helps users collect art with crypto.
  • Blockchain Art Collective Community driven art provenance on the blockchain.  

Democratizing Fine Art Investment

Blockchain use cases in the art industry - Democratizing Fine Art Investment

Even though online art sales grew in 2017, fewer people actually bought art online compared with 2016. This is not a positive trend, especially considering that art can serve as one of the best investments going. When Jean-Michel Basquiat’s 1982 painting Untitled was purchased in 1984, the price tag was $20,900. When it was sold again in May 2017, the owner fetched $110.5 million. That’s quite a return for 33 years of investment in a single painting, and while this is obviously one of the more extreme examples of contemporary art’s appreciative value, it is indicative of the industry trends.

Contemporary artworks sold during 2016-17 have averaged an annual return of 7.6%, compared with S&P 500’s 6.5% returns going back nearly a half century. While art returns are far from linear, those looking for a long-term investment in something with tangible investment would not be foolish to consider works of art, whether contemporary or older. However, the art sales industry has often been considered the domain of the ultra-rich, and for good reason. When a single evening auction at Christie’s nets nearly $853 million in total sales, it doesn’t exactly scream blue-collar investors. But by tokenizing art and making it available for purchase in segments, many hope to open the doors of investment to art lovers and shrewd investors who don’t have access to Met Gala attendee-level capital.

Employing micropayments via blockchain smart contracts to allow more investors the opportunity to invest in a work of art could ultimately raise the price of expensive works. Top-flight works will still have demand, and those who are able to own them outright will always be permitted to do so. Works of art that are more difficult to sell to a single buyer are the prime targets of such a democratized system, by which purchasers could own a percentage of the work with the hope that its value will appreciate. 

Companies Trying to Solve This Problem

  • Maecenas Allows users to raise funds from a syndicate of investors using their art collection as collateral. 

Fair Blockchain Auction Houses

Blockchain use cases in the art industry - Fair Blockchain Auction Houses

Art auctions are a lucrative racket, and the major players serving as intermediary points of contact between sellers and buyers are tasked with handling lots that routinely fetch millions of dollars. Whether the art being sold is a painting, fine china from the Far East, or a work of some other form, there is no margin for error when it comes to authenticating a work and its chain of ownership. A single Sotheby’s auction in November of 2018, “Important Chinese Art,” garnered over $9 million in total sales. An “Impressionist and Modern Art” sale by renowned art auction house Christie’s in the same month reaped nearly $280 million in sales, with paintings from Picasso, Dali, and Monet among the works that changed hands in a single evening. Christie’s happens to be one of the leaders pioneering the intersection between blockchain and art auctioneering, as they plan to sell a privately-held collection valued at over $300 million with assistance from the blockchain, which will be relied upon to register and encrypt sales.

Christie’s represents the first of the major auction houses to begin storing its sales and ownership records on a blockchain ledger to augment their systems of provenance and secure their sales data. Information including the title of the work, description, creation and sale dates, and more can be logged into a blockchain ledger for safekeeping and indisputable proof of ownership transfer. In the future, there also lies an opportunity for sales to be conducted via blockchain platforms, with smart contracts facilitating both payment and rights transfers.  

Companies Trying to Solve This Problem

  • Christie’s  Major auction house listing sales on a Blockchain.  

Monetizing Digital Content

Blockchain use cases in the art industry - Monetizing Digital Content

The many realms of digital content creation have officially reached diminishing returns, at least in most cases. There are now over 1.8 billion logged-in users accessing YouTube each month, and figures such as these have led many to the not-so-rational conclusion that they should forego their day job, cash out their 401K, and take to performing sketch comedy in front of their webcam on a full-time basis.

Even more concerning than adult YouTube hacks is the scourge of young people aspiring to a career as a YouTube creator. At VidCon, the forum dedicated to digital video personalities that attracts roughly 30,000 people each year, you’ll find “personalities” such as Alex Wassabi, who has been strutting his stuff as a YouTube creator since he was seven. Perhaps it’s not surprising, based on the unrealistic expectations that one will be the next Jake Paul or Jenna Marbles, that a reported 75% of children aspire to work as a blogger or vlogger. Unfortunately, the odds are stacked against them — over 96% of YouTube creators don’t earn enough to rise above the poverty line. On a more encouraging note, merit-based alternative platforms may be on the horizon.

Platforms that have emerged have served to lay out a blueprint for how digital works — whether in the form of video, illustration, text-graphic, or otherwise — can be monetized. First, artists upload their content. Then curators can pay for that content, with the artists receiving a commission in the form of digital currency. Creators can use the currency they receive how they please, including “buying” preferential space in the marketplace in order to increase the number of eyeballs that are directed to their works. This system allows digital creators to reap financial reward from their work, while consumers can pay a reasonable sum to download and share content that speaks to them.

Companies Trying to Solve This Problem

  • Synereo’s WildSpark Incentivizing YouTubers to monetize content on their platform and get rewarded in their token AMP. 

Decentralized Fundable Street Art

Blockchain use cases in the art industry - Decentralized Fundable Street Art

Banksy, perhaps the most well-known street artist of our generation, has made a killing off of his thought-provoking, socially critical masterworks. One of his works, Space Girl and Bird, sold for $479,926 in April 2007. That was just the tip of the iceberg for the mysterious yet prolific visual composer, as art dealer Steve Lazarides said earlier this year that he is in possession of Banksy pieces he anticipates to sell for at least $2.5 million — and Banksy’s works typically far outearn their projections. Though Banksy will certainly not be turning down the fat checks any time soon, he is a street artist at heart, and auction houses aren’t the venue in which he prefers to peddle his wares. As evidence of this, Banksy was selling original works for as little as $60 in Central Park as recently as 2013. If there was a more secure, feasible means for street artists to connect with a more like-minded audience, it would surely tickle their rebellious, beatnik instincts and ensure that those who end up with their works are willing to come to the place of the art’s origins — the city’s streets — to seek them out.

Like street art, some envision the ability for blockchain-funded art exchanges to exist outside of traditional marketplaces — auction houses, galleries, etc. The art community has been long identified with its rebellious eccentrics who take pride in bucking “mainstream” institutions, whether it is in the times of Picasso and Dali or Banksy and Basquiat. Blockchain concepts have been tested to marry cryptocurrencies and street art, ranging from outdoor art fairs funded by Bitcoin-only ticket sales to on-site Bitcoin ATMs that allow art enthusiasts to convert their currency to fiat currency on the spot, and many other variations.

Why not just use cash, you ask? Remember, crypto-heads buy art, too.

Companies Trying to Solve This Problem

  • Plantoid Crypto funded works of autonomous art that bridge the gap between the physical and digital world.
  • The Scarab Experiment Decentralized community art experiment that welcomed online community submissions with tokens as a reward.
  • Pascal Boyart Street artist incorporated Bitcoin wallet QR codes in pieces raised $1,000 from small donations. 

Artwork Ownership Provenance

Blockchain use cases in the art industry - Artwork Ownership Provenance

Guaranteeing the chain of ownership for a given work of art goes a long way toward establishing that it is not a fugazi. Such a system would have come in handy for the many victims of Wolfgang Beltracchi, also known as the “Robin Hood of art.” While this moniker may sound flattering, Beltracchi, referred to by at least one outlet as the “forger of the century,” is seen in some circles as a genius, in some as a criminal, and in many as a bit of both. He’s made millions peddling some of the most convincing fakes ever to hit the market, and has revelled in visiting the likes of the MoMA and seeing one of his works, signed with the name of the artist he so convincingly imitated. He’s expected to have flooded the market with over 300 paintings over a 35-year forging career, and while he’s now making a more legitimate fortune since deciding to create original works, Beltracchi is the ultimate reminder that systems of provenance in the art sales industry remain wanting.

Pioneers for this use case have sought to establish a platform connecting artists, painting owners, galleries, auction houses, transporters, and anybody else involved in the transfer of a given work from one owner to the next. The ability to guarantee that a work has traveled from the original artist through the hands of verified owners drastically reduces the possibility for fakes to enter the marketplace.

Companies Trying to Solve This Problem

  • Deloitte  Developed a proof of concept Blockchain to solve issues with art traceability.  

Creating Self-Sustaining, Autonomous Works of Art

Blockchain use cases in the art industry - Autonomous Works of Art

The ability to give or sustain life is a powerful thing, and the phenomenon isn’t limited to child-rearing or the garden. As the proliferation of hobbyist technology in the ’90s showed us, and video games like The Sims have further illustrated, people can gain satisfaction from acting as caretaker even when the recipient of the care isn’t a living organism. In 1996, Tamagotchi burst into popular culture, selling more than 40 million units worldwide and more than 11 million in the U.S. and Canada alone. During its peak sales period, 15 Tamagotchis were sold every minute in the shared U.S.-Canada market. In retrospect, Tamagotchis were the “original virtual reality,” and as time has passed, humans’ desire to act as a puppeteer pulling the strings of virtual marionettes has proven lasting. The blockchain is emerging as a means for next-level exploration of the instincts that made the Tamagotchi such a rousing success in the ’90s.

Animal lovers, green thumbers, and those who may have taken a liking to Tamagotchi in the ’90s and early 2000s may also find appeal in the concept of autonomous works of art. These works exist in the digital world as a software built upon a blockchain-based network, and also as a physical form sculpted by artists funded through blockchain-facilitated contributions to enhance the sculpture. Additionally, hobbyists interested in the development of technologically-augmented ecosystems can attain a sense of ownership by contributing to their development. Algorithms on the blockchain help facilitate both the development and continued functioning of these projects, such that those who contribute may get a sense of life-giving as their pet projects come alive. 

Companies Trying to Solve This Problem

  • Plantoid Plantoid seeks funding from people familiar with their existence and powers itself with solar energy. 

Crypto Collectibles

Blockchain use cases in the art industry - Crypto Collectibles

Crypto collectibles have been equated to Beanie Babies for the blockchain. While they fall under the umbrella of digital artwork, they are designed in most cases to be bought, sold, and traded as one would with a baseball card. Crypto collectibles are tied to unique identifiers, which makes them scarce and feeds into the entertainment value associated with purchasing and swapping them — they are truly one of a kind, or at least limited to a defined number.

The market for these crypto collectibles has proven to be almost shockingly strong. In fact, one doesn’t need to stretch to explain the crypto collectibles analogy as it relates to baseball cards. Baseball cards have been given the blockchain treatment, with “crypto baseball cards” having gone on sale in August. With a starting price of $20 per card, 30 player cards were released during each hour of the sale. Because of the limited quantity of each player’s card, those that sold out were priced higher in the next round of the auction. The creators of virtual baseball cards established a game around the cards, with the end goal being to create a roster comprised of players from the same real-life team.

This is just one example of how crypto collectibles can be creatively leveraged to attain higher sales prices and keep users interested. While some crypto collectibles are simply created for their own sake, creators who have the ability to keep users interested will experience the greatest success and even long-term stores of value through their fleet of digital, blockchain-enabled collectibles.

Companies Trying to Solve This Problem

  • CryptoKitties First mover collectible cats on Ethereum Blockchain.
  • MLB Crypto collectible baseball cards.
About Sam Mire

Sam is a Market Research Analyst at Disruptor Daily. He's a trained journalist with experience in the field of disruptive technology. He’s versed in the impact that blockchain technology is having on industries of today, from healthcare to cannabis. He’s written extensively on the individuals and companies shaping the future of tech, working directly with many of them to advance their vision. Sam is known for writing work that brings value to industry professionals and the generally curious – as well as an occasional smile to the face.