A new art investment platform is using blockchain technology to make the art market more accessible.
Blockchain technology – the backbone of the world’s cryptocurrencies – is revolutionising vast swathes of the global economy, and it’s no different for the art market. A new art investment platform called Maecenas makes it possible to use blockchain and cryptocurrencies to start your own art investment platform by buying shares in paintings.
But let’s back up. What is blockchain? One of the best definitions I have come across is from Hackernoon: 'Like DNA, which is a record of genetic transactions and mutations that spread as life expanded across the earth, blockchain too is a record of transactions, spreading across the internet as more people use cryptocurrencies”. Blockchain allows cryptocurrencies to be traded anonymously but is also useful for storing other kinds of transactional information. This is what makes it so useful to the art market.
The secondary market – which is the name for the buying and selling of previously owned artworks – relies heavily on certificates of authenticity to validate works of art as the original. Often physical certificates, these are easy to forge, and fake certificates have in the past been used in massive fraudulent transactions associated with money laundering and other nefarious ends. Because blockchains are essentially transaction records, it is possible to use this technology to create tamper-proof digital “paper trails” for artworks.
This changes how art buyers are parting with their money. In July 2018, an art collector and self-described “crypto geek” who uses the pseudonym Jet Chen spent close to $20 000 on a fraction of Andy Warhol’s 14 Small Electric Chairs (1980) in the world’s first blockchain art auction. This was Maecenas’s maiden voyage, before the platform allowed regular punters to sign up. 100 investors were invited to bid on fractions of a 31.5% share of the Warhol, a work that had failed to achieve its reserve price of $4 million on a Bonham’s contemporary art auction in 2016. Each of the new owners has their shares in the painting represented by tamper-proof digital certificates, or “asset tokens” stored on the blockchain of the cryptocurrency Ethereum. They will retain their shares even if the rest of the painting is sold at a later stage.
The Warhol auction was a watershed moment for the art market. Although in this case access to the auction was exclusive, the model promises a more accessible art market down the line. Potential buyers who could never possibly afford to buy a whole work can benefit from value accrual in the secondary market by easily buying shares in a work relatively affordably. The minimum investment for platform users is USD 1000.
Although the Warhol auction is old news in the world of blockchain and cryptocurrencies, it’s still radical for the art market. “Initially I couldn’t see how this was such a big deal for the artworld,” Chen said over email. 'How is art different from any other financial instrument? But the fact that this sale could happen with cryptocurrencies is significant,' he said. 'Now I own this part of real-world history and I paid for it with what a lot of people think is pretend money'.