The year 2016 is considered as the year of fake because of the complex forgery art scandals that happened in that year.
In a 2014 report, The Fine Arts Expert Institute (FAEI) in Geneva stated that over 50% of the artworks it had examined were either forged or not attributed to the correct artist. There is an estimated three trillion dollar wealth allocated to the art of which approximately $65 billion are traded annually through auction houses and art dealers. One of the biggest challenges that the fine arts market face today is the lack of transparency.
This lack of transparency is because of the large number of players involved which includes: Galleries who manage to buy and sell, as well as releasing new artwork. The private collectors, entities, and museums own the artwork and make it available to the public.
Next, come the archives and foundations, they generate and preserve the artistic knowledge and manage the historical memory of the artists who have passed away. Auction houses organize and manage art deals and handle transactions taking place between the parties.
Curators and experts take care of all the dealings related to the artwork. Art syndicates are the people who are interested in purchasing and investing in art. The asset-backed lenders and insurance companies accept high-priced pieces of art and collectibles as collateral.
And last but not least – The most important players in this industry are the artists who create art. All of the players are dependent on one another in order to verify the provenance, ownership history, and authenticity of an art masterpiece.
Many fraudsters out of monetary gains, take undue advantage of the opaqueness in the art industry and introduce fake artwork in the market therefore knowing the provenance of a piece of art is very crucial in combating counterfeit artwork.
Obviously, no one would wish to spend huge money to buy a fake piece of art. Knowing provenance is also important to know the exact value of a masterpiece.
The information about the provenance and authenticity of an artwork has a lot of loopholes and additionally involves a lot of paperwork. In the current scenario proving the provenance of the artwork involves a lot of steps that include: An original gallery receipt and gallery sticker on the artwork. Letters, newspapers, or magazines mentioning or illustrating the work of art. A written statement from an artist claiming his work
Photograph of an artist with the artwork. Certificate of authenticity from an expert. Previous owners and transactions of the artwork. This procedure of proving the provenance and authenticity of an artwork can easily be exploited by fraudsters.
The certificates and written statements can be easily forged. Even photographs can be easily manipulated through image-editing software readily available in the market.
The second challenge is that art industry has been dominated by auction houses, art galleries, and private dealers for almost a century. Undoubtedly intermediaries are required for the market as they drive the momentum of moving art in general.
However, the problem, is that artists are subject to these intermediaries. These entities act as middlemen charging exorbitant fees of up to 40%. Therefore there is a need to reduce the intermediaries that will allow artists, the original creators of the artwork to feel more empowered and more connected to those interested in their work. Online sales, which have grown by 12% as compared to last year, have also driven demand for these masterpieces of art. But the buyers face risks, as there is often a scarcity of experts to evaluate the artwork bought online, and to verify its provenance and authenticity.
Blockchain offers a solution to prove the provenance of artwork by storing all the relevant data.
In a Blockchain-based system, the artists will upload proof of ownership of their creations on blockchain for proving their authenticity and provenance. This authentication stored on the blockchain can neither be manipulated nor erased. Further, multiple authorities like art experts and galleries are required to review, verify, and attest to the veracity of this data before it gets stored on the Blockchain.
Few startups like Verisart are creating distributed ledger for fine arts that allows artists to upload the certificate of authenticity of the artwork. Any artwork created is provided with a unique ID tag. With the help of this unique I.D., an artist can track the location and the owner of that artwork at any point of time. Simultaneously the buyers can verify the provenance of the artwork and can even validate the authenticity of the artwork before buying. This will introduce a great level of transparency and trust in the sector.
Even while buying artwork online, the buyer can validate the authenticity of the artwork by scanning the unique I.D. present on the artwork. In the current scenario, investing in the artwork is beyond the reach of normal people, only someone with vast wealth can buy and collect expensive artwork. But blockchain technology can democratize access to fine art and can facilitate fractional ownership of the artwork by a large number of investors. Say an artwork is priced at 10 million USD, through blockchain technology it can have thousands of investors who own a fraction of the piece and can trade the artwork over time.
The bidding of artwork can be facilitated by smart contracts. When the auction process finishes, the smart contract will analyze all the bids to determine the final share price and the number of shares each successful investor ends up purchasing in the fine art. Further, a Blockchain-based art marketplace can enable the artist to sell their art directly. In such a system, artists can set and control the prices themselves.
Additionally, this system would considerably increase the profits for artists, as high commissions charged by the third parties will be significantly reduced. Blockchain can also help artists to get a fair share of their work of art. Currently, an artist makes a profit only once, when he initially sells his artwork. On the other hand, auction houses routinely drive up prices to increase their own profits from that work of art, but the artist doesn’t see any of that share. For instance, an artist sold his original piece of artwork for 3 million USD in 2000 and 5 years later it was sold again for 10 million USD. Now again in 2015, the artwork was auctioned and was sold at a price of 12 million USD.
In this scenario, the artist does not make any profit during reselling of his artwork. But by registering on the blockchain, artists will have the ability to track their artwork and can potentially take a percentage of the profit of each future sale of their artwork. Thus through blockchain, he can have all information on the auction prices of his artwork and can get fair compensation through resale royalties.