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Fine Art and Blockchain : A Collector’s Journey

As long as I can remember, fine art has always been there. I grew up with it.

Not as an artist, nor anyone who could creatively put pencil or paintbrush to paper. Art making was never a part of the family fabric. But it was there, passed down from generation to generation, oils, acrylics, prints all watching through frames and through perspex over family meals, gatherings, celebrations and conversations.

There was the fat Eekman farmer, the frolicking Ickart women, the Wilkie villagers drunk over a table, the arched back of a buck shot by a Baines’ rifleman, the Dufy sail boats. As children, we gave them names and stories, and laughed with friends and family as the works took on their own personalities, history and narratives in our story.

My grandfather, a fellow of the Royal College of Surgeons in Edinburgh in the 1930’s, had purchased some of these works while there, and this, together with our South African roots, explains the mix of 18, 19 and 20 Century English, Scottish, Dutch and colonial pieces, eclectic, but perfectly synchronized to me.

Thomas Baines, "The Wounded Hartebeesie", Oil on Canvas 46x65 cm.

These works remain part of my collection to this day, with each holding some connection, reflection or memory beyond the aesthetic, a visually place-marked Herodotus book from some Ondaatje novel, invisible to an eye not lived or aged with them. And while my focus has moved to contemporary photography, mainly from developing countries, adding names like Hugo, Kuhn and Muholi, to mention a few, the images that fill my walls each still keep a story, an experience, a memory.

To understand fine art collectors means to understand this. Collecting is more than just ownership or aesthetic. It is relationship, sometimes lifelong, generational not only with the work, but with its people, experiences and encounters. It is about accessing not only the art, but also its clique: the artists, the dealers, the collectors, the market; that world.

Through the years of collecting, I have explored ways to enhance this access, to enrich the collecting experience and to bring others to this experience, too.

Art buying is not easy. Absence of knowing what to buy and who to buy from often leads to abstinence, or worse, mis-selling. There is a veneer of distance and aloofness which pervades primary and secondary markets and which keeps prospective buyers away. And, of course, there is the capital outlay.

Traditional advisory services and technology advances have made collecting easier. Online services have made buying, both primary and secondary, more informed and accessible. The Internet brought with it online fine art price and sales databases, information portals and online auction sites which, coupled with traditional fine art funds and syndicates, brought some measure of access and transparency. However, when looking at this from particularly the emerging collector’s point of view, there is still a good deal missing.

As a collector, I want to see more certainty and transparency in buying, and access to the people behind the works, their markets and to works that I would not otherwise see or could, alone, afford.

Enter blockchain. Unfortunately, associated in perception more with cryptocurrency, the digital asset it has become notorious for, the underlying distributed ledger technology which drives presents unprecedented opportunities for fine art collecting.

Blockchain’s very nature, cryptographically secure ‘blocks’ of data in a chain, each connected and immutably recored and verified in a decentralized, distributed ledger, relates, in its very structure, to the chain of title so important to fine art buying and selling. It is as if blockchain was developed with fine art collecting in mind, with each block immutably preserving provenance in a work of fine art, and providing an independent, immutable means of verifying title.

Eekman, Oil on Canvas, 58x48cm.

As a collector, one of my chief concerns when buying is verifying authenticity and the work’s ‘original artifact’. A key feature of collecting is the attraction to the original, the limited quantity. This is particularly true when buying prints and multiples, for example limited edition photography, where electronic or digital means of reproduction make it easier to produce multiple editions of the same master.

While there are laws in place in certain US states specifically geared to providing collectors with some assurance as to the number of impressions or editions or even series in existence, the usual source of reliance is the dealer who sells the work and who issues the certificate of authenticity. It is not unusual (and I have had the experience) where an edition is sold as limited, but then a competing edition is produced from the same master, perhaps in a slightly different size or under the control of a different gallery.

Blockchain provides the opportunity to take this primary means of fine art authentication out of the hands of the individual gallery or dealer and place it in a decentralized environment to serve, ultimately, as a reference for collectors and a better means of verifying the ‘original artifact’. A certificate of authenticity cryptographically stamped into the blockchain provides the authenticated reference to that certificate, which, particularly, in secondary sales provides a buyer with the comfort that the certificate is genuine. As adoption of the technology widens, anonymized information concerning works of art, particularly multiples, will work to provide a universe of limited editions that may be used to identify attempts to produce unauthorized or competing editions or impressions.

Blockchain’s potential takes this further in registering title to works. Now certificates of authenticity can contain verified title to works of fine art, and, for secondary market buyers in particular (not to mention insurers, fine art lenders and others who rely on title), serves as a very useful means of verifying title and provenance in fine art.

The potential doesn’t end there. Fine Art Funds have long been a feature of the investment landscape, and fine art syndicates as long as art collecting itself. Blockchain promises to make syndication easier and to dispense with the problems endemic to fund structures by eliminating the need for an intervening entity between investor and asset. Fine Art is an excellent use-case for asset-based blockchain and co-ownership, with non-fungible token representing titled interests directly in the underlying asset. Fine Art fractional ownership opens in unprecedented ways, and absent an existing, regulating title regime (as with centralized, government-controlled land registries), fine art avoids the dual-structure conundrum implicit in real estate blockchain direct asset title.

Ownership structured in fine art non-fungible tokens, at least in theory, makes for better liquidity then equity interests in closed-ended funds, providing a novel way of participating in purchases of fine art which a collector would otherwise not be able to afford.

And for increased access there is another opportunity. Bitcoin or other digital currencies are simply digital assets secured in the blockchain and free of the ‘double -spend’ problem which troubled digital assets in the past. They exist, in other words, in the ether. Another form of digital asset, arguably of more substance, is digital images and film. So,where multiples traditionally have been produced in limited print editions, with the implicit outlay for the artist or dealer in print-runs etc., blockchain makes it possible to produce limited digital editions where the ‘authentic original’ is secured as a digital impression within a digital edition. Capable of replication, copies other than the cryptographically stamped impression in the edition, would be worthless, with value retained exclusively in the limited digital edition, titled exclusively to the blockchain-registered owner. Besides the lower cost of producing digital editions, (hopefully) passed on to the collector, producing digital editions opens up the opportunity for collectors to engage with the artist.

All of these are possibilities which blockchain offers for fine art. There are a raft of others (just think of artist resale rights), and potentially more which will become apparent as the industry progresses. There is a future where a well-populated decentralized ledger of works will be available as an atlas of sorts for the secondary market, providing (anonymized or discretionary disclosed) information on the ownership and location of works, their authenticity, title and availability, where buying and selling operates fluidly and efficiently, and where artists, art professionals and collectors can engage.

It is these possibilities that drew me to blockchain and started a journey through this technology and regulatory landscape which became not only a part of my practice as a corporate finance attorney, but an essential part of my experience as a collector. Having experiencing the need for more certainty in fine art buying and selling, being a long-time collector and familiar with alternative investment structures for fine art investment, blockchain presented a resolution for age-old problems. A technology that couldn’t be more fine art-suited.

This is the journey that led me to found the Fine Art Ledger, a journey which started in the living rooms of my family home, inspired by my grandfather’s collecting legacy, and which opened up a vast new world not only of aesthetic beauty, but of intellectual intrigue, artists, dealers, lives, perceptions and experiences. A world we want others to see, as collecting really is its own reward.

With The Fine Art Ledger, we are building a collector-facing interface which enables collectors and art market professionals to inventory and title their works in the blockchain giving their buyers down the chain comfort in the uniqueness, authenticity and title to their works, and allowing buyers to easily transfer and verify title and provenance in the blockchain. We do not seek to disintermediate existing art-market participants and professionals. In fact, we need and encourage their participation. We see primary and secondary galleries as essential cornerstones of fine art markets and partners and users in The Fine Art Ledger’s platform.

And we are doing it from a fine art point of view. We do not see The Fine Art Ledger simply as technology to be applied to fine art, or simply as a service to collectors, dealers or galleries. Most services in this space see blockchain as an external mechanism developed as a resource. Technology built to service art or other collectibles. A look at their web presences reflects this. The look and feel of our presence reflects that we are collectors augmenting our experience as collectors and our service comes from the very core of the fine art collecting experience, as that is where the enjoyment and the experience lies, and the space that we understand implicitly.

The Fine Art Ledger seeks to be the primary fine art distributed ledger for the secondary fine market. That means that the works stamped into its chain are works which either have a secondary market presence or have strong secondary market potential, whether it be on auction or through private sale. We distinguish ourselves in this approach. Where other platforms will accept works without evidence of title or authenticity, we won’t. And we will work with galleries, dealers and auction houses as primary gatekeepers in this respect.

While the fundamentals, meaning, and the rewards of collecting will remain the same, technology is set to rapidly change the way in which collectors engage with art market professionals, buyers and sellers and each other.

Decentralizing this process through distributed ledger technology is set to bring with it changes to existing structures and the way in which art is bought and sold, documented and owned. There will come the time when relying on a dealer or gallery’s own letter of authenticity for a work, or provenance disputes (at least for new works) will be a thing of the past.

We intend to be a part of that journey, one that started, for me, decades ago, and invite you to join us as we do so.

**Founder, The Fine Art Ledger. Originally appeared on Medium


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