Why Blockchain truly makes sense for Artists
The Old Art World
By Carrie Eldridge
If you’ve been paying attention to the art world for the past few years, you probably already know that changes are coming — changes to the very nature of what art is and how it’s bought and sold. For some time now, most people have thought of a work of fine art as an aesthetically pleasing or conceptually interesting physical object, which is typically displayed to the public in a gallery or museum, and whose ultimate destiny involves purchase by a wealthy collector. However, these seemingly straightforward traditions are beginning to become more complicated. Performance art, digital art, and installation art have become increasingly significant in the art world, and none of these creative practices lend themselves to traditional models of exhibition and collection. Even in classic media like painting and sculpture, the traditional relationships between artists, galleries, and collectors are fraying, as a new generation of artists search for alternative financial strategies to support their practice.
The art market has been slow to respond to these new ideas, even as some of the most exciting new work around today begins to emerge from experimental genres and communities of artists rejecting the traditional market. I’m a practicing painter and digital artist with a background in gallery work, so I’m very invested in understanding how the art market will adapt to these changes. However, I also have an academic background in economics, finance and computer science, and I’ve begun to notice some truly surprising ways that the two fields are beginning to intersect. I’ve come to the conclusion that to understand how the art market is going to work in the 21st century, you need to understand that art isn’t the only thing that’s going to be bought and sold differently in the near future. Radical new technology is going to affect the way everything is bought, sold, and produced in the coming years — and in my opinion, one specific technology known as blockchain is absolutely essential to understanding what this means for the future of the art market.
If by any chance you’ve been paying attention to the worlds of computer science or finance over the past few years, chances are you’ve heard of the blockchain. The blockchain is a kind of database that was originally invented to manage transactions for the digital currency known as Bitcoin, but it has since been used in even more sophisticated digital marketplaces. Ask a computer scientist and you might be told that blockchain is a “tamper-proof decentralized ledger system” — but if that sounds like gibberish to you, don’t worry. I’m here to explain how those five words are giving birth to a new art world.
Blockchain In Its Natural Environment
To understand why blockchain is such a revolutionary technology for the art market, we need to understand a little bit about how it is similar to and different from the financial markets it was designed to replace.
The markets in which the world’s wealth move are centralized. That means that we rely on organizations like banks and governments to help us hold and transfer wealth. For example, if I say I own a share of stock in Google, I don’t really own it — a bank owns it in my name. If I want to give my one share of Google to a friend, I need to ask the bank to update its internal records and transfer my stock to my friend’s account.
Theoretically speaking, the bank in this scenario has quite a lot of power. For one thing, it gets to decide what transactions should and should not be approved, and what fees to charge on those transactions. Furthermore, if a bank ever gets hacked, everyone’s assets could end up in the hands of nefarious cyber criminals. Reliance on a single central authority to move wealth has always caused concerns about the authority’s fairness and security. Blockchain offers a solution to these problems that also elegantly solves similar concerns in the modern art market. But first, stay with me as I explain what the technology actually does.
Trust is Over
Every modern bank has a massive database, called a ledger, that keeps track of how much money and assets are owned by each of its account-holders. The bank is the only entity that can view and edit the ledger; everyone else has to trust that it will be modified only according to a set of fair, expected rules. Blockchain turns this entire idea on its head by creating a ledger that is stored not by one computer, but by a public network. Equivalent copies of the ledger data are stored on any and every computer that joins a blockchain network. Any computer that wants to join the network can download its own copy of the database from any computer already on the network. The second it is downloaded, this new computer’s version of the database is just as valid as any of the old ones. There is no “real” or “original” version of the database. Anyone with a computer can download the database to check that their assets are still in their account. The key to this whole system is that no one computer can edit the ledger without the approval of the other computers in the network, which is why blockchain is called decentralized.
A blockchain ledger is stored as a list of transactions, each of which lists a sender, a receiver, and an asset that was transferred. These transactions are grouped into sections called blocks, which are, of course, listed one after another to form a blockchain. Every time someone wants to make a transaction, they simply inform the blockchain network, which puts their transaction request in a new pending block once the sender’s identity is verified. Once the network is finished making the block, that block is added to the chain and can never be removed, thus creating a permanent, unchangeable record of the transactions within it.
The blockchain is highly secure because every block contains an extremely difficult math problem that must be solved before the next block is added to the chain. It is easy for the network to use its collective computing power to solve these problems and add a new block to the end of the chain, but no individual can modify a block after it is added because no one individual has enough computational power to solve such a hard problem unless the rest of the network is helping them out. Thus blockchain is called tamper-proof.
Why Do I Care, Again?
As I said at the beginning of this article, blockchain is a tamper-proof decentralized ledger system, which means it’s like a very secure version of the database banks use to record who owns what — with the key distinction that this database is completely transparent and open to the public. Even more radically, no bank, government, corporation, or individual has the authority to impede transactions or move someone else’s money once the network is online.
Another distinction is that while blockchain can be used to manage traditional forms of wealth like stocks or currency, it can also be used to record transactions where any forms of property are exchanged — including artwork. If you’ve ever worked at a gallery or museum, you might have had the opportunity to turn a painting around and see what’s on the back. If it’s not the painting’s first time being displayed, there’s a good chance that the back will be covered in stickers or labels of some sort — galleries, museums, and auction houses like to leave their mark this way, so that the piece’s future owner will be able to trace the journey it took from the artist’s studio to their home. Unfortunately, to rigorously verify the piece’s authenticity, you need more than just some stickers — generally speaking, you want to piece together a complete paper trail that confirms the piece’s provenance. These papers can be hard to find — artists are not exactly known for keeping organized financial records — and they are usually easier to forge than the art itself. Suppose that instead, painters started recording their sales on a blockchain. Every time a buyer expressed interest in a painting, the seller could use the blockchain to prove they bought it, directly or indirectly, from the actual artist. Then once the buyer is convinced, the seller would use the blockchain again to create a permanent public record of the buyer’s purchase. Since blockchain is tamper-proof, the authenticity of art sold in this way would be virtually guaranteed. It’s also not uncommon for the price of artwork to inflate as it floats from collector to collector, and unfortunately, artists are rarely kept up to date as to where their work is or how much it’s being sold for. Artists who want to borrow an old piece from its current owner for a retrospective, or who want to check how much their old work is being resold for to adjust their current prices, are usually out of luck. Blockchain’s radical transparency not only solves the problem of collectors buying fraudulent art but also allows artists to figure out who currently owns their piece and how much they paid for it. Such a network could even be programmed to transfer a royalty payment to the original artist every time their work is resold.
The need for blockchain solutions becomes even more apparent in the field of digital artwork. A constant question for artists working in this medium is whether and how to sell their work. An artist that produces digital animations might post their work online so anyone can see it for free, but if they want to monetize their practice (as most do), they might also sell a unique paper certificate representing ownership of their digital artwork to a collector. This strategy works to an extent, but it is highly susceptible to counterfeiting — it’s pretty much impossible to imagine Sotheby’s auctioning off a 200-year-old piece of paper that supposedly represents the rights to a digital animation — not to mention somewhat incongruously analog.
Blockchain provides a highly secure system for creating and transferring digital versions of these certificates — so secure that even after hundreds or thousands of years, there would be no doubt as to the identity of the rightful owner of the digital certificate. The technology is so secure and fraud-proof that it almost seems excessive until you remember that centuries-old paintings are still being bought, sold, and forged. Blockchain markets have the power to introduce extremely rigorous notions of scarcity and authenticity to digital art, and potentially increase interest in digital art collecting and secondary-market sales, which are both currently very low despite all of the great work being done in this medium.
I’ve only begun to outline some of the ways that blockchain is breaking into the world of fine art. High-tech venture ATO Platform is currently working on integrating blockchain tools that track provenance with other sophisticated physical verification methods to create an art market where the authenticity of work is guaranteed. They’re even attempting to hard-code their market to put artists first and give them new tools to track and monetize their work. It’s easy to imagine blockchain being used to sell everything from painting to performance art, and artists like Eve Sussman are even starting to incorporate blockchain itself into interactive digital artwork. There’s no easy way of predicting the full range of implications blockchain has for the art world, but there’s one thing I can say for sure: the future of the art market isn’t over the horizon, it’s already being made. Us artists just need to catch up.
