Art and FinTech: the Problem of Authenticity

The art world has had lots of issues with fraud and proving chains of custody. This makes art buyers skeptical and increases the need for professional verification, which often drives prices up for everyone involved in a sale. As a result, the industry needs improved, transparent provenance solutions, and the blockchain is perfectly positioned to help.

Usually, art galleries and auction houses rely on provenance, which is basically the list of transactions that show how an artwork switched hands from one owner to another, tracing it back to the original owner, the artist himself. This process requires the analysis of gallery bills, exhibition records, auction records, shipping labels or dealer stamps. It requires lots of time and it is not unusual for these documents to be forged or faked.

Blockchain technology can be used to track art pieces as owners sell and exchange them.

But how does it work for new artists?

Every time an artist creates a new and original art piece, he can authenticate and protect his artwork by relying on the service offered by specific startups, such as Verisart or Blockchain Art Collective. These platforms provide a particular and unique blockchain URL which works as the Certificate of Authenticity (COA) — see figure below for an idea of what it should look like.

To register the piece of art, the artist will have to complete all the information required, such as: title, dimensions, locations, date and especially the creator’s signature. Afterward, the artist will receive a token that proves the authenticity of his creation and this will follow forever the art piece. Indeed, the certified art piece will be added to blockchain, a ledger, a list of transactions chained together using cryptography.

What about existing artworks?

Blockchain is a great tool not only for new paintings or digital art, indeed some start-ups authenticate only existing artworks, e.g. Artory. This German company collaborates with the most respected and influential art world institutions to ensure that only the most trusted information available is added to the blockchain. Once artwork data and provenance are verified, relevant partners in the art world, such as Christie’s, issue a registration record with their unique cryptographic signature, and the artwork is added to the Artory Registry, the first public object-oriented database for the art world.

What are the main advantages of blockchain as a tool for authenticity?

Security

It is clear that the advantages and benefits of this technology are huge for the art sector as blockchain recreates the provenance process, but it is almost impossible to forge the transaction’s documents due to cryptography. Indeed blockchain-based ledger system enables the creation of an unalterable, aggregated, digital record of provenance-related events about a single artwork over time.

Cost savings

Apart from the certainty of the authenticity of the art piece, this disruptive technology allows both artists and collectors to have cost savings regarding the provenance process, which normally requires the expensive intervention of an art expert.

Database

Blockchain technology could lead to the creation of one centralized database that could encompass a list of all owners or all artworks ever created. Since the database will be transparent, unalterable, and easy to access, checking the authenticity of artwork will require just a few clicks.

Easier access to auction

Thanks to the security and certainty of this new authentication process, it will be faster and more convenient for artists, owners, and collectors to communicate with dealers and auction houses. Indeed, these services providers will not have to check the provenance of the painting, as it will be certified by the blockchain. Also, the blockchain URL will increase the value of the specific artwork.

Bocconi Students Fintech Society

Authors:

Carlo Mariani

References:

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