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Sharing common interests for new technologies and art, Verum Capital AG together with photographer Marc Stickler and Austrian based authentication company Authentic Vision have tokenized ownership of physical artworks. A number of Mark Stickler’s photographs have been equipped with a unique code allowing facilitated verification of key information.

In order to verify each photograph’s authenticity, a sticker is attributed to the artwork and added on its back (in our office for illustration purposes we put it next to the artworks). Any tampering with the sticker would immediately be visible. The ownership of the artwork is certified by a unique code on each of the stickers, linked to a digital certificate or token on the Ethereum Public Blockchain.

Authentic Vision Stickers to Prove Authenticity of Artwork

Jonathan Llamas, co-founder of Verum Capital explains:” We created an ERC721 token with the name “Marc Stickler Token”. Typically, tokens are non-fungible, however with artworks that cannot be the case. Therefore, each image has a unique code (sticker ID) that can be checked publicly on the Ethereum Network. As long as the person holds the token in their crypto wallet, they can easily prove and transfer the ownership of the artwork”.

Ownership proof and transfer are now accessible on the app and easy to manage:

Authentication: a person is interested in buying an artwork. A 3D holographic sticker is attached to each artwork. It is used to verify the artwork’s authenticity. Each sticker carries a unique code, which is linked to it’s digital certificate, stored on blockchain.

Verification: it starts with downloading the Authentic Vision app and scanning the unique sticker. 3D holographic technology makes each sticker impossible to duplicate. Any tampering with the sticker would be immediately visible.

If valid, the sticker is verified and the result is displayed to the user. A tempered sticker would return to the user that it is not possible to determine authenticity.

Finally, the user is redirected from Authentic Vision app to the artwork’s website.

Ownership proof: the person can go to Blockchain Explorer such as Etherscan and look up the token. There she can see which public address of a crypto wallet owns which particular token. Because each token comes with a unique ID (Authentic Vision sticker code), it is possible to prove the ownership of each of the artworks.

The owner of the wallet transfers the ownership of the artwork by sending the token that carries the particular Authentic Vision code, to the public address of the buyer’s crypto wallet.

Application to the Contemporary art industry

In their 2018 Art Market analysis, Art Basel and UBS observe the current trends : “As the focus of publicity shifts to galleries and artists at the superstar level, the art market appears increasingly out of reach of new buyers. A key issue in relation to economic impact is that most of the employment and ancillary spending is not in the top end of the market but comes instead from the very many other businesses below the top tier. Hence, the problem of sales shifting to the top tier threatens the benefits the art market offers economies, which, to be maximized, requires the market to be functioning well at all levels.”[1]

Gallery Openings and Closures

These trends have forced many galleries to shut down while the opening rate of new galleries has drastically slowed down: “Closures are often of small and mid-sized galleries in the primary market, including those with highly professional and hard-working teams (…) often discovering and raising key artists of a given generation, and producing a range of positive externalities for other businesses, artists and consumers. (…) potential issues could arise in the future regarding the discovery of new talent and both the introduction and cultivation of a more diverse range of buyers.”[2]

As a response to the constantly increasing costs, interest over online investment channels has increased and is expected to grow even more in the next five years.

Top Challenges for Galleries in 2017 and Next Five Years

Proof of this newly found interest, the size of the online art market has increased substantially over the last five years — by 72%. However, the average amount invested online rarely exceeds $1m.

Encouraging larger online investments, tokenizing artwork with the process used by Verum Capital for Mark Stickler’s photographs would allow fractional ownership.

Fractional ownership can be seen as making non-liquid assets — such as artworks — liquid.

One way of creating an uniquely identifiable token that’s connected to a given asset is through an Ethereum ERC721 token. This token can then be divided and sold to various owners.

Alternatively, a smart contract can be created through the same ERC 721 token by the owner of the given asset, enabling the creation of Ethereum ERC20 tokens for the fractional owners.

In the second fractional ownership solution, governance and maintenance logic are introduced through the smart contract, allowing the set up of advanced functionalities, such as automated maintenance fees or guidelines.

Share of Online Sales by Auction Hauses Turnover Level

Verum Capital believes that bringing ownership of physical artworks to the digital space and implementing fractional ownership will trigger a massive increase of online investments in top end artworks. Not only is the authentication of artworks simplified, but the blockchain also offers a safe and immutable track record of each art piece’s origin and previous ownership.

Blockchain technology undoubtedly offers the power to breathe new life into the art market’s online investments, by reducing costs for sellers and galleries, facilitating fractional ownership and by further strengthening safeguard measures and traceability of artworks.

Endless possibilities

As rejoicing as this is, possibilities offered by the technology don’t stop at financial considerations. As an example, once an artist reaches notoriety, major galleries enter the game and smaller galleries that might have discovered them in the first place tend to be left out. They are rarely rewarded for the risk taken when choosing to promote new unknown artists. Digital channels could offer visionary galleries an opportunity to take credit for supporting artists from day one, as they have the potential to allow an immutable track record of ownership transfers of a piece of art through time.

This is just another example, and many other applications of the blockchain in the art market are to be expected.

But let’s not stop here. The applications go far beyond art. Other luxury goods, such as wine bottles, fashion accessories or timepieces could benefit from this simple yet secure identification technology. Any item currently needing costly time-consuming expertise before any transfer of property could benefit from an embedded unique identification allowing any potential buyer to access a trusted immutable digitalized certificate.

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