For Sylvie Gleises, head of marketing at insurer Axa Art, the problem is all too familiar. A fire sweeps through the home of an art collector, reducing their treasured hoard to ashes. But they find that not only have the much-loved artworks gone up in flames, so have their documents of ownership, tucked away in a drawer in the same home. Proving the collector’s ownership rights now becomes considerably harder.
But what if the history and proof of their purchases, the provenance of works in their collection and all related legal and insurance documents were held on a permanent, trusted database to which the collector and trusted advisers could gain access via a secure key?
“If you have all the certificates and no questions about provenance and authenticity, then it’s easy for us to settle the claim,” says Gleises.
This is one example of the potential benefits of the distributed ledger technology — otherwise known as blockchain — currently animating a wave of entrepreneurship in finance, healthcare, manufacturing and the art world.
Used since 2009 to underpin the cryptocurrency bitcoin, blockchain allows a transaction to be permanently recorded on a database shared between computers, without relying on a third party to authenticate or process it. Immutability and security are written in to blockchain; when no single authority is in charge of the ledger, no one may remove entries or fiddle with them.
It could bring efficiency and transparency to the buying and selling of art, currently a fragmented and opaque marketplace. But it also poses some searching questions about the future of the dealers and auction houses accustomed to carving off a profit: the market’s traditional middlemen.
Christie’s, the venerable 252-year-old auction house, is one of the last institutions one might expect to embrace the potential of this disruptive technology. But last week it brought together technologists, art experts, entrepreneurs, financiers and lawyers at its London showrooms to discuss how blockchain could redefine processes and relationships in the art market.
Anne Bracegirdle, a specialist in Christie’s photographs department, said blockchain had a “potentially revolutionary impact on our business” in its ability to host all data about an object or artwork, from catalogue details, sale prices and provenance, linked to invoices and certificates of authenticity. In her view, it reduces the room for human error, boosts trust and therefore could tip hesitant buyers and sellers over the line. “Property titles and full provenance are often missing, and that information can make or break a sale.”
Digital artists are particularly captivated by the possibilities of blockchain. The market for art created to exist on a screen has suffered from the ease with which it can be replicated. But blockchain allows artists to create digital editions of their work — just as photographers create a limited number of prints — and ensure that ownership can be tracked and verified.
Smart contracts — an innovation of the Ethereum blockchain on which nearly all art-related blockchain activity is taking place — also allow them to make more money out of their work, even perhaps selling portions of their work on blockchain, bringing fractional ownership to the art market.
Digital art, however, is where incumbent companies appear especially vulnerable, since the role of the dealer or auction house in authenticating art, judging value based on previous prices, researching provenance and bringing together buyers and sellers could become redundant when all that information is held on a blockchain.
John Zettler, president of Rare Art Labs, a digital gallery for artists, says: “A simple coding script could ask where this artist has already sold and where this particular piece has sold in the past. There would be no concern about the authenticity of the piece — and no real need for a physical location where buyers and sellers gather.”
One of the pioneers of blockchain-based digital art is Matt Hall, co-creator of “cryptopunks”, a series of 10,000 unique digital artworks in the shape of pixelated heads that he and his business partner released on Ethereum last year. They no longer control the art; it has taken on a life of its own, with rare cryptopunks changing hands for the equivalent of thousands of dollars.
While he sees the experiment as an unexpected success, Hall says it raises “tricky questions” about people’s willingness to buy art that only exists online. Debate also rages about the technical question of where the digital art should reside. Since keeping work on the blockchain itself is expensive, it is typically used to host a proof of ownership and a link to the work itself on a separate third-party site. Purists say that offends the principle of independence that is the point of the technology; it also leaves owners vulnerable to the possibility the third-party company could go out of business, putting their art out of reach or even destroying it.
Few deny that dealing with blockchain is currently tedious: users have to go through the process of acquiring a “digital wallet” and negotiate a barrage of technical jargon. For art entrepreneurs wishing to launch services on Ethereum, the price of engaging with the network to set up or make changes to data — known as the “gas price” — is also painfully volatile.
“There are so many rough edges. You can’t plan for success by buying a bigger server. You don’t control the servers and you can’t call the helpdesk,” Hall says.
Others worry that data held on blockchain will fall foul of the European general data protection regulation (GDPR) that came into force in May and has required monumentally complex and expensive preparations on the part of big corporations. Richard Entrup, Christie’s global chief information officer, says doubts over blockchain’s compliance with GDPR were an “aha moment” for him. “It immediately takes it off the table for a number of applications,” he says. Christie’s is nonetheless exploring the technology’s potential, with hints of an as-yet-undisclosed blockchain initiative coming soon.
For some, the lack of a central authority overseeing the Ethereum blockchain is both its central appeal and its Achilles heel, since it leaves unanswered questions about what happens in the event of disputes. This is particularly acute where the blockchain is linked to artworks in the physical world. When that fire rips through the luxury apartment, who is in charge of telling the blockchain that the items in question are gone? “If a trusted party is required to do that, then how decentralised is the system really, and how different is it from doing it the old-fashioned way?” asks Hall.
The need for expertise in navigating these dangerous shoals means, for the time being at least, that dealers and auction houses are likely to have a role to play. Gleises also believes they have other reasons to keep a tight grip on the market. “There are plenty of intermediaries who don’t have any interest in change. It’s a very small market, and very profitable for some. Who is going to be willing to let go of some of the margin for the market to grow?”