Implementing the blockchain technology remains nothing more than an experiment for the Russian art market. Art industry representatives believe that the main obstacle for wider use of blockchain is the fact that Russian investors are not ready for such a long investment horizon. Will technologies open the market for new, sometimes non-professional, players? Does the industry need blockchain, cryptocurrencies and tokenization? Participants of UNBLOCK ART, a conference on May 17 that preceded the DA!MOSCOW new international modern art show at Gostiny Dvor, will answer these and other questions.
Prospects of using the blockchain technology for registering artwork property rights or creating a distributed registry for the art market have often been questioned. This time, experts are also skeptical. They question the openness and transparency that will be brought to the market by the new technology. However, market players may not be ready for this new development.
“The specifics of the art market is that there is plenty of insider and private information. Of course, it is not as strict as the arms market. However, it also disagrees with the blockchain technology,” explained Vladimir Ovcharenko, founder of DA!MOSCOW and one of the first private modern art galleries, OVCHARENKO, and the VLADEY modern art auction.
Art market participants monitor the development of the technology, but the thing is that they are still doubtful about technological innovations, especially when it comes to profits. Sotheby’s invested dozens of millions of dollars in digital projects, but they are still used as auxiliary services, for instance at online auctions, that is, they support traditional sales.
Experts are also skeptical about the new ways of investing in art objects that blockchain offers (tokenization that allows for dividing the ownership of an art object between a large number of investors), as well as the prospects of funds that provide such investments. Investing in art is not an easy process, and there are not too many examples of successful investment on the market, Ovcharenko says. On the contrary, many funds that were created for investing in the art market were not successful.
This is to a large extent related to a long investment horizon: real profits will be available only within 10-15 years. In addition, it is not easy to evaluate artwork even at to an accuracy of 10%-20%. It is often easier for investors to purchase bitcoin and keep track of it online, Ovcharenko said.
The attitude of Russian investors towards long-term investment differs drastically from the mentality of European and even Asian investors. This also can make things complicated.
“It is irrelevant whether the investments are made in eurobonds or spot metal. In Russia, the limit for a long-term investment is two years and a short-term’s one is only six months, while for European and American investors these limits are over 10 years and 3-5 years, respectively”, says Anaida Schneider, Founder and CEO of Tilcoin, an international project that unites blockchain platforms and investment potential of the contemporary art market.
Foreign investors feel comfortable putting money into art objects with long investment horizons, while in Russia the situation is different.
Despite the doubts concerning the prospects of using the blockchain for the art market needs, efforts are made to implement a number of projects that utilize the new technology. They are mostly related to contemporary art, where the owner’s personality is not so relevant. For instance, Chinese artist Ai Weiwei and Irish artist Kevin Abosch joined forces to create Priceless, a work of art that uses the Ethereum blockchain. The Priceless tokens are purchased not only by private collectors but also by museums, said Georg Bak Fine Art Services curator Georg Bak. The industry players see prospects for digital collectibles as well, the most glaring example being an Ethereum-based collectible game CryptoKitties, whose price amounted to $175,000, Georg Bak reminded.
The technology could help solve the contemporary art’s provenance issue in the future.
“Blockchain can make the contemporary art market more or less transparent. As a client-oriented gallerist, I want my clients to understand what they bought, where, at what price, and where this piece of art was created”, says Yekaterina Vasilyeva, founder of Zurich-based Kate Vass Galerie.
Using blockchain to create a register of contemporary art objects would allow avoiding fraud and counterfeits, a problem that many beginning collectors face, agrees Anaida Schneider, adding that these efforts could also regulate price formation. In the future, art object tokenization could not only attract new investors who are willing to put money into the art but have limited financial opportunities, but also become a new source of financing for traditional museums. Anaida Schneider cited the last year’s situation with the US-based La Salle University Art Museum, which had to sell part of its artworks collection. Tokenization of art objects could be a solution.
By Olga Blinova