I’m sure you’re wondering how art and fintech are related. At a first glance, it seems like an odd combination of “art” and “fintech”. However, let’s first discuss the concept of investing in art.
Investing in Art
The collection of art is one that dates back as far as the ancient Greeks; however, it was only in 1904 that the first modern art investment fund was formed in Paris. At first glance one can think that art is a sentimental purchase, however, it can possess greater value in the long run than some might expect. In the long run, art as an asset has a store value that generates quite modest returns. But the difference is that it is less influenced by stocks and bonds which fluctuate a lot. So, in the short term, buying art might not seem like a great asset, but it can constitute the forming of generational wealth.
Blending Art and -Tech 🎨
So how do art and fintech interact together? In recent years the art industry has relied on social media, word of mouth, or other more traditional methods. Those are slowly proving to be outdated. Hence, galleries and auction houses are seeking to increase and improve their online strategies. That trend was only accelerated when COVID-19 broke out.
Throughout this transition of the art world, digitalisation and analytics have had an impact on how institutions approach connecting with collectors. Innovative tech solutions and digital opportunities have risen in consequence. This doesn’t simply relate to the times we live in, but also the fact that millennials have had an increasing interest in collecting fine art.
In order to reach the newer and younger generation that is more tech-dependent, dealers must constantly be aware of who among their customers purchases the most art, what the most marketable price point for an artwork is, which of their sales performs best, perform KYC, store, automate operational processes, and the list goes on. All of this is now expected to be done in real-time requiring more technological input than in the past.
The Art of Blockchain
One of the great challenges in the art world is that of authenticity and tracking rightful ownership. Blockchain can alleviate the pains that come with the trade of art. There are several companies that focus on the authentication and tracking of such artworks. Let me explain to you how it works, but first make sure to have a quick revision on blockchain.
How it actually works?
Let’s say an artist creates a new and original art piece, he can through blockchain technology authenticate and protect his artwork. The registered piece of art will contain all the information required, for example, title, size, location, and signature. Once registered the artist receives a token that proves its authenticity and ownership. Then once tokenised it is added to the blockchain (the ledger), in a list of all transactions chained together.
This principle is not exclusive to new art but also already pre-existing older art pieces. The idea behind it is that you can keep secure track of your artwork so that nobody can claim to have purchased it somewhere and claim it to be the original. You possess the token, and as such ownership, can track its history of owners (if there are), proof of authenticity, and all other factors that prove it belongs to the owner of the current token.
The benefit of blockchain technology is that of security regarding the art, reliable database information, and easier access to auctions. It creates a democratised market that is secure, brings transparency and is an open platform. To quote Arternal: “ArtTech will continue to disrupt the art industry as it joins the ranks of “-tech” disruptors”.