Q&A: How Blockchain Could Transform the Art Industry

The art world has had a tough time lately. The coronavirus pandemic has forced many galleries and museums to close, with sales of premium pieces also affected.

But there could be a solution that helps the industry get back on its feet and achieve much-needed digitization: blockchain. Here, we talk to Niko Kipouros, founder and CEO of 4ARTechnologies, about how this technology could transform the way we purchase and own artwork — and even ensure that the provenance and authenticity of masterpieces are never doubted.

1. What are the biggest challenges facing the art industry right now?

The surge of the COVID-19 pandemic shuttered galleries and museums, while exhibitions, art fairs and auctions have either been postponed or moved online. The art world ground to a halt. It became immediately visible that all players in the art market are vulnerable to physical distancing measures implemented to slow down the spread of the pandemic. If people are not allowed to leave their homes or attend big events, then what is left of the business models of exhibitions, art fairs and auctions?

Everyone in the industry is now aware that the art market as we know it will never return. Digital tools can help us overcome restrictions on physical operations.

2. Can blockchain solve any of these issues? Does the art industry really need blockchain?

Blockchain opened the space within the existing art system. What blockchain brings to the art industry is unprecedented security and accountability, along with introducing decentralization on an institutional level.

Operating in the sphere of art, blockchain allows for the decentralized, immutable storage of data and documentation while enabling the automation of many daily art handling tasks.

The technology can’t do it alone, but it provides a secure, verified information foundation on which solutions and services can be built.

3. How does the tokenization of art work? Does this mean that an everyday consumer could partly own a renowned masterpiece?

The tokenization of an asset — in our case, an art piece — makes it available to be traded and handled digitally. Artworks can be tokenized in two different ways: either a single token per art object or multiple tokens to allow for fractionalized ownership.

The single token option is only relevant for art collectors and those who want to better manage their collection. Far more groups, from the arts as well as the finance industry, are exploring the creation of a larger number of tokens for a single artwork.

The excitement there is based on two important aspects. For one, it allows previously untradable artworks to be made available to the art market, which is especially beneficial to public institutions that continuously lack funding.

Even more interesting, an artwork can be owned by a large number of people through blockchain-based tokenization, making art and art collecting far more accessible and more democratic.

These digital frameworks also allow for completely new ways to own and enjoy art. 

In a pilot project of ours known as ARTCELS, tokenholders gain access to enjoy and share the tokenized collection in a virtual reality showroom within the 4ARTapp. We are seeing a surge in demand for these models, and we are certain that in the future, many collectors will only hold a portfolio of artwork tokens — a purely virtual collection.

Why have one piece of art on your wall when you can choose from the whole collection and enjoy it the same?

4. What else can be digitized in the art industry?

The art industry is ripe for digitization. Most of the business is still done as it was 30, 40, or even 50 years ago.

Registering artworks, creating artist catalogs, condition reporting, updating or transmitting documentation, and tracking movements: All the processes that are part of the logistics chain in the art industry can be digitized.

As we have seen in response to the COVID-19 pandemic, even major international exhibitions can be digitized. The art world is in urgent need and just waiting for creative solutions.

5. What about cryptocurrencies? Are they part of this digitization?

Cryptocurrencies offer qualities that a global market like the arts always requires: fast peer-to-peer transactions, little regard for borders and minimal losses. They also solve the double-spend problem to facilitate transactions that were previously secured by more complex, expensive escrow solutions. Or you can create automatic participation models for artists, content creators and communities so they get reimbursed for their efforts.

In the future, we will also support peer-to-peer 4ARTcoin transactions, including artwork purchases, within the 4ARTapp. Even more important are our campaigns to have other networks, galleries, museums, exhibitions and online platforms accept the 4ARTcoin. As with all of our efforts, while we may believe very strongly in its advantages, we require partners and like-minded innovators to make it happen.

6. Blockchain is difficult for many to understand. How does 4ARTechnologies plan to achieve mainstream adoption?

As with all new technologies, especially revolutionary ones, it is not necessary for users or customers to understand how they work in full detail. Very few know how most everyday devices really work, be it microwaves, cars, the internet or even currency.

What adopters of a technology are interested in are the benefits — how these innovations can provide new possibilities and solutions.

The technologies, including blockchain, that our company is deploying are cutting-edge and very complex, but the benefits — being able to store information and documents immutably, being able to automate and simplify daily tasks, and being able to communicate and transmit information securely — are easy to understand and will bring about mainstream adoption.

7. There used to be a plethora of blockchain projects in the art industry. Many of them have already disappeared. How do you set yourself apart from the competition?

Previous ventures had two major issues: a lack of reliable artwork identification and a small scope for their solutions. A digital certificate or document is essentially useless, with or without blockchain, if it cannot be directly and reliably linked to the physical artwork.

This is the first roadblock that kept other ventures from finding acceptance and success.

With the 4ARTapp, we have implemented this functionality in a way that can’t be manipulated and that does not require the object to be marked with a sticker or chip. 

If you have ever seen an art forger at work, these things would never stop them.

With our solution, we use the artwork itself as the key to its documentation and history.

To gain adoption within the art world, solutions need to be wide ranging and usable by many. Most have only focussed on the collector, and some on logistics, but essentially none on the artists. We offer benefits to all art world participants, with increasing value the more the 4ARTapp is used.

Connecting the global art community is the next big revolution, and we are happy to lead the way!

We are proud to say that 4ARTechnologies has been recognized for its vision in both the “CV VC Top 50 Report,” which lists top blockchain projects in Switzerland’s Crypto Valley, as well as in the “CV VC Global Report” as the number one blockchain project in the art industry. On Sept. 02, I will take part in a panel discussion organized by CV VC, which will be livestreamed, on the topic of how blockchain is shaping the art industry.

8. How does 4ARTechnologies’ plan for insurance work?

We have been in partnership with Munich Re, the world’s largest reinsurer, and its subsidiary Ergo Insurance for over a year. The goal of our pilot project is to create wholly new, purely digital solutions for artwork and transport insurance, based on our verification and condition reporting technologies.

Through their utilization, the individual or company looking to insure their artworks can do so quickly, easily and specific to their requirements. The insurer can significantly reduce the structural costs associated with art insurance and therefore offer far more attractive rates and services.

To give you a simple visual: An art collector uses their mobile device and the 4ARTapp to scan the microscopic surface structure of an artwork once per year. That detailed condition report, which takes mere minutes, is sent over to the insurer with all the relevant documentation within the 4ARTapp, quickly and highly securely.

The insurer does not have to use expensive experts to evaluate the condition and risk factors, rather they can do so automatically. The immense cost savings can be offered to the client in the form of favorable rates or other incentives.

The client has a better service at lower costs, and the insurer has far more accurate data on which to base its risk evaluation — a win-win situation through digitization.

9. Counterfeiting and establishing the authenticity of artworks have been big challenges for the art world. What does this platform do to address that?

The challenge of art forgery is what brought blockchain to the attention of the art world. However, without a secure link between the physical artwork and the digital information, blockchain alone cannot solve that challenge.

This is why we have developed our patented Augmented-Authentication-Technology. 

With our technology, everyone can easily and quickly create a digital fingerprint for an artwork, using nothing but a mobile device and the artwork itself.

With the identification being fast and absolutely tamper-proof, we can begin to use the capabilities provided by blockchain.

What we, or anyone, cannot solve is questionable authenticity for older artworks.

However, we have now initiated a new era of digital provenance, one where artists can register their works themselves and create a reliable, highly detailed, lossless history from the very first minute of the artwork’s existence.

For artists of today and tomorrow, the question of originality will no longer be relevant.

10. As blockchain and crypto become more widely used, where do you think the art industry will be in 10 years?

Blockchain offers a new platform for working with traditional art. This, to me, looks like a very promising partnership.

What’s more interesting and challenging is to think about what blockchain has to offer to contemporary and digital artists interested in code and data. How can it deal with new questions of authorship, copy, identity and so on?

Questions of society are always reflected and discussed in art. I am looking forward to trying to bridge this gap, and blockchain technology gives us the tools to do so.

Disclaimer. Cointelegraph does not endorse any content or product on this page. While we aim at providing you all important information that we could obtain, readers should do their own research before taking any actions related to the company and carry full responsibility for their decisions, nor this article can be considered as an investment advice.