Blockchain: A potential Tool for Art Market Transparency and Protection of Artists' Rights

Blockchain, not to be confused with cryptocurrency, is a big database for the management of cryptographic transactions on a decentralised network. Transactions through these networks can be made anonymously by the account holders. This system assures the traceability of the transactions without the intervention of intermediaries and lets the market be more transparent and efficient. Thus blockchain has the potential to eliminate paper trail, which is easily replicable, lost or destroyed.

What does blockchain have to do with art?

The art market is known for its opacity. Most of the transactions are private, meaning that, apart from the parties, no one knows which are the current prices of the artworks sold privately. So it becomes difficult to trace the value of an artwork. In this context, blockchain could be a useful tool. By developing this system, it creates a digital certification for each artwork which contains all the information related to the artwork (provenance, condition, price), verified by experts and market operators who are responsible for the veracity and authenticity of information. After that, the certificates are inserted in the network in such a way that they are not modifiable (by connecting each transaction to the previous) and in order for data to be visible to everyone. Information can be modified only by a certified authority.

The advantages of this technology are of course the security of artworks provenance, the traceability of their value together with the possibility for the holder to not reveal his or her identity (a truly important aspect in the art market).  Thus it ensures the protection of contemporary artists’ (and of his or her heirs) rights. The Directive 2001/84/CE, which was implemented in Italy thanks to the Dlgs n.118 of 13/02/2006, introduced the so-called resale right (“droit de suite”). The resale right is the right of the author of figurative arts and manuscripts to receive a percentage of the selling price at each transaction, based on the amount and the value given to the artwork and incorporated in the price (similar to royalties in the music industry). In particular:

• 4% for prices between € 3,000.00 and € 50,000.00

• 3% for prices between € 50,000.00 and € 200,000.00

• 1% for prices between € 200,000.00 and € 350,000.00

• 0,5% for prices between € 350,000.00 and € 500,000.00

• 0,25% for prices higher than € 500,000.00

The seller will handle the compensation of the artist, and will only be practiced if done by professional public entities (such as auction houses). Transactions solely between private actors are not included. Considering that, as said before, private transactions are a big part of the art market, this right is only partially exercisable. And artists, whose artworks are sold privately, can’t receive a compensation on subsequent transactions, so they don’t have any recognition for the potential growth in value of the artwork, that it is likely to happen over time. Again, blockchain is the solution to the problem. The system, by allowing in a safe way to trace transactions and prices of the artworks, allows artists to exercise their resale right, and to enjoy the possible appreciation of their art.

That’s why start-ups such as Gioconda-Labs and Verisart (platforms for digital certification of artworks) are emerging. Moreover, operators such as Deloitte Luxembourg and the online auction house Paddle8 (through the project Bidcoin in partnership with The Native, a society that deals with e-commerce, marketing and technology services), are working on a traceability system for artworks.

Just recently, on November 13th 2018, the Barney A. Ebsworth Collection sale at the Christie’s auction house in New York raised a total of $317,801,250.00, in the process becoming the most valuable art auction to ever to be recorded on a blockchain. Christie’s revealed that the auction was handled in partnership with art-focused technology provider Artory, using its permissioned Ethereum blockchain to host the auction information.

However, the interest raised from the blockchain technology contains in itself a problem: the formation of several platforms that use the same technology, but are not interconnected. Could the creation of a unique system be the next step?