Tokenization is changing the way investing in traditional assets work. How about the art industry? ArtSquare.io uses Blockchain-powered fractionalization to make investing in art possible and accessible for the many and not the few.
“The tokenization of assets is disrupting the financial industry. Are you ready?” asks Deloitte in the latest issue of his magazine. Asset tokenization refers to “the process of issuing Blockchain token that digitally represents a real tradable asset.” It can been applied to any real-world asset which is normally available for ownership and participation to a single individual— from buildings to art. In the art industry, tokenization is applied to turn contemporary art, collectibles and digital art from illiquid to fractional assets, opening up an unprecedented scenario of customization and flexibility in art investments.
ArtSquare.io uses tokenization and other FinTech solutions to empower the many to access the market for contemporary art and collectibles. With ArtSquare.io, a new category of users will be able to buy and trade fractions of value of artworks, that is, to invest in real-world contemporary paintings, sculptures, and other art objects and collectibles. Here’s how it all works.
ART & TECH
Investing in art can be a daunting task, and one exclusively for deep pockets. Buying blue-chip works of art often means throwing money at one single object; from a financial point of view, it means making a four- or five-digit long-term investment in a physical asset that involves tied up liquidity and management issues—for instance, the necessity to assess provenance and authenticity of the object, insure it, and manage terms of its ownership and loans.
According to Deloitte’s Art & Finance Report 2019, a new category of art buyers and forward-looking collectors have emerged thanks to the internet and are using technology to grant inclusivity and accessibility to a closed-off art world. Galleries, museums, and auction houses are turning to ArtTech solutions to respond to their call for affordability, innovation, transparency, and sharing while also fuelling the transformation of the art market into a financial space.
BLOCKCHAIN & THE ART MARKET
To put it succinctly, Blockchain is a technology for encrypting information that can also be used to issue digitally-based equity of any type of assets and to make the fractional ownership thereof secure, immutable and legally binding.
While the case for the positive consequences of Blockchain and tokenization is still up for debate, the changes that fractional ownership of art is bringing about are undeniable. They include greater liquidity, faster and cheaper transactions, and more transparency and accessibility.
Blockchain is changing for the better the way we trace data and manage provenance, authenticity and condition reports of artworks. At the same time, it is creating new possibilities for both sellers and buyers of art: it allows galleries and private collectors to expand their client base and reach small and retail investors and enabling even regular art enthusiasts to participate in the art market for the first time.
According to Dr Clare McAndrew’s 2019 UBS & Art Basel Art Market report, the global art market totaled $67.4 billion in 2018, up from $62 billion in 2008 and up 6% year-on-year. The incessant growth was led by the top end of the industry, with high-end private galleries and auction houses contributing —respectively— to 43% and 57% of transactions. [1] When looking at inflation rates over the past ten years, however, the picture emerges of a shrinking art market which is in the hands of a very small group of wealthy people.
By buying fractions of artworks instead of paying for the whole objects, low-net-worth individuals can take part in a type of investment they were traditionally excluded from. On one hand, it prevents investors from tying up a huge amount of money to a single object at the time; on the other, it disrupts the traditional art ownership system by turning art into an asset for the many and not the few. The advent of Blockchain means that you can invest in a masterpiece with fifty bucks.
FRACTIONAL OWNERSHIP ON ARTSQUARE.IO
ArtSquare.io allows anyone, from retail investors to art enthusiasts, to buy fractional shares in gallery-quality artworks from as little as € 1. We work with galleries and advisors in selecting works of art by masters of contemporary art, such as Andy Warhol, Keith Haring and Alighiero Boetti, and use Blockchain to issue digital shares that represent fractions of their value. We call these tokens Digital Art Shares; they are unique to each artwork. With ArtSquare.io, you can create a Portfolio of by purchasing multiple Digital Art Shares in different artworks and earn from it. How?
Earnings that derive from a Portfolio of Digital Art Shares are not unlike traditional investment returns from equity in conventional businesses. When the artwork you’ve invested in is sold in real-life by its real-life owner (a gallery or a private collectors), you will get your dividends which you can cash out or re-use to buy Digital Art Shares.
But there’s more. ArtSquare.io is in the process of creating a digital stock exchange for art, the ArtSquare Exchange, where the expanded network of art investors can trade their shares easily and safely.
You can now fill your Portfolio with fractional shares in exciting works by leaders of the Pop Art movement and one of the most interesting conceptual artist that Italy has ever known. Sign up to ArtSquare and start your Portfolio—it’s free.
