On the one hand, there are the sales platforms that act as art providers on the Internet: These companies buy artworks, paintings or sculptures themselves and invest millions for them. Basically, these platforms are in the role of art collectors. The only difference is that they don’t stop at collecting, but offer the art for sale right away.
The large public should buy art tokens
For example, a painting by Picasso. The platform offers the painting to all of us on its homepage. What is meant by “all of us” is the following: It is not the wealthy and rich art patrons who are in demand. But the large public in America, England and worldwide. They have less money available for investments and have not yet invested in art. So the platform is now offering the Picasso to the large public via tokenization technology and the blockchain. And it does so “piecemeal”: many small investors can purchase a share in the painting for as little as a few dollars.
Tokenization: a new form of art investment
For example, on the marketplace of Finexity, based in Hamburg. For as little as 500 euros, you can own a painting by Andy Warhol or Keith Haring there – not as a whole, but a part of it. Together with other investors. They all profit from tokenization, a new form of art investment. A market for tokenized art is also emerging in America, England and around the world.
Tokenization works as follows for most platforms:
- First, the tokenization platform initiates curation: specialists search the market for suitable artworks. This is followed by due diligence.
- Investors can see the details of the painting, its history, the condition report. This also includes high-resolution images of the artwork and its full provenance.
- Tokenization follows: “asset tokens” are minted to represent shared ownership of the artwork. In this process, a work of art is virtually “chopped up” into small parts and tokenized via the blockchain to the market.
- 1 token corresponds to 1 euro, for example. The Andy Warhol painting “Cow” (1971) costs 25,000 euros. If one acquires 500 tokens, one owns a small share of this work of art accordingly.
- If the value of the painting increases over the years, you participate in the profit as an investor. After a certain period of time, you can sell your tokens to an interested buyer via the platform and receive the equivalent value back in euros.
Warning of loss through crypto art
But there is also the threat of loss: consumer protectionists warn against risky investments and non-transparent platforms on the Internet. A work of art can lose value, returns are not guaranteed. The danger: a plus of 6% quickly turns into a minus of 10%. Crypto art also calls scammers on the scene, who want to pull inexperienced small investors over the table. The established platform Finexity focuses on transparency. According to its own website, it offers investors to view the unique art pieces on site by appointment.
Artists offer art NFTs
Artists can also offer their artworks themselves and sell them tokenized. They do this by making their artwork a so-called “NFT” – a Non Fungible Token. This is a unique “non-replaceable” cryptographic token. It’s generated via the blockchain, unique, and neither replaceable nor replicable.
In other words, American or English artists can make a digital NFT artwork out of an analog one. Older artists are also joining in the digital development and report on their experiences with art NFTs. But how do you create the digital artworks? In simplified terms, it’s as follows:
- The artist first takes a photo, for example, of a painting he or she has done.
- Or the artist creates the artwork digitally – materially it never exists. For example, an illustration, a video, 3D model or an artistically decorated photo.
- The digital file could now be copied any number of times without anyone noticing any difference.
- Now, blockchain technology generates an NFT token from the artwork file. The token has a unique, almost forgery-proof signature – this makes it a digital original.
- The artist can now offer this NFT for sale on a sales platform.
We are not addressing art experts – but people who may be investing in art for the first time.Marcelo García Casil, founder and CEO of Maecenas. Expert at Oxford University’s fintech program.
FAQ – Frequently Asked Questions
For example, anyone who buys a share in a tokenized artwork from the art trading platform Maecenas invests in asset tokens. These are secure blockchain tokens with Ethereum ERC20 standard. The ERC20 protocol ensures that art tokens are compatible with Ethereum. One can store them on popular crypto wallets and trade them on global crypto exchanges.
No. Since financial institutions do not usually classify art as “investment class”, they cannot charge portfolio management fees. Therefore, they have no incentive to inform their customers about potentially lucrative investment opportunities in art.
As an investor, you know what you’re getting for your investment. There are no middlemen, commissions or fees from auction houses or galleries. The art market is historically opaque with little to no price transparency. It is an unregulated and inefficient market with no registrars and no standard protections for investors. Factors determining value – title, authenticity, attribution – are difficult to determine.
NFT trading platforms for artworks
NFT’s can be posted and traded on platforms such as opensea.io or superrare.co. Selling prices range from cents to several thousand euros. One of the world’s leading platforms is Maecenas. This blockchain-based platform allows people to buy, sell, and trade partial ownership of art on the liquid exchange. Maecenas CEO Marcelo Garcia-Casil told CNN, “We’re not targeting art experts – but people who may be investing in art for the first time.” For them, he said, this is effectively their first stock market experience.
Asset tokens are like stocks for artwork
Maecenas chunks multimillion-dollar artworks into “asset tokens.” Buying an asset token is like buying a stock in a work of art. “These platforms kind of act like galleries. Except no one there has ever studied art. But they control who puts what art up for sale,” says New York artist Kenny Schachter. He is a curator, art critic, artist and columnist all in one, and has been making digital art since the early 1990s.
Are digital files really still art?
But are digitally tradable files still art? “To me, there’s no difference between a painting, a sculpture and a file,” Schachter says. “Some is good, some is not. Art is art. Period.” Critical art enthusiasts, however, complain that NFTs can’t be exhibited and shown for real. For Schachter, such objections are inaccurate. “You can buy an NFT and print it out. That way you can still hang the NFT painting on the wall as a digital work.”
To me there is no difference between a painting, a sculpture and a file. Art is art. Period.Kenny Schachter, NFT and digital artist, curator and columnist in New York and Zurich
Contact from artist to investor is more direct
A new, exciting market is opening up for art collectors. This is because more and more established artists are discovering the possibility of generating art NFT. The contact between collectors, investors and artists becomes more direct through NFT platforms. Even big-name artists don’t want to miss the tokenization bandwagon. The analog and tokenized art markets are likely to influence each other.
But there are critics of the NFT hype, such as Max Hollein, director of the Metropolitan Museum in New York City. “The mega-deals with digital artworks serve mainly as propaganda for gambling with cryptocurrencies,” Hollein tells the press. He has yet to see an art collector buy millions of NFTs with cryptocurrencies.
The opportunities of tokenization for artistsFor many artists, entirely new opportunities are emerging. They can post their offerings directly on NFT trading platforms. Suddenly, artworks that have not found their way into a museum find a large audience. The value of NFT art can increase, even without the absolution of the "official" art business. Traditional auction houses are not involved. They charge up to 25% commission for the sale. Galleries up to 50%. In contrast, the fees of, for example, the NFT art platform Maecenas are only 1% for buyers and 8% for sellers. Moreover, Maecenas has no storage fees and no lock-up periods. Blockchain technology makes art trading more secure and transparent. In America, NFT art is experiencing a real boom. Many are already talking about a "democratization" of the art market. But tokenization also offers opportunities to artists in America, England, and around the world. Self-conscious decisions are possible, without the dictates of curators. "Unlike the commonly hierarchical art world, it's now possible for every artist to sell their art themselves," says Kenny Schachter. "Much like Instagram, NFTs are democratizing the art world."