How Blockchain makes Art Market Safer for Clients?- Varun

How Blockchain makes the art market safer for clients?

What do stats show?

The art market is booming and investors are jumping in. The global art industry recorded $63.7 billion dollars in sales last year, a 12% increase from 2017, according to the 2018 TEFAF Art Market report. The art market is now growing faster than both corporate bond yields and small-cap U.S. companies. While we may be living in a golden age of art, potential clients looking to invest in alternative investments are spooked by the art industry’s lack of regulation and the risks of fraud. 

Can Blockchain provide an answer to this situation?

Of-course, Blockchain may provide an answer.

Adopting blockchain technology offers the art industry an opportunity to ameliorate the drawbacks of its opacity while retaining the benefits of an unregulated structure. As fine art matures into a formidable asset class, it is imperative for advisors to understand how new technologies are updating the art industry, and more specifically, how blockchain can protect their clients from future frauds.

What does Art Industry lacking?

Currently, the art world’s lack of an adequate regulatory structure fosters a system of opaque exchange that is prone to abuse. Fraud and price manipulation are particularly endemic in the art industry, deterring many potential investors from entering the market and ultimately stunting art’s growth into a formidable asset class. Another problem with the art industry’s unregulated structure is a lack of product information. That can cause buyers to routinely misunderstand their investment risks. These information asymmetries will only increase as art becomes more accessible through fractional ownership platforms and other wealth management strategies.

Blockchain, however, can ameliorate these issues by allowing stakeholders to better assess the risks and rewards of investing in art. Access to an artwork’s relevant data points — transaction costs and artist/appraiser background — can enable investors to create more reliable valuation metrics and models for individual artworks. As a result, firms that sell the tokenization of art, such as Rally Road and Arthena, will become more credible.

Ultimately, the conclusion is

Blockchain technology offers the art industry a unique opportunity. It has the potential to serve as a panacea for an industry that is ailing from a lack of regulation. Detractors might argue that art will become a common alternative investment regardless of the adoption of blockchain technology. If true, professionals and investors alike will increasingly have to navigate the murky waters of the art world. The benefit of using blockchain, however, is to ensure that art’s transition to an asset is done in a way that is efficient, safe and lucrative for all involved.