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  • Writer's pictureElvis Yeung

The Disruption of the Fine Art Industry by Blockchain Technology

The fine art industry has historically been a capricious arena of the rich. Fine art has been traded and speculated upon since the early medieval period and is considered a legitimate, investable asset that attracts wealthy buyers to spend tens of millions of dollars on the world’s most valuable artworks. However, the fine art industry has been threatened by sophisticated technological forgeries, millions worth of fine arts can be forged and deceive the eyes of art appraisers. For example, the $11 million sale of a "Frans Hals the Elder" portrait by Sotheby’s, one of the world's largest brokers of fine art, was revealed to be a synthetic fake demonstrates the potential of forgeries to delegitimize even the most authorized art auction houses in the fine art industry. Forgeries also contaminate the provenance records, leading paintings to falsely gain or lose value at the expense of the artist, investor, and auction house. This is not only the case in the physical fine art industry but also in the digital age. Under the vital spreading of the internet, the ownership and distribution of digital art quickly became a major headache for all digital artists. Digital works, no matter art, song, or video, are easy to be copied and circulated without proof of provenance. In this vicious circle, the value of digital artworks is plummeted and is discouraged without any methods to prevent piracy or prove ownership. Although such depressing events keep happening in the fine art industry, artists are often the earliest adopters of emerging technology and mediums to keep developing and evolving their artistic world. This exposes artists and the entire fine art industry to the opportunity of blockchain technology — NFTs can completely rewire the establishment of fine art, reshaping the ecosystem of the contemporary fine art industry.

Frans Hals, Portrait of a Man, one of a series of Old Master works sold by a French dealer that authorities now believe may be forgeries.

Before the implementation of blockchain technology, registering, reselling, and transferring ownership of artworks was an entirely paper-driven process. All the auction houses, art galleries, and museums conducted provenance manually without an integrated procedure, causing lengthy, expensive, and error-prone processes. Compared to the fickle and human-error-riddled record-keeping of today’s art auction houses, blockchain is an unparalleled stabilizer. The transactions recorded through blockchain generate hashes, patterns of numbers, and letters that protect against forgeries. After a hash is created, the nodes verify the hash, write a block, and spread a copy of the blockchain amongst numerous different computers. Records created through blockchain are impossible to erase, and faking a block requires enough computer power to fool thousands of nodes, a feat that is essentially impossible and expensive. This irreversible technology offers the traceability of artworks worldwide which the art archives have never expected before. From now, the auction houses and the buyers can track the complete journey of fine art, a sculpture, or any valuable object, from its creation to its final destination. This would lead to a more transparent marketplace where the buyers can be confident that art is sold by a reputable source to cut down on art counterfeiting and fraud, as well as increase security and make the processes of buying, selling, and authenticating art more efficient.

In the traditional fine art market, middlemen hold most of the power to operate an auction and transaction while depriving the profitability and authority of independent artists. Indeed, it is no doubt that middlemen do have an influence on aggregating fine art buyers and help expose the name of the potential artists in the industry much more easily. However, due to excessive and additional physical operations and costs, the middlemen may charge exorbitant fees of up to 40% for often what is a highly time-consuming process. Some of the dealers on the Forbes list can even earn almost 1 billion dollars a year from the sale of artworks. As such, traditional fine art markets have always been an exclusive club for the elite and the rich at all times, making it impossible for small retail investors to invest in fine art collectibles. Meanwhile, independent artists cannot gain back what they deserve by spending months or years on their fine art creations. The artists are required to provide commissions for the agents.

Blockchain and NFT, however, can restore an element of egalitarianism and reshape the now opaque fine art industry. Initiatives based on NFT applications and smart contracts will give artists back control of their works. In this way, they will be able to show or sell their work to potential buyers in a secure cyber environment and at profitable prices without any physical confirmation and support from intermediaries-- all the transactions are made by cryptocurrencies and recorded on the transparent and traceable blockchain. Fine art is no longer a Mecca for the wealthy. By eliminating the unnecessary cost and digitizing transactions and arts on the blockchain, it becomes much easier for anybody from anywhere globally to purchase artworks from the artist directly at a much more reasonable price.

What's more, a legitimate record of fine art auction sales and trading would allow for royalties to be earned. Artists can automatically collect a percentage-based royalty on each sale until this innovative technology disappears. No one, not even the auction house, can steal this promised revenue from the art creators. What makes art valuable, is the scarcity of the form. Digital scarcity embeds new value in virtual fine art and redefines the idea of ownership of art assets. Through the protection of independent artists by the blockchain, Web 2 artists are encouraged to create their unique fine arts on blockchain to revolutionize the entire fine art industry.

Unfortunately, fine art artists are merely an artist. The difficulties they may encounter when trying to adopt blockchain technology are not easily solved by just swiping their paintbrushes. Unlike digital artists who are skillful in technology and eager to express their art in a modernized solution, traditional fine art artists may not have the techniques to join this contemporary art trend and regain back their original right in the fine art industry. At the same time, those intermediaries, such as auction houses and galleries, may have already realized that the importance of their position in the art ecosystem keeps decreasing under the intervention of NFT applications. As such, it is an excellent opportunity to reshape the relationships between traditional artists and art agents fairly.

Since blockchain and NFT are relatively new in the fine art industry, traditional artists need support from intermediates on the tech side and the capital side in order to dedicate themselves to fine art creation. Having an excellent and sharp vision of this trend, the House of Fine Art Gallery (HOFA) was the first art gallery in the world to make its entire fine art collection available in cryptocurrency in 2018 while keep developing an accessible entry point for art buyers and artists to the NFT art world.

Based on decentralization and transparency, HOFA has launched its HOFA NFT marketplace as the platform to accept multiple forms of fine art creation. The emergence of such a high-quality NFT marketplace has encouraged many digital art creators who were under the shadow of traditional fine arts before and provided a gateway for them to express their artistic minds under a modernized solution. For example, 25m42, a self-taught 3D and pure Web 3 artist, has impressed a lot of art lovers and redefined the standard of NFT fine art by using his detailed unique oriented style to craft highly-detailed photo-realistic images.

25m42, Atalanta NFT

Apart from offering a shining place for original Web 3 artists, traditional fine art creators also get assistance to take their first step into blockchain without any burdens or technical concerns. Instead of keep profiting from traditional art auctions, the HOFA team has abandoned the physical business behavior and put the entire fine art auction on the chain to return the maximum profits to the people actually making the art. Just two months ago, HOFA held a triumphant Web 3 art auction for Jan Kaláb's artwork with sales of 1,888,888 ARTEM, a governance token of HOFA which was equivalent to around 18 thousand USDT of the sale on the day of the auction. The team helped this traditional Web 2 artist to create an NFT version of the art thereafter the winning bidder could receive both physical art and NFT, as proof of provenience and ownership recorded on the blockchain. HOFA demonstrated a groundbreaking integration between physical art and NFT art in the art auction ecosystem, facilitating the adoption of the blockchain in the fine art industry under the reference of this remarkable cooperation.

Jan Kaláb, Orange Glow in Blue Field 622 sold for 1,888,888 ARTEM

Developers are constantly inventing new things to do with your digital assets. By applying tokenization to revolutionize the fine art industry, there is no reason for HOFA to only stay on the traditional practices of fine art. Your digital art need not just live on a wall, either, but can integrate into other experiences. Hereby, HOFA has broken the geographical limitation, putting the NFT fine arts in the highest quality virtual art gallery. Visitors can get ready with their VR equipment and walk freely on the art metaverse to experience and enjoy the details and effects of every single piece of digital fine art. The arts can even guide the visitors into the marketplace of the arts for purchase. In the coming months, the HOFA team will launch the DAO program by using unique art NFTs as a membership to grant access to VIP events and voting rights on acquisitions. Committing to decentralizing the fine art industry, the profits from the HOFA art sales are even distributed via a smart contract to all the DAO members. The team will also take responsibility for art education through the Learn to Earn program to return fine art accessible to the general public. As time goes on and you can do more with the fine art NFTs, they’ll grow ever more valuable.

Virtual Reality HOFA Art Exhibitions

As a step towards this promised land, the story of fine art development will last forever and cannot be censored or corrupted under the decentralized and immutable nature of blockchain technology. The misery of fine art artists since medieval times needs to be stopped from now on, returning fine art to everybody who truly loves art. While the full adoption of blockchain in the art industry might take time, under the significant progress of HOFA, it is anticipated to witness enormous progress in the fine art industry shortly.

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