Blockchain, Bitcoin, Cryptocurrency… within a short space of time, these terms have risen to the forefront of discussions about the future of technology in business, finance, government and life. Their emergence has been met with wide-ranging reactions, from alarmist objections to fervent excitement. So what does this new digital technology mean for the art world?
After some initial hype, the art market’s interest in blockchain technology has dipped, with the latest Hiscox Online Art Report labeling its emergence as “a bit of a damp squib.” Skeptics continue to view the technology as a new Eldorado, speculating on its potential to encourage illegal activity. Similarly, traditional art buyers harbor concerns for transparency, and feel they lack clear guidelines on how to buy art using cryptocurrencies. Even some art experts remain uncertain about both the possibilities and implications of new technology.
But this uncertainty is largely unfounded, according to Guillaume Simon, Chief Technical Officer at Singulart – an online art gallery and pioneer in the digital art industry. Blockchain technology was integrated into Singulart’s payment system as early as December 2017, meaning artworks can now be purchased not only in traditional currencies such as dollars or euros, but also in the Bitcoin cryptocurrency. Simon believes buying art in Bitcoin has benefits for art galleries, artists and buyers alike. So what are these advantages? Are there residual transactional risks for buyers? And how does buying art with Bitcoin actually work?
What is a blockchain?
What are we actually talking about when we refer to a ‘blockchain’? Is is the same thing as a ‘bitcoin’? Is it a single entity or a small part of a big network? To best understand its arrival on the art scene, let’s briefly revisit the term itself.
A fairly young technology, a blockchain is a digital ledger that allows for the movement of cryptocurrencies like Bitcoin. It consists of continuously expandable data blocks which are cryptographically linked together. All transactions made in the blockchain (e.g. bitcoins, title deeds and bills of lading) are recorded transparently. In this way, it can be thought of as a digital public cash book. Unlike traditional databases, a blockchain is not centrally managed but rather shared by all users, stored on thousands of computers with each owning a copy. Currently, blockchain technology is primarily used by innovative companies in the finance and logistics sectors. More recently, however, it has begun to appear in the art industry.
Bitcoins: Investing in a transparent future?
Openness, independence, transparency, anti-counterfeiting security and transactional ease are among the biggest benefits of blockchains for use in the art industry.
Blockchain technology is an open peer-to-peer network – anyone with hardware can install the blockchain and access the source code. Because all participating users can then directly exchange with all data on the network, with each successfully executed transaction recorded and saved, a blockchain is virtually forgery-proof. Even works of art – including catalog information, certificates of authenticity, provenances and all sales prices – can be registered in the blockchain and art sales recorded transparently, like a digital safe for all information.
So far, this technology has only been used by highly innovative actors in the art market. As Singulart CTO Simon sees it, “The art market is still dominated by just a few actors. Market prices are sometimes artificially and unclearly driven up, obscuring sales information. This leaves a lot to be improved on in terms of transparency and participation, and blockchain technology is a good start.”
In addition, a blockchain offers opportunities to create complete, incorruptible provenances of artworks to confirm their authenticity. Of course, all data is only as good as its sources – strictly speaking, only living artists (if any) can authenticate their artworks. This makes things difficult for anyone hoping to hunt down those Picasso fakes once and for all, but an exciting prospect for future masters and aficionados. And there are already attempts to introduce “passports” and “digital fingerprints” for both artworks and artists as alternatives to personal proofs of authenticity. Future forgers, beware!
Moreover, while there are concerns over the potential anonymity of cryptocurrency users who could render the art market prone to fraud, blockchain technology allows for the authenticity of each transaction to be secured by a digital signature and the address of the sender. Such data must and has been disclosed, for example, during police investigations within the EU. Bitcoin is subject to regulations similar to those of traditional financial transaction systems and is designed largely to prevent financial crime.
Balancing Bitcoin’s validity and volatility
One major and oft-cited disadvantage of Bitcoin is its volatility. Since the Bitcoin market is still relatively small, even minor transactions can trigger large price movements. The result: the value of a Bitcoin changes rapidly. Between December 2017 and February 2018 alone, the price of a Bitcoin fell by 80 percent, from $20,000 to $3,600 (source: Hiscox). This makes it comparatively risky for galleries, auction houses and other industry players to accept or use Bitcoin as a means of payment. For buyers, however, the risk can be remedied by acquiring Bitcoin shortly before purchasing a work of art. By using Bitcoin, the buyer gains the aforementioned benefits of the non-erasable and non-falsifiable verifiability and traceability of the transaction.
On a practical level, processing Bitcoin payments still consumes a lot of time and energy. Each action must be validated by a blockchain user machine – this validation process is called mining and requires significant computing power. Transaction fees are also required to offset the high energy costs, but for private individuals, there are no costs for opening a Bitcoin account and using the system.
Buy art with Bitcoin on Singulart
Singulart, the exciting international gallery on its way to prominent status in the digital art industry, is currently one of the few such platforms to accept Bitcoin transactions. Vincent Bardou’s painting ‘The King of Street Art’ was the art marketplace’s first sale made with Bitcoin, processed just a few days ago.
It’s easy to follow in this collector’s forward-thinking footsteps; buying a piece of art in Bitcoin on Singulart is no more complicated than paying with non-digital money. When a customer has their heart set on an artwork, they can choose between different payment options in their shopping cart, and must agree to the terms of payment. Once having chosen to pay in Bitcoin, a QR code then appears containing the most important data for payment processing: the public address of the recipient account (Singulart) and the transfer amount. The customer scans the QR code using their mobile phone camera, and the wallet immediately reads the Bitcoin address (the long code consisting of letters and numbers; see above image.) Finally, the buyer must confirm the purchase amount. Here, validation of the transaction (mining) can take up to 10 minutes. To minimize the customer’s waiting time, Singulart only waits for confirmation that the blockchain is ready for mining. Once this confirmation arrives, the customer’s payment is considered successful – purchase complete and mission accomplished!
Protected purchases on an international scale
Ease of payment and participation in technological innovations is exciting, but what about privacy? How do we make sure to keep a tight net in an ever-widening web? Prospective collectors can rest assured that payment in Bitcoin is protected by governing bodies and strict consumer and data laws.
Looking specifically to Singulart, as a Paris-based company, it’s bound by the EU General Data Protection Regulation (GDPR) and the know-your-customer principle (KYC). This means that each customer is free to allow or prohibit tracking cookies when browsing on Singulart, with modifications to privacy settings accessible here. All required Bitcoin transaction fees are paid for by Singulart – with no fees for the buyer; in fact, customers who pay in Bitcoin will receive an automatic discount of 5% off every piece of art. Additionally, just as payments are made with the same level of privacy as non-digital currencies, refunds are also processed identically. In the rare case of artwork damage or returns, customers are reimbursed in Bitcoin, in the same amount as before.
With the integration of Blockchain, Singulart also hopes to expand its customer profile. The typical Bitcoin user is young and tech-savvy – the new generation of digital natives that increasingly form the targeted clientele for companies across the globe. For Singulart, an energetic and thriving company, implementing blockchain technology represents an exciting investment in the future.