Over the weekend, two publications with expertise in markets, economics and enterprises published short items on the use of the potential use of the blockchain to improve art market transactions. Unfortunately, neither item seems have gotten past the most superficial understanding of blockchains—let alone the relationship between the art market and blockchains that we’ve previously dubbed Art-coin.
Many see art as the last unregulated market; crypto-currencies such as bitcoin, which permanently record transactions on an open-source database called a blockchain, could resolve concerns about access, transparency and authentication.
Of course, the art market is far from unregulated. The issue with the art market is that it is regulated locally where the transactions take place but not globally where the art often travels. Art transactions are regulated through the global banking system. And much of what observers call ‘regulation’ in the art market is really wishing for standards of authentication and scholarship that are also local, not global.
The Financial Times goes a step further. Not only does it repeat the misguided comparison of the blockchain to a database—particularly curious when the item links to an FT explainer on the blockchain that explicitly says, “The blockchain is a protocol and does not have the ability to identify parties”—the FT gets lost inside its own mostly-right-but-possibly-for-the-wrong-reasons analysis of the problem.
The potential for the quirky art market seems embryonic at best, despite a thirst for more reliable information. Data are only as good as the person who enters them — plus, according to the Tefaf report, 20 per cent of 673 dealers have no intention even of moving online, so sophisticated fintech solutions seem a long way off.
In short, the idea of the blockchain—when properly understood—is right for the art market. The problems lie first in the blockchain proving itself as a technology. Lots of smart persons are working on this at the moment in a wide-array of domains. Second, with a proven blockchain, there remains a substantial implementation problem in the art market which the FT points to but doesn’t seem to fully understand.
More to the point of the Economist’s observation is that describing the blockchain as a kind of open-source database isn’t really accurate and the use of the database metaphor suggests a kind of transparency that the art market isn’t really looking for, no matter what the chatter around the art market says. (AMMpro subscribers can read our discussion of the relevant issues below.)Continue Reading