The ripple effect created by the functional application of blockchain technology seems to know no boundaries. This disruptive innovation burst into many fields revolutionizing ways of recording, creating, storing, and trading. The world of art is no stranger to this revolution. Every day we see more news about NFTs as a new way to generate revenue.
A token is a unit of value, a digital asset, which can be used to represent different kinds of assets. Based on a smart-contract this digital representation, which can be either total or partial of the asset, is registered within a blockchain. In this way, those who operate in the market where the asset is bieng traded will be able to benefit from the advantages offered by this technology.
What is tokenized art?
If we talk about token or NFT (non fungible token), in the world of art, we refer to the digital representation of an asset that has artistic value, such as a work of art. Technically it works in a similar way as the creations of other tokens, but in this case the asset that is being digitally represented has a creative value, where uniqueness is very important. Each NFT is unique, so that the singular value of each artistic creation is recognized.
The goal is to provide the asset with a framework of security and trust. Each token follows pre-established parameters that are established in a smart-contract. Rules are set forth for the issuance, exchange, trading and possession of a token. These assets can be traded very easily. Many of the complications that tormented the art market (e.g., storing and/or moving artwork) are simply overcome. This implies lower costs.
Advantages and doubts about virtual museums and NFTs
The advantages of this technology grant the digital asset and its potential transfers security and transparency. The unalterable record of the ownership of the digital asset is a great added value. On these pillars, the art market can gain greater dynamism and liquidity.
The technical possibility of fractioning the asset representation into many small parts of that asset will allow many people who today cannot purchase an artwork to do so on a smaller scale. As time passes, like other assets, its value may increase or decrease. In this way a new speculative market is build. There are those who may decide to acquire a token as a form of investment, betting that in the long term the value will increase. This would also generate a new way of getting funding for artists, museums or galleries, which by splitting an artwork and being able to market it in parts could reach a wider audience.
However, we must emphasize that, as in other markets created around blockchain technology, there are still many doubts and challenges to overcome. We are still at a very low level of knowledge and the regulation is nearly nonexistent. We do not know when and how this regulation will arrive. Will it favor the development of the market? Will it solve the problems that exist today? The lack of protection against potential fraud is perhaps one of the most relevant struggles.
With reference to art, another challenge is the valuation of the digital asset. Valuing a work of art is complex. Probably the artistic value of a work is given by many factors ranging from the quality of the work itself, size, reputation or trajectory of the author, history of the work, the technique used for its creation, to the market demand. A high level of technical knowledge is required. Therefore, making an investment without being certain about the value of the asset being acquired is too high a risk.
In the context of these uncertainties, it is important to study the opportunities surrounding the tokenization of works of art. Seeking advice from specialists will help to understand how these projects work. In this regard, submitting an art tokenization project to BACS arbitration can make the project more secure.
Undoubtedly, there are still many obstacles to be resolved in the digital world of art. Will we pay for tickets to see a collector’s collection of NFTs? The truth is that it is a market that continues to grow. Every day more and more people are interested in this digital world and, in some cases, the values of the assets traded are really high.
