VK

Works of art as an investment tool

Art as an investment tool

Works of art can grow in value and bring profits to their investors like stocks and other assets we know. For example, the painting “Savior of the World” by Leonardo Da Vinci in 1499 is now worth more than $ 450 million, and “Algerian Women” by Pablo Picasso – almost $ 180 million.

But unlike most exchange-traded instruments that traders can speculate on, artwork is a long-term investment. It may take years or tens of years, or maybe even more than one generation, before an author gains popularity, and his works become very popular in the market and, accordingly, expensive.

What is special about works of art as assets

The art market is structured differently from other markets, and operates according to completely different rules. For example, unlike the same stocks, which can fall in value due to poor company performance, the value of works of art only grows over time. This is due to several factors:

  • Their number is very limited. Shares can be issued in millions of copies, which is why the ceiling of their value is limited. Works of art are unique and are usually found in a single copy. Therefore, one painting can be worth several million. What other assets could be worth that much money?
  • Unable to reproduce original. Money and stocks can be printed – it’s easy. But the original work will always be only a single copy.
  • Works of art serve as decoration or decoration. They can be of cultural, anthropological and historical value.
  • Market shocks do not affect the cost of work. They do not correlate with other markets and do not depend on the quotes of various assets even during periods of crises.

Works of art can grow in value over time, so they can be a great diversification tool for investors. Much depends on the reputation of the authors, the demand for their work and other factors that affect the cost. But if you buy works by young and promising authors, then the risks will be low, since their paintings are still inexpensive and are unlikely to drop much in price.

However, there is still a risk that the work of art could be depreciated and the investor lost his investment. And if it already has value, then investors can bear the costs of their storage and maintenance.

How blockchain is changing the art market

Until 2018, the art market was hard to reach for most users far outside the city where the exhibition or auction is taking place. To acquire a job of interest to an investor, it was necessary to be physically present at the event, and for residents of other countries such a trip would be expensive.

But blockchain technology has opened up the art market for investors from all over the world who can purchase artwork with digital tokens. At the same time, no physical presence is required, and tokens are a universal means of payment that can be bought anywhere in the world.

In September 2018, Maecenas put up for auction the painting “14 Small Electric Chairs”, a famous work of American pop art artist Andy Warhol. But it was an unusual auction: for the first time, a piece of art was sold on the blockchain. This attracted hundreds of investors who had no previous connection with the art industry. The painting was valued at $ 1.7 million, but the fact that the trades took place on the blockchain attracted the attention of investors so much that the valuation rose to $ 5.6 million.

Blockchain allows you to tokenize works of art. In other words, converting artwork into thousands or even millions of digital tokens. With this approach, ownership can be easily proven, since the blockchain stores all transaction records that are almost impossible to alter or tamper with.

How it works

First, an expert evaluates a work of art, such as a painting or sculpture, and determines how many tokens it will cost after the digital record appears on the blockchain.

The picture is then transformed on the blockchain platform into digital tokens that potential buyers can purchase. Moreover, the number of works that a buyer can purchase is unlimited. Thus, an investor can collect a portfolio of tokenized art objects.

If the owner wants to sell the painting, he just needs to exchange his digital tokens for another cryptocurrency or stablecoin. Moreover, along with the tokens, the ownership right will also pass to another buyer. Such a transaction can be carried out automatically using a smart contract. This means that the buyer is guaranteed to receive their tokens after transferring their funds to the seller of the art object.

If you use the blockchain and tokenize works of art, then the physical transfer of the work itself is not required – it can also be located in a museum or special storage, and the owner of the art object will only pay for storage and maintenance services.

Plus, blockchain makes cross-ownership easy. If one of the owners decides to give up his share, then other investors just need to buy out his digital assets, and his share will go to them.

Conclusion

The main advantage of this approach is that the tokenization of property rights increases the liquidity of works of art and can increase their value, as more buyers from around the world will apply for them. Compare the difference: how many people who want to buy your painting will visit a gallery in a small town, and how many of them may be on an online auction from different parts of the world.

A well-known research company in 2019 estimated the art industry at $ 64.12 billion. According to expert forecasts, exponential growth can be expected in the coming years, as blockchain can increase liquidity and unite investors around the world. In addition, early successes are encouraging developers to develop blockchain platforms through which art can be tokenized and integrated, revolutionizing this market. More information on the official website of Amir Capital.

Link to source.

We use for the best presentation of our site. You will continue to use the site, we will assume that it suits you.