Blockchains, fractionalization ownership, and the future of art, with Professor Dr. Christoph Meinel.
Professor Dr. Christoph Meinel is Dean of the Digital Engineering Faculty of the Potsdam University and Director and CEO of the Hasso Plattner Institute for Digital Engineering. Meinel is author/co-author of 10 books and 12 anthologies, as well as editor of various conference proceedings. More than 600 of his papers have been published in high-profile scientific journals and at international conferences.
In recent years, there has been plenty of talk of the “financialization” of art. As prices soar to new levels and digital technology opens new markets, perhaps the world is finally listening.
Capital markets are nervous and the indicators are setting new warning marks for big changes. The wealthy and liquid may have opportunities to secure their wealth and begin to take defensive measures with their portfolios with art as a new asset class, partially used for the purpose of securing long term well-being. This sounds good, but only for those who have sufficient means to convert parts of their stock portfolio or cash into meaningful and valuable art, which has a secure chance to survive a crash or turn down of the economy. Here lays the crux for the big majority of the people, they don’t have the means to buy an artwork for millions which provide such a hedge against loss of assets. But perhaps, for the first time in the history of the art world, this disadvantage of the majority of people in the world seems to find a promising solution, the democratization of major artworks through sales of small segments in artworks, through the advancing blockchain technology and crypto currencies. The close cooperation of art and the tech world plays a crucial role for a potential widespread and transformation of the art market for the benefit of small investors and collectors.
Below is the AMM interview with the thought leader in this space, Professor Dr. Christoph Meinel.
AMM: In light of your recent talk at the German House, how is the art market flawed for buyers and sellers?
Professor Dr. Christoph Meinel: The art market today lacks transparency. Buyers and sellers run the risk of being involved in counterfeit numinous businesses. What is needed is an electronic transparent, secure and accessible platform for everyone with the relevant data on the art works.
AMM: Can blockchain technology solve those flaws, and offer more security and transparency?
Dr. CM: Today, the use of blockchain technology is not only limited to cryptocurrency, but the technology is used as a programmable distributed trust infrastructure. Other term for blockchain technology like Distributed Ledger Technology represent the most widespread use case of blockchain technology so-called distributed “accounting book”.
“For artists and collectors blockchain technology can provide a secure, robust and transparent platform for prove and verification of the provenance and ownership of the artworks, without the need for a trusted intermediary.” Professor Dr. Christoph Meinel
The innovative concept of blockchain technology makes it possible to log data in a tamper-resistant and transparent way in a decentralized system without any maximum number of users or identification requirements (users are free to join and leave the system). At the same time, there is no requirement for trust between the users.
Therefore blockchain technology can provide a robust, secure and transparent artworks and collectibles registry with ownership and purchase information included.
AMM: If an art market change or transformation is possible, who do you think may be best qualified to orchestrate it, the art world, the finance world or the tech world? Or is it a combination?
Dr. CM: Information Technologies today offer a wide range of unprecedented opportunities in the art world too. Blockchain technology is one of them. For more widespread and interoperable transformation of art market is the close cooperation of art and tech world important.
AMM: How can blockchain technology create unprecedented demand in art?
Dr. C.M. Many are under the influence of hype of the blockchain technology and see it as a general problem solver. To keep it in perspective, the blockchain technology can offer a transparent, secure and accessible platform for everyone with the relevant data on the art works without the need for a trusted intermediary. Using this platform artists can register provenance information for their art, buyers and sellers can prove and verify the ownership information as well as a lot of new business opportunities for artists and collectors can arise as a result (e. g. for a digital art).
AMM: Would making art an asset class, that can be sold in fractions, expand the market. Could blockchain facilitate this?
Dr. CM: There is already an example on the market for such use case. Artist Eve Sussman is working with Snark.art to offer an blockchain-based artwork, shattering her artwork (video piece 89 seconds at Alcázar) into 2,304 squares, which can be individually purchased. The resulting blockchain-based artwork can be collected by a group of new owners, who are empowered to reassemble the full video at will (Snark.art White Paper – https://snark.art/assets/white-paper/89-seconds-Atomized-White-Paper.pdf).
Such as asset class in art market could help to attract new target audience. As sharing economy find great approval in a digital world, new interested parties could relish it in the art world.
AMM: Who would gain most from an art market transformation?
Dr. CM: Everyone. For artists and collectors blockchain technology can provide a secure, robust and transparent platform for prove and verification of the provenance and ownership of the artworks, without the need for a trusted intermediary. And welcome any interested party to participate in the art market without risk of being cheated (to buy an artwork or a piece of it without a large expertise in this field – the real price, the real owner, fake or not, etc.).
AMM: We have heard from several people in the art market that they believe that the use of blockchains for the fractionalization of artworks i.e. being able to sell major artworks in sections to small buyers with full transparency for the involved parties, may become a future of art sales. Thus far, we have not seen a working blockchain system which can do this without causing the problem that the segment buyers can hinder the sale of such a segmented artwork to one buyer. Is there any solution available which we can study?
Dr. CM: As in other areas, there should be consensus between multiple owners to resell a joint art work to one buyer. Blockchain technology can support a consensus between different owners in a decentralized way, without the need for a trusted third party. For example with the help of Smart Contracts, the voting by the owners can be safely automated.
AMM: Crypto coins are available in the legal form as utility token via ICO and as security token via STO. Do you believe that one of those systems will survive or will they have a parallel existence in the future?
Dr. CM: The Blockchain technology is still young and emerging technology. At the moment it is easier to predict the technological development as economical. The second one depend more on speculations as on technical opportunities.
AMM: We have heard about blockchain developers which are developing blockchains as a holding system for several different blockchains and their coins, and then issue some type of crypto coin of coins. Can you tell us about this development?
Dr. CM: Some of Blockchain solutions are blockchain agnostic. It means they are compatible with several underlying blockchains. For example in case of pegged sidechain technology digital assets from one blockchain can be securely used in a separate blockchain (sidechain) and then be moved back to the original/parent blockchain if needed. Sidechain is the name of a blockchain that can recognize and check data from other blockchains. The digital assets of original blockchain are converted into sidechain digital assets using a fixed conversion rate.
AMM: How will Design Thinking help create the user experience for the coming blockchain art marketplaces?
Dr. CM: As I already mentioned before the close cooperation of art and tech world plays a crucial role for a widespread and interoperable transformation of the art market. The appeal of Design Thinking lies in its ability to inspire new and surprising forms of creative teamwork (https://hpi.de/en/school-of-design-thinking/design-thinking.html) for more innovative solutions.
The approach goes far beyond traditional concerns such as shape and layout. And unlike traditional scientific and engineering approaches, which address a task from the view of technical solvability, user needs and requirements as well as user-oriented invention are central to the process. This approach calls for continuous feedback between the developer of a solution and the target users. (https://hpi-academy.de/en/design-thinking/what-is-design-thinking.html)
This cooperation with the help of Design Thinking approach can create new and innovative blockchain solutions for the art market.
Professor Dr. Christoph Meinel (Univ. Prof., Dr. sc. nat., Dr. rer. nat., 1954) is Dean of the Digital Engineering Faculty of the Potsdam University and Director and CEO of the Hasso Plattner Institute for Digital Engineering gGmbH (HP). Meinel is author/co-author of 10 books and 12 anthologies, as well as editor of various conference proceedings. More than 600 of his papers have been published in high-profile scientific journals and at international conferences.
Bio von der Website https://www.blockchainbeach.com/the-work-of-art-in-the-age-of-blockchain/