Testing consensus in the arts

Piero Bisello  -  June 19, 2018

Next 17th July in London Christie’s and Vastari are going to host a one-day summit about how blockchain can be applied to the art industry. Who is ready to change the all nature of ownership?

There is nice rhetoric about Christie’s communication of their event on blockchain happening on July 17th in London, which is co-curated by Vastari. Under the title ‘Art+Tech Summit: Exploring Blockchain‘, the organisers ask the question whether the art world is ready for consensus. One might argue that consensus in the art world, which is a very heterogeneous and opaque environment with very poor standardisation and regulation, is a bit of a chimera. For example, there is nothing like consensus about artist contracts, or blueprints of business agreements.

Yet the question is justifiably asked, and blockchain might be a possible focus to firstly achieve consensus in the art world, or at least in the art business. More specifically, the question operators need to ask is whether the art business can agree on a single technology that promises great improvements for everyone. Now, when a huge player of the industry such as Christie’s endorses blockchain through sponsoring a state-of-the-art event on the topic, this question reads as their bet that this agreement could be found, and this is indeed interesting news.

But why is consensus so important for blockchain in the first place, so that players like Christie’s need to lobby for it? After all, some very successful technologies in history grew quite organically, without the need of consensus-driven top-down approaches, such as panel discussions or focused marketing campaigns. For example, it is hard to imagine that very successful historical technologies such as the plough, the steam engine, or arguably the internet grew because of cutting-edge lobbying like the one blockchain is getting. Many technologies could just spread from the bottom-up, in view of their amazing efficiency at the time. This doesn’t seem to be the case for blockchain and the art business, but why is that?

We believe the answer is that blockchain applied to the art business has great technical limitations that can only be overcome if huge players of the industry lobby for it. Only they can make this technology grow. To see this, let’s look at what are said to be two of the greatest benefits of blockchain for the art business.

The first promise of blockchain is that such technology could help authenticity and traceability of artworks, which is a major issue in the art business. To take an abstract example, imagine that a painting costs 10 if it’s made by painter X, so one could take a painting made by painter Y that costs 5 and double its value by falsely claiming that it’s made by painter X. Being a technically incorruptible shared database, blockchain promises that if all information regarding paintings (or any other artwork for that matter) is uploaded on it, it could not only offer the transparency that is missing in the art business, but it could also offer a system of traceability that could help spotting frauds like the one in the example above. In short, blockchain enthusiasts claim that when works are registered in the blockchain, false things about them could no longer be claimed.

However, this promise is based on (1) an uncertain future scenario; and on (2) a problematic assumption. The uncertain future scenario is one in which there exists only one public blockchain for the entire art business, and in which a lot of information (if not all) about a lot of artworks (if not all) is uploaded on it. This is important not to fragment the database and keep the promised traceability. In principle, this scenario is of course possible, yet given the already poor standardisation of the art industry compared to other industries, its realisation seems more improbable than uncertain. The involvement of big players such as Christie’s is surely a positive step forward in this regard, and the more big players are willing to be involved in blockchain, the more probable the scenario becomes. Here is where the necessity of consensus comes up in the promotion of the technology.

As to the problematic assumption, blockchain optimists believe that all information uploaded on blockchain will be correct information. They believe that what the database says about artworks actually corresponds to real life. Yet, blockchain cannot guarantee that by itself. One can have the most technically incorruptible and unbreakable database with the most faulty information in it. For example, this person recently registered himself as the author of the Monnalisa in the blockchain as an attempt to make this point. To use a metaphor, it’s like having the most secure underground vault to store fake diamonds. Again, this problem could be solved by having big players such as Christie’s acting as a guarantee that the “diamonds are real”, i.e., that the information about artworks uploaded in the super safe blockchain database is correct information. Reputation here is necessary, as only the highly reputed actors could provide with the guarantee that the information in the blockchain is reliable. For example, these actors would need to make sure that when an artwork enters the market, its authenticity is certified by them before it enters the database. Moreover, every following movement of that artwork would also need “real life” guarantee first and blockchain registration after, so to maintain this line of traceability. Again, consensus about the technology so their users are virtuous in keeping the database matched to what happens in real life is necessary in this regard.

As to the second big promise of blockchain, this is what market operators call “tokenisation”. Tokens refer to “parts” of the blockchain that could be assigned value by virtually connecting them to real artworks. In this sense, one could buy a share that corresponds to an artwork, or a fraction of that artwork, or even a collection or a fraction of that collection. This token would then become a currency to be profitably traded. However, here blockchain is also limited, as the business of art tokens has intrinsic problems that cannot be magically solved by blockchain. The best way to see this point is to compare tokens to share in regular art funds, which have never convinced investors because of, among other reasons, the great insecurity of how to value artworks to which these shares are linked. In this regard, an artwork “reveals” its value only when it’s sold, and since the same artwork is never sold very often, it follows that there is great uncertainty concerning the value of shares connected to it. Mind that this is not the case when it comes to shares of firms, whose health state is regularly made public. Unlike shares of art, investing in shares of firms is to invest in something whose performance can be more easily and regularly checked.

Now, even if it is hard to see what blockchain could offer to solve this intrinsic problem of art funds, it could be argued that having access to a larger network of these funds provided by blockchain as their infrastructure could at least offer an incentive to investors. In short, blockchain could help enlarge the offer and reach more potential buyers. Yet, to make blockchain a large network (or a popular network protocol to be more technically precise), consensus and lobbying is needed, especially if there is no great technical advantage of blockchain compared to already large networks such as the internet and popular protocols such as TCP/IP. This is again where the help of big players such as Christie’s comes into play: building consensus among operators and investors, lobbying, marketing, etc.

Finally, in this article we hope we have made clear what big players of the art business can do for blockchain. However, it remains unclear what blockchain can do for them. In other words, what are the real benefits of a secure shared database for a huge art business operator such as Christie’s, so that this operator feels that it should lobby for it to such large extent? This is perhaps one of the questions the event Exploring Blockchain will answer in London on July 17th.