When it comes to art, I am as unsophisticated as they come.
I couldn’t tell a Picasso from a Van Gogh, and the most memorable piece of art I ever hung on a wall was the iconic ’70s poster of Farrah Fawcett.
That’s just as well, since the cost of fine art is so high that only the wealthy can afford the lofty prices that collectible art goes for these days.
For example, a painting by Leonardo da Vinci sold for $450 million last year. That’s way too rich for my blood.
However, the technology that underlies cryptocurrencies like Bitcoin and Ethereum is changing the way collectible art is being sold. It’s helping to make art an affordable investment for regular people, like you and me.
What I’m talking about is the use of blockchain technology to “tokenize” valuable pieces of art, such as works by Andy Warhol and Claude Monet, into affordable increments.
Tokenization = Democratization
New York-based Maecenas buys a piece of collectible artwork they deem to be undervalued. Then they sell — to qualified participants — shares of that work of art.
Those shares are transferred and recorded on the Ethereum-based blockchain. Blockchain is an open source, distributed protocol that enables users to record transactions securely and immutably. And this type of transaction is called “tokenization.”
The first collective painting to be tokenized is Andy Warhol’s 14 Small Electric Chairs. Maecenas raised $1.7 million for 31.5% of the artwork, which valued it at $5.6 million.
New art-investment platform Masterworks paid $1.8 million for the Warhol. So the process of tokenization actually increased the value of the painting.
What did the buyers of the Andy Warhol tokens get? They received tamper-proof digital certificates that are permanently linked to the Warhol painting via the blockchain, which they may sell at any time.
“Tokenization of assets is the most prominent and exciting use case of blockchain technology, and we’re proud to be pioneers in this space. This Warhol painting is the first of many more to come and we are looking forward to seeing and leading the financial revolution for the art market,” said Maecenas CEO Marcelo Garcia Casil.
The tokenization of collective art securities is going to dramatically change the dynamics of the collectible industry. But the same thing is also going to happen to many other markets that suffer from illiquidity and costly bid/ask spreads such as real estate, numismatic coins, and diamonds.
Real estate is a highly illiquid market. And now, for the first time ever, a piece of property can be easily divided with blockchain tokens among investors all over the world.
For example, a brand-spanking-new, $36 million luxury condominium development has just been sliced into digital blockchain tokens. It only holds 12 luxury apartments. But if you want to own a piece of Manhattan real estate, blockchain offers you a way to invest as much or as little as you would like. You can watch a video about it on Bloomberg here: “Blockchain Takes Manhattan.”
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| New York real estate is booming. But tokenization lets you buy a stake, from any state. |
After Jeff Bezos announced that Amazon will put a headquarters in Queens, New York real estate brokers reported such a surge in interest that they’ve been selling units — many sight unseen, and some even by text message.
Now, with tokenization set to disrupt the real estate industry the way Amazon has disrupted retail, we could very well see even more interest in this unique new way to invest — whether in real estate, collectibles or the technology companies that are making it possible.
So, sure, cryptocurrencies have gotten clobbered this year. But the underlying technology — blockchain — is filled with success stories and investment riches.
Best wishes,
Tony