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Could Blockchain Technology Help Prevent Art Market Fraud?

Recent years have seen some of the biggest art forgeries of the 20th century, including a $79.6 million Austrian case of forged certificates and replicas by Pablo Picasso and Claude Monet.

According to the FBI’s art crime unit, art frauds, forgeries and fakes total $6 billion annually.

In an industry plagued by authenticity and traceability issues, could Blockchain technology be the solution to bringing transparency to the art market?

Essentially a cloud-based digital ledger, Blockchain offers a secure means of digitizing authentication, provenance and ownership history.

Artists would register their work into the Blockchain to create a digital certificate of authenticity. Through a unique cryptographic ID, each artwork can be authenticated and ownership rights securely transferred to galleries or collectors. Once a transaction is verified, the Blockchain ledger is updated and cannot be removed or altered.

This “distributed registry of authenticity” offers a significant upgrade from the current system and incredible potential to easily prove authenticity, ownership and transactions.

https://www.slideshare.net/EXANTE/blockchain-and-fine-art-how-the-technology-could-change-the-art-market

Accessibility

Blockchain can help to make fine art accessible for everyone. Traditionally, artists have relied on galleries for distribution. Blockchain could eliminate such intermediaries and connect artists directly to a broader audience through an online market.

Proving Provenance and Authenticity

Standard paper-based transaction records are unsecured and prone to inaccuracies, omissions and forgery.

When combined with technology like in-depth scanning and fingerprinting, Blockchain offers a secure, digital solution to verifying provenance (where a work comes from), authenticity and ownership.

Once the provenance and authenticity is recorded in the Blockchain, it won’t require authentication again, which takes a lot of cost out of the system.

Establishing Identity and Ownership

Anonymity has long been central to the art world. The identity of art owners is oftentimes concealed, especially during auctions. But this creates opacity around tracking ownership- a key element in establishing a work’s authenticity.

Blockchain could provide visibility into the secondary market by recording transactions and changes in ownership as well as transparency around the identity of the owner.

While proponents of the Blockchain believe it has the potential to revolutionize the art market, the technology has been slow to gain traction. As with anything, change is often slow.  It will likely take a progressive gallery or a prominent artist to adopt it before it becomes the industry standard.

The Perils of Art Authentication

On June 07, 2017, the New York Senate passed Bill S1974 and delivered it to the New York Assembly– a proposal that has been stalled in the state legislature for three years. The purpose of the Bill is “to enhance protections under the law for individuals who are employed as art authenticator in the visual arts community.” If enacted into law, it will be the first of its kind in United States to explicitly protect art authenticators.

But what has prompted legislative intervention to protect art authenticators? The Bill comes after an increasing number of frivolous lawsuits against New York authenticators. Such claims have resulted in authenticators ceasing to offer their services and abandon their profession due to the exorbitant costs of litigation. Even prominent artist foundations such as the Andy Warhol Foundation for the Visual Arts and the Pollock-Krasner Foundation have dissolved their authentication boards.

“Untitled” by Jackson Pollock was one of the counterfeit works involved in the Knoedler Gallery forgery scandal.

Senator Betty Little, the Bill’s sponsor, corroborates these claims by stating, “In recent years, the work of authenticators has come under pressure from meritless lawsuits against those who render opinions in good faith. Such defense of expensive and frivolous lawsuits has left many in the industry reluctant to lend their expertise in authenticating art works.”

As such, collectors have found it increasingly difficult to find experts willing to authenticate art. An absence of authentication poses a significant threat to the functioning of the art market: diminishing consumer confidence, disrupting commerce and increasing the number of forgeries entering and devaluing the market.

There is no doubt that authenticators need protection from frivolous claims. Their opinions play an integral role in the fine art market by preserving art values, preventing art forgery and fraud, and providing assurance to collectors, which promotes the purchase and sale of art.

While the passing of the bill may encourage authenticators to resume their profession, some may argue that it will be more difficult for collectors to seek recourse should they be sold a forgery, which also has the potential to seriously affect the sale of artwork.

Are you an art collector? What’s your opinion on the Bill? Let us know your thoughts in the comments below. 

RELATED: AVOIDING FAKES IN THE ART MARKET: A BUYER’S GUIDE

Avoiding Fakes in the Art Market: A Buyer’s Guide

Avoiding Fakes in the Art Market: A Buyer’s Guide

For art collectors, there is no fear greater than discovering that a once-prized work is merely a worthless forgery; a nightmare that has become all too common in the art world.  Instances of art forgery now comprise a major portion of the market – with estimates that at least 50% of all works sold are forged.

Yet, novice buyers aren’t the only victims of buying fake art. Forgeries have proven to fool even the most seasoned professionals and have infiltrated galleries, auction houses, and even museums. When authentication presents such a challenge for art professionals, it’s not surprising that collectors would have trouble determining legitimacy.

With the art market considered to be the largest unregulated market, collectors must be diligent about protecting their investments. Just as home buyers request inspections prior to purchasing a house, the same due diligence should be taken for art purchases, especially when you are going to spend upwards of thousands of dollars.

So what should buyers do to ensure the authenticity of artwork? First and foremost, familiarize yourself with the artist you’re interested in: their style, use of color, materials and signature.

Secondly, try to buy from reputable auction houses, galleries, dealers or vetted art fairs, which are required to certify the works they sell as authentic.

Another crucial step is to confirm the artwork’s provenance. Provenance is the documentation that certifies authenticity. Ideally, provenance should document the history of the piece from the time of creation by the artist until the present day. Details can include a record of owners’ names; dates of ownership; and means of transfer (if inherited or purchased via a dealer or auction).

Provenance can be established through a variety of sources, including:

  • An exhibition or gallery sticker attached to the art
  • An original gallery sales receipt or receipt from the artist
  • An appraisal from a recognized authority on the artist

Also, inquire as to a Certificate of Authenticity (COA). The COA should be signed by either the artist who created the art, the publisher (for limited editions), an established dealer or artist agent, or a recognized expert on the artist.  A legitimate COA should contain specific details including the name of the artist or publisher, the work’s title, the medium (i.e. oil painting, digital print, etc.), dimensions, edition size (for limited editions), and the and contact information of the individual or company that issued the certificate.

Keep in mind that a complete provenance history, especially for older pieces, can be rare. Oftentimes, collectors wish to remain anonymous and sales are done privately, which result in gaps in provenance. Nevertheless, purchasing a piece with incomplete provenance is risky.

In the absence of provenance, other methods may be required to prove a work’s authenticity. These include technological and scientific analyses, but are typically reserved for old masterpieces since the services are quite costly.

In conclusion, it’s a far wiser decision to purchase artwork from a reputable seller that is accompanied by complete provenance.

Are you an art collector? How does lack of provenance influence your decision to buy art? Let us know in the comments below.

RELATED: THE PERILS OF ART AUTHENTICATION