What is Art Tokenization, and How Does it Work?

by | Feb 11, 2021 | Tokenization | 0 comments

Art tokenization is reality, thanks to blockchain technology. Have you ever tried investing in art? Were you put off by the high cost of acquiring the whole piece, inadequate knowledge on what you were investing in, or market concerns, like storing or displaying it appropriately to preserve its value? 

The above questions bear the primary reasons people have not heavily invested in art. Luckily, art tokenization solves all these issues. The tokenization of art allows people to securely buy the rights to a fraction of artwork instead of purchasing the whole piece, eliminating the entry barrier. This article discusses what art tokenization is, how it works, and its benefits. Stay tuned.   

What is Art Tokenization?

Art tokenization is the process of converting ownership rights of artwork into a digital token on a blockchain network. Tokenization brings effective ownership transfer and secondary markets, reducing friction in conservative industries, like art and real estate.  

A UBS report shows that the art market is growing by two-digit figures each year. Another report from Deloitte shows a 20%+ rise in auction sales globally, but just 8% of the total art auction sales are represented digitally. To sustain this growth, the art industry must go digital, and the best way to achieve this is through tokenization on the blockchain. 

How Does Art Tokenization Work?

First, a piece of art is appraised by an accredited curator to determine its value and the number of “pieces” it will be divided. After the appraisal report is out, the process of tokenization now starts. Digital certificates bearing the intrinsic value and showing the piece’s legitimacy will be kept on a blockchain network. Blockchain tokens, whose numbers were previously determined by the curator, will be issued by a tokenization platform. Each of these tokens has a monetary value and digitally represents ownership of the artwork. The issuer can then start trading the tokens on a secondary market. The investors/token holders receive ownership of the piece relative to their investments.  

The Benefits of Art Tokenization

Considering the transparency and immutable nature of blockchain technology, its features, and additional benefits are automatically applied to tokenized artworks. As a matter of fact, art tokenization helps eliminate several issues that have plagued the art industry for a long time. 

The first benefit of tokenizing art is that the process digitizes ownership into tradable instruments, thereby improving the pieces of art’s liquidity. Tokenization transforms the art industry into a lucrative venture. 

Secondly, tokenization platforms also emerge as reliable platforms to authenticate and verify artworks. It is much easier to monitor the certification and ownership of art digitally through blockchain than doing it manually. 

Thirdly, independent and upcoming artists can use this medium to showcase and promote their work, instead of depending on expensive galleries’ services. Additionally, this will help them continue enjoying the ownership of their works while also avoiding payment to third-parties/agents.   

Final Thoughts

Generally, art tokenization enables artists, investors, collectors, museums, and galleries to enjoy better transparency, injects more liquidity to this illiquid asset class, and lowers the high entry barriers to the art industry. Besides, it acts as an avenue of tabbing blockchain technology’s full potential. 

Tokenizer: A Self-Service Tokenization Platform

At Tokenizer we are harnessing the power of blockchain to design and build an end-to-end decentralized finance and banking eco-system with the pioneering aim to innovate and advance capital creation, serving as a platform to invest in the future of finance. We aim to be the new venue linking capital to investment projects.

Do you want to understand more about Tokenizer and our platform, if so follow this link Tokenizer and register. We will contact you with further information.

 

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