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Security Token offering: revolutionize the artwork market

revolutionize the artwork market

From the reflection of human worship to expression of inner mind, art has served our spiritual need since ancient civilization. And time goes on, trading began among merchants and collectors, art piece represented an asset, a symbol of wealth. In tech age, with further exploration of its intrinsic value, a new investment opportunity emerged by the power of tokenization, and that is security token offering.

Security token offering and utility token obviously differ in purpose. The main role of security token offering is acted as a digital shares, claiming certain percentage of an asset ownership, and transferred through blockchain, one of the distributed ledger technology for data storing and management. When it comes to art space, a token is backed by an artwork, that mean it can being a truly valued token in digital form, and prevent the price fluctuation like speculative utility token nowadays.

Talking with pricing the artwork, it depends on valuation, some of them in gallery may cost millions of dollar by its origin or artist, which put hurdle on people who really want to invest in the marketplace. With security token offering, the artwork can digitize into a set of tokens, and own by different buyers. So you can take part for something that can’t be done in past, with a relatively low price for investing in whether a painting or sculpture you like.

Not only allowing more participants, fragment of ownership also boosting the liquidity of the tangible art asset. A painting is fully owned by one person generally, but now numerous token holders can own the same painting by portion, and they can further sell it in exchange.

TheArtToken (TAT), issued by FineArtDigital AG, is a asset backed security token offering with fine art, every token is backed by post war and contemporary art on 1 to 1 ratio, which started sale through Swarm, and STO will be launched this year, following with the listing on Swiss and International token exchanges. First, KYC and AML approved investors buy the token, then the company will convert into equivalent artwork, which then stored in Swiss bonded warehouse and protected by the Swiss government. The holders can trade their token on exchange, or redeem for physical art piece.

Codex record, a security token offering used for storing asset’s identity and owner history, which guarantees transparency and authentication for transaction in artwork space, and protect the right from artist. Through the decentralized registry, it uses blockchain technology to record, verify and securely stored the artwork’ information that you owned, which makes the insurance work or buying or selling easier than before. A auction of Codex secured artwork took place in may 2018, a CryptoKitty digital collectible was sold for $140,000 successfully.

In 2017, the sale of global art market is $63.7 billion, recording a 12% rise when comparing to 2016 figure of $56.9 billion. The turnover of post war and contemporary art market even gain a 14x increase in last 17 years, from $103 million to $1.58 billion, in EURO. Among all artwork in last two decades, it also secured a 10.71% in annual return, leading all stocks like Dow Jones, DAX and Euro Stoxx in financial market. Just imagine every art piece were break down into countless token and be traded in global, it would be a huge investment opportunity to the market.

Unlike the traditional auction way, once the token is sold, it transferred to investor’s wallet automatically by the execution of smart contract, so no worry of loss in currency exchange, it excludes the middlemen and makes transaction efficiently.

Andy Warhol’s 14 Small Electric Chairs painting, which valued at $5.6 million, has been sold through Maecenas’ platform for 49% ownership in June 2018. Security token offering has a bright future in art space, and surely, there will be more to come in 2019.

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