49% blockchain stake of Andy Warhol painting going up for auction
The blockchain art auction shows off the benefits of fractionalisation, digitisation and tokenisation.
In a world first, blockchain company Maecanas is auctioning off a 49% stake of the Andy Warhol painting 14 Small Electric Chairs in bitcoin, Ether or ART (the Maecanas native token). The complete painting is valued at $5.65 million, and the auction will be accepting a minimum of $4 million.
It's not the world's first blockchain and crypto art auction, but it is the world's first tokenised fractionalised fine art auction. In this case, that fraction is a 49% stake in the artwork for the buyer. The artwork will also be written onto the Codex Blockchain and given a Codex title.
Asset digitisation, or tokenisation, has been one of the more apparent immediate applications of blockchain technology. It's exactly what it sounds like, with physical assets being represented on the blockchain.
Although the benefits of asset tokenisation might not be immediately obvious, it can serve a range of valuable purposes. Asset fractionalisation is one of the more straightforward applications.
Fine art, less-fine art, exotic cars, mint condition comic books or baseball cards and other physical collectables can be some of the world's most consistently valuable and quickly appreciating assets. So as an investment class they're often regarded as well worth a slice of a portfolio. They come with some major downsides though.
For example, some serious maintenance expenses, the poor liquidity and difficult transferrability of delicate physical assets, and a very high minimum entry price for anyone who wants to diversify their portfolio to these kinds of investments. Previously, there was no real way of buying a fraction of an exotic car, or a small piece of rare art.
Enter asset tokenisation and fractionalisation.
BitCar, for example, might be succinctly and derisively described as "cars on the blockchain". But that kind of underplays the potential returns on investment that vintage and exotic vehicles can offer, the advantages of not needing to pay for storage and maintenance yourself, and the usefulness of being able to own a portion of a rare vehicle without ripping off a wing mirror or something.
Fine art can be even more consistent. The general rule is that as long as an artist is already renowned, and preferably dead, their genuine work will continue to appreciate. However, the "safe" art investments, are well beyond the reach of mainstreet buyers. Asset fractionalisation is the only real way to bring it within reach.
The same systems are already being used in real estate, which is perhaps the ultimate appreciating physical asset. Brickx, for example, is an Australian fractional real estate company that lets people invest in potentially appreciating real estate for hundreds, rather than hundreds of thousands, of dollars.
Paper certificates can be forged, lost in housefires and are otherwise just as prone to being accidentally destroyed as any other physical asset. To say nothing of the counterfeit problem that's already swamping the art world.
It also removes the need for some central, and compromisable, certificate printing entity which would cast doubt on the entire process and serve as a new point of failure. A securely decentralised public blockchain like Ethereum is the only suitable system that has ever existed, for digitising these kinds of assets.
This system might let owners sell off portions of their own stake relatively freely, or accrue more. And if something happens to the asset itself, the digital footprints can allow for an easier insurance payout.
Beyond that, you get the benefits of digitisation and actually having programmable assets. The possibilities of asset tokenisation might be most apparent in collectable investments but can find applications in just about all physical goods.
A very simple example might be tokenised goods being sold via escrow smart contracts on online peer to peer marketplaces like eBay or Amazon, or Craigslist if you're feeling more adventurous.
Everything in a store could get its own digital token which describes the exact item listing, photograph, a description of the goods, the owner's name, etc. The movement of this token can be used to determine the current rightful owner of the property.
If someone buys an item, the token could be sent to an escrow smart contract. Once the buyer sends funds to the same contract, it can release the token (which represents the purchased item) and the funds to their new owner. This could be modified further as needed. For example, by dispensing half the funds immediately and then the other half after the goods are confirmed to arrive in.
As systems get more advanced, the token could move along with the package itself to serve as a tamper-proof digital replica of the physical item, and the contract might only dispense funds to the seller when the item has arrived and the buyer has confirmed they've received it.
If/when there's a dispute, the token can serve as proof of purchase and ownership, and can contain an exact record of the goods which were promised and when and where the payments went. This could go a long way to solving chargeback scams and similar problems plaguing peer to peer sites right now.
There are undoubtedly plenty of rough edges to be smoothed out before this kind of system is viable on a large scale. But for the more specific applications, such as tokenisation of collectables with relatively few stakeholders, it might be ready for valuable real world use today.
Disclosure: At the time of writing the author holds ETH, IOTA, ICX, VET, XLM, BTC, NANO
- SEC crackdown on Binance, Kraken – What it means for Aussie investors
- Sam Bankman-Fried found guilty – what it means for Australian FTX victims
- Bitcoin’s price soars over 10% on ETF rumours – here’s why
- New regulations for Aussie crypto exchanges: What it means for investors
- Sam Bankman-Fried’s FTX trial starts tomorrow – what it means for FTX customers