Art Tokenization: The Revolution Art Industry Has Been Waiting For
Looking At Art From TokenFi’s lens
Online sales of physical art account for nearly 40% of total art transactions, worth $65 billion in current annual trading volume. The art industry is probably the oldest and the most resilient in existence. It has also been among the most disrupted by technology.
The online market for art and collectibles has existed for a long time, with auction houses moving to online bidding to sell artworks. The 2021 NFT boom was just a preview of what was to come.
As tokenization readies itself to take over almost all asset classes — art as an asset class will be one of the biggest benefactors of tokenization. For instance, LiveArt, a Web3 platform for Art tokens, sold an artwork ‘Emma Webster, Primavera, 2019,’ for US$165,000.
Blue-chip art alone is a $2.1 trillion asset class owned as collectibles by private owners today. Tokenizing just 2% of these assets can be 10x the annual trading volume.
Thanks to tokenization, Web3 will impact how art is created, traded, licensed, and distributed. As new digital native buyers enter the market and become more comfortable with higher-value transactions online, the online art industry is set to grow several fold.
The Advent of Art Tokenization
Remember Beeple’s Everydays? The first artwork to be sold as an NFT at Christie’s auction for a whopping $6 million in 2021.
From being non-existent in 2020, the NFT market generated sales of almost $25 billion in 2021 and then $7.4 billion in January 2022 alone.
The rise of NFTs helped increase overall art sales, with $2.3 billion of art sold in just two weeks at the November 2021 auctions. The NFTs were on track to double the art market before the bubble burst and the market fell.
In December 2023, Bitcoin NFTs generated record volumes of $880 million. It was a revival moment, and we knew the use case wasn’t dead.
The tokenization wave changed everything as the more fantastic world discovered the versatility of tokenization as a tech to bring assets on-chain and regulate their exchange through extensive smart contracts.
But what would tokenization mean for art?
Tokenization involves converting works of art into digital tokens that live on a blockchain. Tokenization can help investors own a piece of artwork via fractional tokens. Pascal Boyart minted his mural, inspired by Eugène Delacroix’s masterpiece, “Liberty Leading the People,” into 100 NFTs selling for 0.5 ETH in 2021.
Imagine their value today (both in terms of asset value and token value. Ethereum has grown immensely ever since, and Boyart’s mural no longer exists in physical form)!
The art industry has been essentially a closed industry accessible to a few filthy affluent investors.
By tokenizing valuable artworks into fractional tokens, the industry can become more accessible and inclusive for small investors. TokenFi believes that bringing assets on-chain will shorten the onboarding process and add utilities to the existing asset/artwork profile.
Tokenization will enable art to shun the tag of a collectible and become an investable class available to the masses. The inherent benefits of tokenization include eliminating intermediaries, reducing operating costs, operational efficiency, asset traceability, and yield generation.
Yield generation is an unusual yet remarkable advantage DeFi can lend to art as an asset. Picture a Mona Lisa giving you per annum yields or a Dali work acting as collateral for your loan!
The possibilities of art tokenization are immense and breathtaking. TokenFi has been building the most sophisticated tools for creators, artists, and collectible owners to tokenize their prized artworks and convert them into yield-bearing assets in just a few clicks.
How Will Tokenization Impact The Art Industry
The financial markets are missing an ample opportunity if they aren’t considering tokenizing art. Contemporary art has seen an annualized appreciation rate of 14%, outperforming all other asset classes. All Art Pricing Index delivered a 28.2% in 2021.
These numbers are comparable to publicly traded risk asset classes, including market equities and commodities. Art collectors are motivated by not just the collectible value of art today but also the investment returns that accompany it. All collectors can get their hands on rare, high-value items that would have been otherwise out of their reach.
The art industry is a multi-billion dollar, but it is restricted to a few. Once the market opens up to a user base hungry for investment and investments with a check size of less than $500, the exponential growth of the art industry is guaranteed.
The art markets are also relatively inert to broader market movements. They are, in fact, recession-proof and can act as an excellent hedge against inflation. Adding a 5% allocation of art tokens could do wonders for your portfolio while diversifying it into a category that can be the shock absorber in times of distress.
Moreover, tokenization would also give new and small artists a chance to showcase their collections to a broader market and sell their artworks. Since the tokens live on a blockchain, any tokenized artwork’s entire sell and purchase history becomes publicly traceable.
The artists know how often their artwork has changed hands and can seek royalties from secondary sales. The new artists also get the opportunity to explore new markets, sell their artworks as fractional tokens, and develop a wider following for themselves. The artists can use the proceeds from the sales to fund new projects.
TokenFi envisions making art an investible asset class by bringing it on-chain as tokens. Even if you aren’t an artist but are interested in exploring art as an investment, TokenFi’s Generative AI tools allow you to develop breathtaking art pieces with just a prompt. TokenFi Connect brings together buyers and sellers, forging new markets to sell and purchase assets.
And a relevant key product of TokenFi is also the token launcher which allows users to create their own ERC-721 token (NFT), without any need or specializing in coding.
The tokenized art market can offer excellent opportunities to earn superior risk-adjusted returns on new and high-end artworks. For the art industry, tokenization presents a chance to look beyond the gated forts and add infinite liquidity and utilities.
Courtesy of tokenization, we might soon see options and derivatives of art tokens traded on exchanges. What, say?
