Fine art purchases can be quite complex. You have to pay upkeep fees and shell out a lot of money.
For example, take the rare painting sold by VS Gaitonde, India’s most prominent abstract artist. It was sold at auction in Mumbai for Rs 42 crore by Pundole’s, making it one the most valuable pieces of contemporary or modern Indian art worldwide.
This is only the tip of an iceberg in the art world.
A buyer who spends millions on fine art does not get a single page document to verify its authenticity. Asif Kamal, the founder of Artfi, a Web3 company that aims to make art accessible to all through Nonfungible Tokens(NFT), says there is no technology to stop tampering.
The platform will enable the purchase and sale of these NFTs, which are an investment in blue-chip artworks by world-renowned artists like VS Gaitonde, Sacha jafri and many others.
Collectors in traditional art have no proof or transparency of their past sales and history. According to The Decrypting Story, NFTs can be used in the form authentic digital certificates that provide proof of ownership and transfer.
Art industry: New perspectives
Asif is an expert in this field. Asif has managed an international auction house and art-house, Alturaash. He knows how to navigate the industry. Although the task is difficult, the company believes fractionalisation will solve the problem of exclusive ownership.
The startup will receive physical artwork via consignment. This involves trusting an auction house or gallery with art pieces to be sold. After that, the startup tokenizes the painting and fractionalises it. This could be 5,000 to 10,000 pieces.
The NFTs are then available for sale to anyone who is interested. We sell the art to hundreds of buyers by fractionalizing it. Not one. These NFTs can be traded in secondary markets by buyers. As such, the asset’s nature changes to a tradable asset,” Asif explains.
This bet on fractionalisation led to the project raising 3.26 million at an estimated value of $100 million through a round of funding led by private investors.
Artfi isn’t the only one to do this. Masterworks, which is not a Web3 player in fine art segment allows users to purchase a piece of exceptional art starting at $20 per piece.
Web3 has been used by some well-known museums and auction houses like Christie’s and Sotheby’s.
Artfi is different from all the rest.
Artfi’s consignment process is the same as any other art museum. Things change once consignment is complete.
The startup splits the digital art into thousands of smaller pieces (say 10,000).
Kamal says that each Artfi piece is unique because it has predetermined coordinates for NFTs.
The startup is also exploring other ways that holders can receive a share of future trades and some features to stake NFTs.
NFTs have been criticized for their inability to connect with real assets or lack of utility. This project addresses this issue by allowing customers to purchase a piece of a tangible asset and granting holders access to the museum in Dubai, where they can view the physical versions of these paintings.
Artfi will consult NFT holders to determine a selling opportunity and then sell the artwork at a lower price. The proceeds of the sale are distributed back to all holders. This is in exchange for the NFTs being burnt, which allows these assets to keep a constant price.
Markets for blue-chip NFTs, such as CryptoPunks and Bored Apes, are experiencing a bear season. Tokenization of digital assets as well as fractionalization is becoming more popular.
Blue-chip NFTs are often difficult to obtain and can accrue value over time. NFTs issued by companies like Artfi, however, are more accessible than blue-chip NFTs. They are linked to assets such as paintings, which are usually expensive. Asif says that these NFTs are cheaper and more accessible than a Bored Ape.
Artfi is joining the ranks of FanTiger and Estate Protocol, which use similar technology in the areas of music and real-estate.
Future that is both challenging and promising
Artfi is a platform that democratizes fine art. It must not only acquire, consign tokenise, fractionalise, tokenise, and tokenise art but also create a marketplace, manage its museum, and resell the art it collects.
Asif admits that conceptualizing the flow was difficult when he started to think about how to launch his project. He says that the process has become clear enough now for the team to begin building each piece after a few months.
There is also the issue of fluctuating demand. Asif is positive Artfi’s offerings will be in sufficient demand. However, if traffic is low, Artfi may still use its private network to participate in the drop.
Artfi faces legal hurdles, just as it does with crypto. Masterworks have to undergo a tedious and jurisdiction-specific process to allow people to invest in pieces of blue-chip art.
This involves buying a painting and filing it with American regulators, The Securities and Exchanges Commission. (SEC), this is called an IPO or public offering. After that it can sell “shares” of the painting to users. This restricts Masterworks’ offer to US residents, particularly those with US bank accounts.
These challenges aside, Asif believes Artfi can succeed by unlocking value from both sides.
It aims to create an asset class of fractional fine art NFTs that retail investors can use. It also aims to encourage traditional fine art players, who are part of an industry worth around $1.7 trillion in art and collectibles, to tap into new Web3 technology use cases and increase their reach.