AN UPGRADED ART MARKET FOR A DIGITAL AGE

Abstract

The traditional art market suffers from systemic market failures resulting in inefficiencies. There is no universal system or database to keep track of provenance information. The lack of provenance results in authentication issues, raising risk within the market. Additionally, the physical form of traditional art presents numerous problems including theft and transaction costs. Copyright and trademark laws attempt to address these market failures through regulation and enforcement mechanisms. However, these legal mechanisms are inefficient tools to regulate the art market because they rely on voluntary record keeping and retroactive enforcement through the judicial system. In contrast, blockchain technology, as an efficient regulatory and enforcement system, solves the art market problems that the law cannot fix. This innovative technology can solve the complex legal problems that the art market faces daily. Blockchains are immutable ledgers that store impeccable provenance information. Several blockchains have a native form of artwork—non-fungible tokens (NFTs)—that work seamlessly with the technology. NFTs take the physical aspect out of art, allowing art to exist digitally on the blockchain, where they cannot be damaged, stolen, or forged. Blockchain technology presents a novel solution to the physicality, authenticity, and provenance problems in the art market.