Modernizing Art Ownership in the Digital Economy

Art represents an increasingly considerable portion of an individual’s assets. In a near post-pandemic world and following years of social limitations, many people are refocusing their time and funds on culture, community, and passion investing. Art ownership will play a strong role in this new world. As the Deloitte Art & Finance Report 2021 states, “collectors’ strongest motivation has consistently been the passion and emotional value associated with art ownership.”

The pandemic has emphasized the importance of art and has given way to multiple exciting ways to experience and own art such as Online Viewing Rooms, NFTs, and the Metaverse. On the other hand, the ownership of art has remained stuck in a place where only a small portion of the art market can invest in art and reap its benefits.

Due to the art market’s resilience to economic crises, art is seen as a reliable tool for storing, maintaining, and appreciating wealth. Fine art is regarded as a stable, value-preserving asset class that can act as a safe haven against inflation and other fluctuations in the larger financial market. Art also has the potential to deliver exciting returns on investment, with certain art category indices greatly outperforming the S&P 500 each year. In 2020, for example, a 12-month return rate of 20% was observed in Global Impressionist Art. This is compared to a 16% return for the S&P index in the same year (Deloitte Art & Finance Report 2021, 22).

The strong performance of the art market and the clear financial benefits of art ownership have increased the demand for art investment vehicles. An increased emphasis on social impact and emotional assets further establishes art one of the most attractive alternative assets. As Deloitte continues, “59% of wealth managers in 2021 stated they have seen greater demand for wealth management services aimed at protecting, enhancing, and monetizing the value of art, up from 28% in 2011 and 40% in 2016” (Deloitte Art & Finance Report 2021, 99).

Despite strong financial and social motivations to participate, the art market is plagued with substantial barriers to entry. Key challenges in the market include illiquidity, low transparency, lack of information, and artwork access. While art’s intrinsic value as an illiquid asset is what makes it a strong store of wealth, the process of finding and acquiring valuable art assets is an arduous and risky endeavor. Artwork investment requires trusted market expertise, management, and ongoing diligence: services not available to the typical investor. Authenticity issues, lack of provenance, and forgeries further undermine investors’ ability to realize significant and stable returns on art investment.

The Art Market’s Traditional Barriers to Entry:

• Access to artwork
• Access to information
• Access to expertise
• Liquidity
• Transactability
• Transparency
• Trust
• Inconsistent Regulatory Standards

Individuals’ demand for art as an asset cannot be met within the art market’s current framework and needs to be modernized. The art market’s current barriers to entry have ultimately limited the supply of viable art assets.

The Artory Solution

Artory is creating the next generation of financial products by building investment instruments on top of the most trusted physical artworks. Through trusted data from Artory’s network of independent partners, Artory is linking NFTs to vetted physical artworks to be offered as financial instruments through alternative investment platforms, crypto marketplaces, and private offerings.

Artory’s NFTs are certified with transparent and ongoing due diligence from trusted, independent institutions such as leading independent art appraisal and advisory firm Winston Art Group. In creating a connection between investors and trusted art world institutions, Artory takes a vital step in democratizing and modernizing the art market: giving individuals access to information, returns on investment, and a level of trust that is typically reserved for the upper echelon of the market.

By removing traditional barriers to entry, Artory’s certified NFTs enable the art market to reach a wider community of investors. Through the tokenization of physical artworks, Artory can offer fractional shares of an asset and allow investors to hold percentages of a range of different artworks from a range of different categories.

Predicting the popularity of tokenization in 2021, the Deloitte Art & Finance Report 2019 states, “In the future, low-net-worth individuals who would usually be excluded from this type of investment opportunity may be able to own a fraction of an expensive work of art. This could prove particularly valuable and interesting for small investors who have not been able to meaningfully invest in fine art in the past” (Deloitte Art & Finance Report 2019, 126).

Benefits of Tokenization

Tokenization addresses the traditional barriers to entry of the art market by:

• More Access to Artworks: Artory will tokenize a range of trusted artworks from Old Masters to emerging artists, allowing investors to buy shares of their favorite artworks at a lower cost
• Improving Liquidity: Artory tokens will be traded on secondary markets and artwork owners can sell shares of their artwork while maintaining custody
• Higher Transactability: Artwork shareholders don’t need to enter a gallery or auction house to sell the artwork they own
• More Trust & Transparency: Ongoing due diligence by trusted art institutions is transparently built into Artory’s certified NFTs so investors don’t have to worry about the authenticity, provenance, or condition of the artworks they own
• Access to Information and Expertise: Artory’s data products allow investors to be confident in their investment decisions
• Clear Regulatory Standards: Shareholder rights, legal responsibilities, and ownership requirements are embedded in Artory’s certified NFTs

With the increased digitization of the art market, tokenization is the natural next phase in artwork investment. According to the Hiscox Online Art Trade Report 2020, “For the majority of traditional art world operators, the pandemic has exposed an overdependence on certain traditional sales and promotional channels (physical art fairs, gallery exhibitions, auctions etc.) and how vulnerable they currently are with such limited digital strategies in place. An online presence is more likely now than ever before to keep the art world afloat, and it is providing a fast-track for the lagging digital transformation we have seen in the wider art industry,” (Hiscox online art trade report 2020, 18).

Artory is modernizing art ownership in this new era by opening access to the highest echelons of the art market.

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