Fine art has traditionally been seen not only as a luxury item, but also a prudent investment for long-term storage of value. Investment in art is attractive because it is stable and appreciates long term. However, up till now, art as an asset class has only been accessible to the ultra-wealthy who could afford to invest millions in a single painting, and then had the resources to keep it insured, secure and preserved in a suitable climate-controlled environment.
The global art market is huge with an estimated $3 trillion of art value in storage, and has been warming to the potential of cryptocurrencies, partly due to blockchain's dual ability to establish the provenance of works of art and reduce the reliance on brokers and other middlemen.
The first, and soon to be launched platform that aims to democratize access to fine art investment is Maecenas – a blockchain-driven platform that allows shares of fine art to be bought, sold and traded. Through the platform, Maecenas divides paintings into fragments, and investors trade can trade these painting shares, similar to trading shares of a company like Apple or Google. The beauty of this is that you can own a fragment of an artwork, even though you could never afford the whole painting or sculpture. “It’s just like you buy a share in a company. In a way, Maecenas will be the NASDAQ of fine art investment.” says Maecenas co-founder and CEO, Marcelo García Casil.
The name Maecenas comes from Gaius Maecenas, famed Roman patron of the arts. The online marketplace will enable art owners to sell shares in works of art (worth upwards of $1m) and raise money more efficiently than they could though a bank. Owners also get to maintain possession of their artworks while sharing up to 49% of the ownership. This allows galleries to raise money while still being able to display the masterpiece in an exhibition. And as the value of the art increases, the gallery and the Maecenas investors see the value of what their shares rise. Investors will also be paid a leasing fee for use of the artwork in the gallery.
Investors, who ordinarily wouldn't be able to afford multi-million-dollar works of art, will be able buy shares or units in the work. They will then be able to sell these units later in the marketplace. Each transaction is recorded cryptographically on the Ethereum blockchain.
The current system of selling expensive artworks is far from easy. It is an old-fashioned, illiquid and often opaque market. Galleries typically go through a few reputable auction houses that charge huge fees — up to 25 percent. Finding someone who is willing to match the price which, can also be very difficult due to the large quantum involved.
A lot of the value provided by the Maecenas platform is in bringing liquidity to the product. Investors can sell/buy it in fractions, diversifying their portfolio while gaining exposure to assets that would otherwise be priced out of their reach. You can now own a piece of a Picasso. This wasn’t possible before blockchains.
Establishing the authenticity of works of art is critical to their value, and this will be done by skilled professionals. But once the provenance has been recorded in the blockchain, you never have to do it again. This takes a lot of cost out of the system.
Galleries are already lining up to sell their art on the Maecenas platform because they immediately get access to a crowd of investors. “They can auction their masterpiece through Maecenas, selling fragments of the artwork — and paying much lower fees.”
Investors who participate in the auction on the platform acquire shares in the painting which they can then tradeon the platform’s secondary market. And just like that, you have a liquid market for fine art investments.
"We want to make fine art accessible for everyone," says Mr Casil, who has an extensive background in investment banking. "The old auction houses like Christie's and Sotheby's have controlled the art market for centuries, so we think the opportunity for disruption is huge."
The alpha version of the platform has already been released, and the beta live trading platform is scheduled to be launched this year. Artworks valuing over $100 million dollar cumulatively are already in the pipelines, listing well-known names in the art world that are sure to make headlines. Artworks will also be divided into categories – investors will have a choice to buy into individual artworks or funds that contain a “basket of works” based on genre, such as Impressionist, Modern, Contemporary, etc.
Any kind of art can be auctioned whether it’s paintings, sculptures or photographs. You can only imagine how the platform in the future could be used for all kinds of valuable and tangible assets such as collectible cars, vintage wine, precious gems and other high-worth asset classes. Could Maecenas be the future of high net-worth investments?