The traditional art market is opaque, exclusive and difficult for creators to navigate. But Bitcoin could usher in a renaissance.
This is an opinion editorial by Rebel Money, a visual artist who focuses on Bitcoin themes and advocates for other artists in the space.
For centuries, the traditional art market has been dominated by established auction houses and galleries, where works of art are sold for millions of dollars. Despite its longevity, the art market has been criticized for its opaqueness, exclusivity and the difficulties faced by new collectors when navigating its intricacies. In fact, it has been described as "the most corrupt industry in the world."
Given that Bitcoin was designed to counter large, corrupt monetary policies, many wonder if it can also disrupt the shady and unscrupulous practices of the art world. If so, how might Bitcoin achieve this transformation?
From an artist's perspective in the traditional art world, comprehending the intricate economics of selling their artwork and where the funds end up is a daunting task. Unfortunately, artists are often left in the dark about the financial aspects of their craft, which can be disheartening and even exploitative.
There appears to be a deliberate effort to infantilize the artists, depriving them of a comprehensive understanding of the financial transactions involving their work, and rendering them vulnerable to manipulation by powerful intermediaries in the industry. Art galleries are not immune to such practices, as they take advantage of the complex processes involved in the purchase of artworks, which typically requires the involvement of multiple intermediaries such as banks, auction houses and art dealers.
This can create a sort of sleight of hand, making it easier for galleries to obscure the actual sale value of artwork, and resulting in the artist being kept in the dark about the true value of their work.
The murky economic model applies not just to artists but also for new collectors trying to navigate the market. Large galleries often change prices depending on who they are selling to, which can make it difficult for new collectors to acquire pieces. This tactic allows galleries to maintain control over who owns the art, limit the supply and ensure that the art will not end up in the secondary market, leading to a Cantillon-style effect.
In addition to the challenges faced by new collectors, museums and prestigious collectors often have access to special work and can pay less for pieces. Having their names associated with certain pieces can also boost the value of the artwork. For example, the Guggenheim has reportedly received discounts of 30% or more for certain pieces because of their association with the museum.
These pricing tactics and exclusivity practices can leave new collectors feeling frustrated and unable to acquire pieces, no matter the cost. Even celebrities like Daniel Radcliffe, known for his role in the “Harry Potter” movies, have been turned down when trying to acquire pieces. Radcliffe told Time Out London that, in 2012, he attempted to purchase a Jim Hodges piece but was told, "No, we’re waiting for a more prestigious collector to take that."
While it may be tempting to assume that large auctions at industry giants such as Sotheby's or Christie's are fair and open, the reality is that the price of art at auction can still be manipulated. Despite the seemingly-transparent nature of auctions, there are still ways for insiders to control the outcomes. One example is the practice of "chandelier bidding," where an auctioneer takes extra phantom bids from non-existent bidders in order to artificially inflate the price of a piece. This technique is used to create an illusion of competition, driving up the price and creating a sense of urgency among bidders. In addition to chandelier bidding, collectors may also bid on lots simply to raise the bidding temperature, even if they have no real interest in the accompanying piece, in order to protect the value of their existing collection.
As a result, auction prices may not always reflect the true market rates, and may instead be influenced by these behind-the-scenes tactics.
Can Bitcoin Fix This?
The use of Bitcoin in the art world has the potential to address the issues of corruption and inequality in the industry. Bitcoin offers a more efficient and transparent transaction mechanism, eliminating the need for multiple intermediaries and enabling immediate payment for artists after the sale of their artwork.
However, the human layer of Bitcoin adoption in the art world is complex. While Bitcoin has the potential to be a powerful tool for good, it can also be misused by those with malicious intentions. Nonetheless, Bitcoin has the ability to incentivize ethical behavior in the art world. As Bitcoin is not subject to inflationary pressures, it reduces the exploitation of artists in revenue sharing and eliminates the need for potentially-questionable practices.
Bitcoin auction sites such as Scarce.City and Plebeian Market have recognized the gap in the market and are leveraging Bitcoin's capabilities to create a more ethical approach to art sales. By charging lower fees and offering a transparent bidding process open to all, these companies aim to disrupt the traditional gallery and auctioneering worlds. With direct payments to artists and collectors after the auction, the use of Bitcoin in the art world could bring more fairness and transparency to the industry.
And Bitcoin's disruptive potential extends beyond just providing a more efficient and transparent means of buying and selling art. It has the power to fundamentally change the traditional art world's structure by offering a decentralized, peer-to-peer relationship between artists and collectors. This shift is crucial because it enables artists to have direct relationships with their collectors, rather than relying on galleries to control access to their work.
In the conventional art market, the artist's relationship with the collector is often non-existent, and it is the gallery that dictates who gets to collect the artwork. However, with Bitcoin, artists have the opportunity to create beautiful and meaningful relationships with their collectors, as both parties navigate and learn from each other. This relationship-building process is facilitated by the fact that Bitcoin enables transactions to occur directly between artists and collectors, without intermediaries.
The emergence of digital art collectibles, such as Counterparty tokens, Ordinals and Rare Pepes, has further amplified this effect. With these digital art collectibles, artists can easily send their pieces to collectors around the world and reward them with additional sub-assets in the future. This new dynamic empowers artists to grow their work organically as their relationships with their collectors develop.
Counterfeiting and the forgery of artworks have plagued the art industry for centuries and continue to be major concerns for galleries, auction houses and collectors. In fact, the Fine Art Expert Institute's report suggests that the market for fake artworks is worth approximately $6 billion per year. Moreover, in some categories of artwork, the percentage of fake artworks may reach as high as 70%. To make matters worse, some experts suggest that up to 20% of art pieces displayed in museums around the world could be counterfeit.
The rise of Bitcoin presents an opportunity to combat art forgery and counterfeiting through its immutable ledger. This technology can provide a transparent and secure platform for art sales, addressing the issue of authenticity and provenance. By embedding tokens in physical art pieces or digital art, these assets can be tracked transparently from owner to owner, ensuring that the buyer is purchasing a piece of authentic art.
This method of tracking art pieces has significant potential to mitigate the risk of forgeries and counterfeits in the art market. It also offers art collectors and investors a transparent way to purchase art pieces with confidence, knowing that they are genuine and have a reliable provenance. Furthermore, it may discourage counterfeiters from creating fake artworks altogether, as their creations can be easily detected and traced back to the source, leading to legal consequences. As such, Bitcoin can play a pivotal role in reducing the circulation of fake art, ensuring that the art industry remains a safe and secure place for art collectors, investors and enthusiasts.
1494 All Over Again
More and more art and artists are being drawn to Bitcoin every day. This is not a surprise, as creators are primed for adoption of Bitcoin. Artists know that proof of work and energy transmutation have always been a part of the alchemical process of painting. Selling artwork for sats is an artist's way of mining.
With greater adoption, Bitcoin principles such as leveraging open-source information, emphasizing transparency, remaining borderless and promoting decentralization will influence the traditional art market through the nuts and bolts of the network and, perhaps more importantly, the culture and behavior surrounding it.
It gives artists and collectors new tools to sell art and forge relationships directly. While there will always be a role for the gallerist, transparency is the basis for growth in Bitcoin art, and building off of it can create a more ethical and creative ecosystem.
In 1494, the invention of double-entry accounting ushered in a new era of human prosperity and a golden age of artistic expression. While it’s not a silver bullet, Bitcoin offers a real hope of echoing history and paving the way for a Renaissance in the art world in terms of creativity, freedom and ethics. Embrace the great restoration.
For more, listen to the Bitcoin Magazine Podcast episode featuring a conversation between Rebel Money, Dennis Koch and X Nardo.
This is a guest post by Rebel Money. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.