Cryptos and blockchain: a borderless new economy for the art market
The art world is traditionally slow to change, especially to a concept as difficult to grasp as new terminology like cryptocurrencies, tokens, coins, blockchain. But for sure even the most riotous of traditionalists will not deny the evidence the international monetary system is facing one of the worst crises ever. Fiat currencies around the world are crushed by the enormous weight of public debt and trillions printed as a recovery fund. Price inflation is an increasingly topical issue and is putting small and medium investors around the world at a crossroads: continue to fuel a fraudulent system ready to explode, or invest in innovation and decentralization?
The arrival of Coronavirus has paved the way for further intervention by central banks. The management of the pandemic and the flood of money poured into the United States and other countries is distorting the prices of many markets, creating a fake recovery. As China, the US and other states blame each other for a scapegoat, the world economy is preparing to increase its money supply far beyond bailing out subprime mortgages.
We increasingly read the phrase "investing in cryptocurrencies to protect against inflation" in the most varied blogs or information portals. Now more than ever, this is a theme to be addressed and shared.
Cryptocurrency is proving the world we can create a more solid economy focused on human action, where digital money is going to be a reliable store of value. The store of value in a currency is the quality that guarantees stability over time, reliability in savings and investments, and individual freedom to decide what is best to do with one’s own money.
The possibility of exchanging money quickly and easily, without asking for anyone's permission, is creating increasingly large and strong communities.
Cryptocurrency and blockchain are increasingly becoming synonymous with transparency and democratization, creating a more ethical approach to the global economic system. This is most true with the art investment, also. Blockchain may definitely put an end to the main two traditional concerns with the art system: opacity and information asymmetry.
Transparency is a topic of much debate and controversy within the art world. In fact, the art world has been characterized by a lack of it. Compared to other markets, the art market is relatively small and unregulated. Its dim reputation casts a gray shade on the ambiguous behaviour of the major galleries and auction houses. On the other side blockchain in the art market promise that, for instance, within the context of auctioneering, there will never be a concern as to whether a potential bidder has funds to actually obtain a piece she has bought. The transparency a blockchain network brings to the ledgers of its users ensures a punter must have sufficient funds to transact any business through the network.
Asymmetric information, also known as "information failure", occurs when one party to an economic transaction possesses greater material knowledge than the other party. In the art industry, sellers usually possess more precise information about the work of art and its estimated value than the buyers. Not all information relevant for making an art investment decision is or can be revealed. Auction houses, galleries and dealers are interested in achieving the highest prices and are usually successful in not sharing their full insight; the result is low or even no transparency at all.
In contrast, a blockchain transaction is immune from information asymmetry due to the security mechanism hard-wired into the protocol. Transaction information stored in the blockchain is protected from tampering, that is, rewriting the transaction record comes at a prohibitively large cost. This technology ensures that all project participants have access to all the information exchanged between them over the duration of a project. It can thus radically reduce information asymmetries and secure more trustful relationships between project participants.
There are many industries involved in this common effort to build a new borderless economy based completely on value. One of the newest and most innovative projects is Idoneus (https://idoneus.io), and is definitely pioneering the art market. Well, not only the art market of course: but being an art dealer, that's what immediately got Idoneus on my radar.
What would you think of a platform that allows you to immediately sell or buy a painting in exchange for cryptocurrency convertible into dollars, or - without going through a traditional currency at all, and without any need for an exchange - by trading it for a different asset? Maybe a luxury car or a house by the sea? All with smart contracts that guarantee the originality and authenticity of the asset, as well as the incontrovertibility, immutability and total transparency of the transaction on the blockchain? Maintaining total and direct control of the transaction at all times, without external intermediaries?
Well, now you can do that.
Created by a Swiss Company whose members are leading industry professionals, Idoneus is reinventing a new secure digital economy, that makes it simple and easy for artworks to be purchased, sold, or otherwise experienced, at the same time enabling private investors, family offices and institutions greater speed, security and trustfulness. It’s a borderless economy that provides freedom of choice and control.
At the heart of this system is the ability to use an asset to buy an asset, directly, without the need to convert to cash, irrespective of the physical complexities and variability across each asset type. Cash can be used, but it is not a requirement, since Idoneus uses a common secure unit of value that translates across asset classes, called IDON. With IDON, its holders can send and receive payments quickly and securely and almost instantly convert assets to tokens, eliminating high holding costs.
The advantages for the whole art industry in terms of transparency, security and trustfulness are evident: the age-old problem of trust between the two contractors, who are not required to know their respective identities, would be completely resolved upstream. The legitimacy of the transaction is guaranteed by their digital identities and by the blockchain security protocol, while the smart contract perfectly solves all issues relating to authenticity, provenance and chain of ownership of the work (the so-called "due diligence"). Two birds with one stone.
The art world is traditionally slow to change, as I stated at the beginning. But I can bet they will all hear about IDON in the near future. Of course, when everyone starts talking about the “new” thing, that thing is not longer so new. Meanwhile, since I don’t want to be left behind, I already opened my crypto wallet today.
