Security Token Essentials - Fine Art Tokenization

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20 Sep 2021

In our series going deeper into the trends for the next big thing for the crypto market Security Tokens today we take a look at the tokenization of fine art One of the user cases often pushed forward for the advantages Security Tokens can bring to an existing market is fine art The democratization of art giving ordinary people the chance to own a piece of famous artworks the chance to diversify small portfolios into a high performing sector the chance to bring liquidity to a very illiquid and elite market are all quoted as main drivers So what is the current state of play who is actually achieving anything in the market past whitepaper ideals and can you actually buy Security Tokens for art work now and sell them on secondary markets What comes next in this video will try to present a snapshot of things as they are now In 1986 two enterprising mail order business in Australia purchased an original Picasso sketch for 10 000 and then offered it to the public cut up into 500 different pieces for 135 each causing quite a stir from art lovers Fast forward to 2009 and the Chinese government looked at the idea of democratizing the ownership of great art and through legislation introduced cultural artwork exchanges where shares in artwork could be bought and sold They were immensely successful but were closed down by the government after they fell prey to wild speculation and suffered many cases of fraud So as blockchain has the ability to offer transparency and greater protection against fraud and the new Security Token landscape offers the opportunity for new more efficient funding models new entrants are clamouring to offer their solutions Let s take a closer look at what is currently out there - Masterworks io This project is running on the Ethereum blockchain and singles out artworks for tokenization having already taken a Andy Warhol 2 million piece called 1 Coloured Marilyn and made advance sales of the shares and now working with a 8 million Monet offering shares for future sale The model is quite straightforward the painting is bought at auction advance admin fees added 1 per year for 10 years and shares sold In the process they register a new company for the piece and gain SEC approval of it as an investment completing the actual sales as the permission is granted No one person is allowed more than a 10 interest minimum investment is 200 and the majority of the token holders vote on offers for sale and once sold the capital is divided and given back to the investors You can even see the SEC application that is in process and filed on their website so it appears to be a very transparent operation with full legislative protection under SEC regulation A Of course it is too early to comment on liquidity and how well the secondary market operates but being Regulation A the tokens will not be locked down for a year the question is how long the SEC approval will take Maecenas co Is another ethereum based blockchain offering with its own ART token that went to ICO to raise 15 million just to build their team their offering their platform on the existing Ethereum blockchain The ART tokens are used within the auction process for works of art being sold currently are 10 of the ICO price and have been subject to large volatility in the last few weeks bouncing up to 4 times the value Also at one point the CEO stated that all would be fine with the project whilst the price of Ethereum stayed above 200 which he has since revised to say they will now have to operate on a shortened runway They have also achieved a successful project with an Andy Warhol picture called 14 Small Electric Chairs which they tokenized 49 of the artwork with a dutch auction system in June with their UK partners Dadiani Syndicate who specialized in digital wealth to physical assets Their latest project is to partner with Evershift exchange and offer a Picasso up for tokenization which has also involved John McAfee promoting the idea FeralHorses co uk Offer a platform for selling art pieces into shares that can be traded on their platform At present they do not operate a blockchain solution but are partnering with Codex to bring blocchain authentication of artworks into the offering but not yet onboarding tokenization Co-art is an EOS platform solution that is in the stages of fundraising in the sector So lots of noise in the space and lots of future promise it just will take a lot of work and application to realize the potential