Dealer or no deal: Why pay a middleman when you buy art?
Blockchain aims to ‘democratise’ art sales. Will it work?
It was to have been the star lot in Bonhams’ contemporary art sale in February 2016. Andy Warhol’s 2m-high painting, 14 Small Electric Chairs, was made in 1980 by reducing the scale of 14 separate paintings which he made in 1967 as part of his Death and Disaster series, and combining them in one work.
The electric chair image was taken from a 1953 news report on the death chamber in New York’s Sing Sing prison. Single 1960s examples from that series are highly rated by collectors and have sold for as much as $20.4-million.
Bonhams’ later combination work, in which each image is reversed, was billed as a rare example of an historic icon and estimated at £4-million. But the Warhol market was going through a period of self-doubt, and the painting went unsold.
Over the years, 14 Small Electric Chairs hasn’t had much luck. In its previous outing at auction at Christie’s in 1999 it also went unsold when it carried a £430,000 estimate. But now, two-and-a-half years after its last auction appearance, it is back – not in an auction room or a gallery, but as a Blockchain investment challenge where it has been valued at a virtually unchanged £4.2-million.
The painting itself is not for sale exactly, just shares in 49% of its purported value. The controlling 51% is owned by Georgian art dealer Eleesa Dadiani, who is believed to have been the unsuccessful seller at Bonhams.
Although buying shares in an artwork is not new, this is the first artwork to be offered for multiple shareholding, or “fractionalised ownership”, via Blockchain-based technology. On her website Dadiani claims to be “the first fine art gallery in Europe to begin trading in cryptocurrencies and the first gallery in the world to accept multiple cryptocurrencies as payment for works of fine art”.
For her Blockchain activities she has set up the Dadiani Syndicate for multiple investments which her website says will turn “digital wealth into real wealth”.Her partner in the Warhol venture is Maecenas, an online investment platform that intends to specialise in high-value art. CEO Marcelo Garcia Casil says they hope to democratise the ownership of art which most people could not afford to own.
From tomorrow, anyone with $5,000 worth of cryptocurrency can buy into the Warhol once they have paid their 2% commission charge and satisfied Maecenas they are not money-laundering.
The share offer will remain open until the £2-million or so has been raised, and the company already has 500 hopefuls lined up before the auction begins. Buyers won’t get to live with the painting, but they will be able to trade their shares at the touch of a button through blockchain – which would be good news for them if the value goes up.
But that could take time. Traditionally, when a work of art is unsold at public auction it becomes “burned”, and difficult to sell at that price again for a while.
But Maecenas, which does not, incidentally, reveal the painting’s auction history in its provenance details, claims it is “not subject to the market dynamics of an auction house”. It “provides access to a far more varied audience than traditional auction houses, potentially increasing the chance of realising a strong market value”.
At a conference at Christie’s last week on the use of blockchain in the art market, there was much talk about how it could change the way things are done. Apart from providing more secure records of ownership and introducing new buyers to the market, it could challenge the existing structure that revolves around auctioneers and dealers, introducing peer-to-peer selling via blockchain and cutting out the middlemen.
But although current market players are keen to employ what is useful about the new technology, they are unlikely to change their ways too radically.
Private information about buyers and sellers and particularly of the art itself, for instance, is too valuable a commodity for dealers or auctioneers to share with each other, let alone with a public sales platform. Also in question is whether collectors and investors will trust blockchain any more than a reputable dealer or auctioneer.Someone has to put the technology in place after all, and someone has to apply notions of value to the work being traded in. Maecenas, it would seem, is being a middleman in the same way that auctioneers and dealers are. Either way, it is going to be interesting to see if blockchain can succeed where the auctioneers have failed.
- © The Daily Telegraph