Marcelo Garcia Casil
Posted with permission from International
Business Times
Blockchain technology can
transform the way the financial world works. Besides being highly secure,
transparent and robust, the key aspect revolutionizing the industry is that
blockchain lets parties handshake and transact without intermediaries. By
combining advanced cryptography with decentralized security, blockchain
platforms democratize access to capital very much like email democratized
access to communication worldwide.
This creates opportunities
and threats for financial institutions. Well-established players who rely on
being the trusted middle man are at risk. There is a reason companies like Visa
or Western Union are researching and investing in the technology best-known for
underpinning the digital currency Bitcoin. If people can make payments and
transfer money across borders without needing a bank account or a third party,
then these institutions’ business models crumble. The blockchain technology
creates its own smart contracts to govern value transfers, meaning there is no
need for a third party to verify the transaction. Its currency is trust.
Now, payments and
remittances are not the only transaction areas dominated by intermediaries.
Other industries such as real estate and fine art are also controlled by
brokers and dealers — and they are ripe for disruption.
Fine art investment, in
particular, has operated practically the same way for hundreds of years, with
large auction houses like Christie’s and Sotheby’s setting high fees (up to 25
percent), controlling liquidity and access to information. They can get away
with it because their centuries-old reputation makes them hugely
trusted. But what if you could replace trust based on reputation with
trust based on technology?
The $56 billion art
industry is in desperate need of open and fair marketplaces that create
transparency and liquidity. Blockchain technology can provide the
foundation for a secure and efficient market that enables buyers and sellers to
transact directly without intermediaries.
Want to own a Monet? A
Van Gogh? Now, millions of people who have been priced out of the exclusive art
market, can own a piece of a Picasso. Blockchain
platform Maecenas democratizes access to fine art investment. It
converts million-dollar artworks into smaller, financial units that can be
bought and sold easily
— literally at a fraction of the cost.
For the first time, technology will allow investors, collectors and owners to
exchange shares in paintings and sculptures easily and instantly, similarly to
how stocks are traded today. And galleries benefit too. When
a museum wants to add Rembrandt to its
collection, it no longer has to ask a bank for
a large loan and then submit
to high auction- house fees. Instead, it crowd-funds the
purchase on the Maecenas platform — and still gets
to hang the masterpiece in its exhibition.
Art has long been
an attractive asset class, thanks to its
resilience in downturns and its long-term capital appreciation.
And recent surveys show interest in fine art among investors and
wealth managers is on the rise.
But despite all
that, the art finance industry is struggling to see trading volumes make new
highs. The problem is that access to information is patchy
as long as pieces are traded almost exclusively
at outdated venues. Sales are still processed manually
and settlement can take weeks. The inefficient, opaque
process discourages too many potential investors,
meaning art trades are too infrequent. In short, the
art world must join the digital age.
Maecenas aims to
make that happen. Investors will be charged a fee of just 2 percent each
trade while owners pay no more than 6 percent of the price of their
pieces. The brainchild of experts in financial technology and the art world,
the company has received funding from a Swiss venture capital business,
Polytech Investors, and galleries and collectors are lining up to list artworks
at the platform’s launch.
Masterpieces will be
traded briskly through an open exchange, giving frequent updates of what the
artworks are really worth. Portfolio managers will be able to price their
positions more accurately and diversify their risk by investing in a range of
different art assets. They will no longer need to have their funds concentrated
in a handful of hard-to-sell pieces.
Art should become a
first-class citizen in capital markets, and have rich market data feeds, order
books, indices and even derivative markets.
Blockchain can save
the art investment world.
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