by Michael Hunter
Investing in art is becoming more accessible through blockchain, as the latest financial technology opens up a new way to buy into the full range of works, from the avant-garde to the old masters. The rise of Digital Ledger Technology (DLT) has made it possible to buy tradeable tokens linked to blockbuster pieces.
One of the best-known names in the trade is Masterworks, a New York-based investment house which buys art and sells shares in what it calls “multi-million dollar, blue-chip artworks”.
With 125 staff based on the 57th floor of Manhattan’s One World Trade Center, the firm buys art. Its portfolios are securitised in line with oversight rules set by the main United States financial regulator, the SEC. Ownership is tracked using the blockchain, right down to specific paintings. This so-called fractional ownership means art buying is now a possibility for many more people.
The blockchain is used to track ownership, right down to specific paintings, making so-called fractional ownership a possibility for many more people. Open and reliable proof of ownership is available to would-be buyers of artists from Banksy to Cecily Brown, and even some old masters.
Masterworks has “over 1,000,000 users from around the globe” according to its website {https://www.masterworks.com/} from first-time buyers to experienced collectors. It has raised over $1.2bn in capital as of January last year. Scott Lynn, its founder, claims to be the first company “to offer art investment products to the retail investing public,” adding:
“Contemporary art has outpaced the S&P for nearly the past 30 years overall, but there has been no way to invest in it.” Blockchain and DLT has changed that. Properly transparent and regulated use of the tech can connect fresh investment capital with a new source of assets, with provenance and colour all of their own.
But with as with any frontier tech, with the opportunity comes risk. There are unverified reports that some globally resonant paintings have been tokenised and offered to investors, via non-fungible tokens or NFTs, without the full regulatory oversight seen elsewhere. Perhaps the most famous example is Leonardo da Vinci’s Salvator Mundi. The renowned portrait of a long-haired, blue-robed Christ holding his right hand up in a casual-looking blessing gesture was sold for over $450mn by the old-school auction house Christie’s in New York. Now in private ownership in the Middle East after the record-breaking auction, this Renaissance masterpiece has been linked with an unregulated fractional sale.
Caveat emptor in the online age
An NFT proves ownership of a portion of a blockchain record, but it does not provide definitive evidence of the physical asset claimed to back it. These tokens are, in this sense, similar to safety deposit boxes at banks. An investor may have the key to an empty vault. The saying “buyer beware” has rung out through the ages for a reason.
Digital finance expert Oliver Oram, the founder of HyYield, an AI-powered blockchain platform, points out that art sales using the latest ownership-tracking tech are part of the wider wave of innovation in the industry:
“Tokenisation isn’t really about the art itself, it’s about infrastructure,” he told The Intersection. “It shows we can turn illiquid, high-value real-world assets into fractional, verifiable and easily transferable instruments.”
He was also the chief executive of Chainvine, which applied the same principles to fine wine and art, as well as other areas. “The asset class changes, but the core challenge remains the same: creating a single reliable record of ownership, provenance and custody.
“That’s where tokenisation adds real value slashing information asymmetry and unlocking capital in private markets and commodities.”
There was a mania for NFTs in everything from internet memes to parts of the so-called “metaverse”, the new form of online space, pioneered in the early part of this decade and now more peripheral. Amid much hype on social media and a slew of celebrity endorsements, the NFT boom was lit up by the $69m sale at old-school auction house Christie’s of an entirely digital work in March 2021. It secured global attention for the artist – Beeple – and his piece, a rendering of a gurning emoji under construction on scaffolding called “Everyday: The First 5000 Days”. The climax of the sale was watched by 22mn people online, with the artworld and the investment industry paying stunned as the landmark price smashed through forecasts.
Times have changed since the heady days of the Beeple boom. The metaverse has been eclipsed by the rise of Artificial Intelligence. Beeple-style emojis and NFTs in general are not as lucrative. Christie’s shuttered its specific digital art department last September, with sales of digital art now run from the 259-year old firm’s 20th and 21st century art category.The closure was a quiet one. At the time, a spokesman for the venerable London firm told the trade press Christie’s “made a strategic decision to reformat digital art sales”. Sotheby’s was reported to have taken similar action in 2024, when the bulk of its specialist metaverse and NFT team left.
Trading volumes in art NFTs, as tracked by DappRadar, a blockchain database site, fell from a high of $2.97bn in 2021 to just $197mn in 2024. Nonetheless, after the boom gave way to a more sober market, it had also set a precedent. Blockchain and digital ledger technology have offered a new route of entry into the art market, as well as wider alternative assets. Concern that fractional ownership could see underlying assets over-securitised is, says Oram, “not fundamentally a blockchain problem — it’s a governance and legal one.” He adds: “You need one authoritative issuer with exclusive rights to mint the token, backed by strong legal title and tightly integrated with custodians, insurers and registries.
“Blockchain gives you immutability and traceability, which is excellent at preventing fraud and unauthorised copying of important works.”
According to Deloitte’s latest Art & Finance Report, covering last year in detail, the use of tokenisation has evolved. “NFTs have come to be viewed less as a new art genre and more as technological infrastructure for distribution and ownership. Interest has shifted toward investment-driven use cases, especially NFTs linked to physical artworks.” The ninth edition of the consultant’s annual analysis said “the novelty-driven appeal” of NFTs “appears to have diminished”, with the technology now being used “in provenance tracking or digital ownership”.
Deloitte found that: “While the initial hype has cooled due to over-speculation and market volatility, the underlying applications of NFTs remain highly relevant....From digital authenticity certificates to programmable ownership rights and resale royalties, the utility of NFTs continues to evolve, offering real solutions to the art ecosystem’s longstanding inefficiencies.”
Oram points out that there is another reason that tokens tracking non-financial assets has appeal: “Art and fine wine attract new capital because they’re culturally familiar and far easier to understand than abstract financial products”, he says.
Digital ledger technology is making art a bigger part of the asset-backed landscape, allowing retail investors to add a splash of tradeable colour to their portfolios. It means owning art is no longer solely the preserve of multi-billionaires. As tokenisation moves into the mainstream, the capital flows that will be unlocked by properly transparent use of the technology could become a spectacle in itself. Investors and the industry will be watching closely, as this eye-catching corner of the market frames the outlook for frontier financial tech.
