Fairchain wants to shake up the art market
The art market is notorious for its opacity and confidentiality. That makes it effectively impossible to track artworks in a way that ensures their authenticity — and also creates insurmountable difficulties for anybody trying to get artists paid when their work goes up in value.
What we're watching: A new startup called Fairchain aims to change all that.
How it works: Fairchain is setting itself up as an art-world clearinghouse that artists, collectors, and galleries can trust with highly confidential information about the price and ownership of artworks.
- Artists use Fairchain to generate a digital certificate of authenticity without which the artwork is worthless. The certificate can only be transferred to a new owner if that person signs a contract promising the artist a royalty payment — normally 10% or less — on all future resales.
- When the artwork is resold, the buyer only receives the all-important certificate of authenticity after they've signed the contract and the royalty payment has been made, normally via Fairchain.
- Fairchain needs to know the identity of the buyer and the amount that the work sold for, but that information is kept strictly confidential. Max Kendrick, Fairchain's CEO, tells Axios even he doesn't have access to it.
Between the lines: Fairchain makes use of the immutability of the ethereum blockchain to generate an unforgeable chain of provenance all the way back to the artist's studio. The digital certificate of authenticity will not, however, reveal the identity of previous owners, nor how much they paid for the work.
- The certificate comes with high-resolution photographs of the front and back of the work, making it much easier for an appraiser to determine whether a piece is authentic.
The intrigue: Dealers in general dislike any system that institutionalizes knowledge they used to have to themselves, or that might make it harder to sell a work. Some smaller gallerists, however, have embraced Fairchain because it allows them to bake in a small resale royalty for themselves, along with the artist.
- Parts of the system can theoretically be circumvented: Buyers and sellers could conspire to lie about the value of a transaction, for instance. But the whole point of Fairchain, per Kendrick, is in large part to create "social expectations and norms" around paying artists when works are resold.
The bottom line: It's very early days yet, but Fairchain contracts already accompany works by artists including Eric Fischl, Marilyn Minter, and Duke Riley.