Applications and future trends

Applications in the art world

The tokens application to the world of 'traditional' art could offer many opportunities by allowing the association of digital certificates with physical works to guarantee their authenticity, transfers of ownership, insurance, transport, and sales tracking, and by offering new development possibilities with a considerable impact on entrepreneurship in the art sector and on the easy usability of the works of art themselves.

These would be initiatives and forms of fundraising implemented with a view to creating a real campaign of support for the artistic and cultural museum heritage with the help of all citizens, while increasing the role (and the social responsibility) of all those involved.

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Securitization

The securitization of NFTs represents one of the new tools for the creation of ‘portfolios’ of rights on art works divided into digital assets and their distribution on the market as ‘equity or asset token’ (1).

This is the offer to savers of the fractional ownership of works of art, purchasable through currencies, having legal tender or

even crypto, which allows the gallery or museum to divest part of its investment to finance new projects, spaces, and even artists.

A small investor can own a small part of a high-value work of art (democratization of art) and that title to ownership can be

exchanged without the actual work being sold as an any other financial investment, with the aim on the one hand of obtaining

adequate remuneration and on the other of allowing a new form of support for the art ecosystem (museums, galleries,

etc.) to which a portion of the value returns for each NFT sold (2).

A recent example is that undertaken by some museums that have transformed their works into NFTs and then sold them at auction in order to obtain funding for the museum or for the system that revolved around it (3).

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Art lending/borrowing

Since it is also possible to attribute an economic value to NFTs, tokenization has given rise to a further form of their use as a ‘collateral’ in the context of lending operations, called ‘art lending/borrowing’, an investment tool that allows to the collectors not only of works of art to benefit from immediate liquidity to be reinvested in the art market itself or in other financial transactions.

This definition includes all those loans that are usually granted against a work of art given as a ‘guarantee’, or those that combine a mortgage with a pledge for the so-called ‘monetization’ of the work of art.

It works in a very simple way: the owner of a work of art requests a loan based on the value of the work itself, which he pledges as collateral. In the event of the debtor's insolvency, the lender can take possession of the work and resell it to recover the loan amount.

The new frontier of art lending seems to be 'peer-to-peer lending', i.e., personal lending between private individuals via the Internet done without going through traditional channels such as financial companies and banks, but through the channels of Decentralised Finance (DeFi) (4).

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Derived artworks

Another important application of tokenization is the possibility of

giving users the access to derivative works of art and/or

purchasing physical works of art accompanied by their digital

‘alter-ego’, making the owners of tokens 'privileged users' over

others.

With the purchase of a fraction of a work, in fact, one can have

access to a derivative work of art, such as a musical arrangement,

a version of moving images, literary material or reproductions of

the work itself, or you can access digital media that complement

the physical work, such as videos documenting the production of

the work or augmented reality visualisations.

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The tokens link the real artwork to its digital counterpart, the digital part becomes part of the physical work, increasing its value and becoming an opportunity for further sale or exploitation of related rights.

The tokenization, moreover, can enable the creation of new graphic expressions, such as, for example, those envisaged by 'gamification', which lead to the fusion of art, virtual reality and game play and are for the user an opportunity to enjoy new experiences up to the more immersive Metaverse (5).

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Marketing (events, communities, etc.)

A common example is found in gaming where the use of NFT technology can also be used to ‘reconnect or unlock unique experiences’ in real life. In these cases, NFTs are no longer a stand-alone collectible, but they become part of a larger experience between museum, art gallery and collectors or simple visitors.

Therefore, tokenization becomes a way to establish a new artist-collector relationship.

It gives the possibility of earning points on the purchase of art NFTs, for:

•  seeing them live (6) or participating in events connected to them, such as e.g. international fairs and/or training events.

•  accessing exclusive features, such as e.g., premieres and special gadgets.

•  participating in common decisions and choices within the DAO (7) or other.

•  proposing and discussing ideas and collaborate to support new creative projects in the blockchain field (8).

•  getting other NFTs for free, through limited distribution by the creators (airdrop) as a reward for a marketing campaign or   as a reward for the loyalty shown by members of a given community (9).

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Phygital merchandising

Finally, with the advent of NFTs, we can also begin to hypothesize a future in which art can be considered as a physical and digital asset to be valued and collected.

In this sense, a further opportunity is emerging to make the NFTs

‘physical’ (10) themselves through ‘fine art’ printing, screen printing, 3D printing or their declination on T-shirts, fabrics and panels, and, finally, the restitution on screens and digital frames (smart canvas) also thanks to the new platforms to support artists and collectors (11).

The so-called ‘phygital ecosystem’ is born: a hybrid environment between physical and digital which, alongside museums, cultural centres and archaeological parks, includes web platforms, social networks, e-commerce sites, blogs and sites where more and more information is sought on the events to attend and users feel like ‘augmented humans’, or transformed through their sensory capabilities into multitasking creatures capable of moving from reality to the virtual spaces of the Metaverse.

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The role of new technologies

Although to date the blockchain technology seems to be an aspect that is still evolving, we can say that the tokenization of ‘analogue’ works of art, in a world intrinsically resistant to digitization compared to other types of business due to the output and of the public, represents the best development opportunity in this sector.

This technology can play the role of ‘key player’ not only for solving some critical aspects of the art market such as the certification of authenticity of the works, the management of their purchase/exchange and their safeguarding, etc. but above all to allow new forms of investment aimed at enhancing them (as well as their restoration/maintenance/conservation) which otherwise could not be achieved.

Not only artists, art collectors, museums or galleries will benefit from it, but also the other actors that go around the art ecosystem, including the public of passionate users who will become an ‘active part’ of this change.