Everledger Plans Blockchain Database to Combat Art Fraud
Everledger, the London-based startup known for uploading specifications on 980,000 diamonds onto the bitcoin blockchain, has announced a partnership with Vastari, a fine art and exhibition database.
“Everledger and Vastari are a natural fit as we’re both in the business of protecting provenance," said Leanne Kemp, co-founder and CEO of Everledger. "For us it’s about creating a permanent record to protect authenticity of an item, for Vastari it’s guaranteeing an item's provenance while it’s mobile.”
Vastari, in which Everledger holds an investment stake, acts as a middleman between art museums that are looking for new pieces and private art collectors that want to increase the value of their art by getting it exhibited in public. This new partnership will see the art information possessed by Vastari written immutably to the blockchain.
Kemp explained that the data is written into the public blockchain, as well as Everledger's own permissioned ledger.
“Having a permissioned ledger allows us to better serve industry," said Kemp. "It creates a system where accessible permissions are tightly controlled, with rights to modify or even read the blockchain state are restricted to a few users, while still maintaining many kinds of partial guarantees of authenticity and decentralization that blockchains [permit]."
She explained that each art institution on the permissioned ledger could be considered a separate node.
“One might imagine a consortium of 15 art institutions, each of which operates a node and of which 10 must sign every block in order for the block to be valid,” Kemp said.
While Everledger had success with diamonds because of the gems' clear cut characteristics, fine art is a different beast. Bernadine Bröcker, Director at Vastari, explained that there are four things that are looked in art.
“There are key factors that are tracked on every piece of art,” Bröcker said. “The provenance, which is who owned it; the exhibition history, which is where we come in; the literary references that the work of art has been referenced in; and the vitals of the work of art – such as the size, what it looks like, title and the medium.”
It’s the ambiguity of art that makes it so much more difficult to track and offer fraud prevention.
“Fine art and antiquities are complicated objects which cannot be simplified with 40 data points,” Kemp explained. She explained that the firm's focus will be on "trackability", along with movement of the pieces with relevant transaction processes when it comes to financing and insuring the works.
But what really has the art world interested is the promised decentralization of blockchain technology. If ever there is an industry that is opaque, it’s the art world, with relatively few parties exhibiting outsized control. Bröcker explained that there is concern in the space that one group might control all the data. However, with a blockchain, that becomes impossible since each party involved can view all the data.
“There is such a hunger in the art world for someone who is not trying to sell something, but just ... to fact check and help their art be seen,” said Bröcker.
Fighting art fraud
Everledger’s platform created a straightforward solution to the diamond world, whereby each diamond was recorded on the blockchain. Once that information was stored, it couldn’t be tampered with, making it harder to offer counterfeit diamonds. Further, with over £100 million in insurance paid out for jewelry theft every year, there is an obvious use case for a shared tracking mechanism.
With art, it might be an even bigger market.
“There have been some estimates, of all the art trade – which is billions a year – we’ve heard that 70-75% of the art that is traded is misrepresented,” said Bröcker, though because few firms talk about it, tracking can be difficult.
“Fine art is becoming seen as an asset in its own right that people want to be trading in and a lot of interesting financial products are being created,” she said.
And with the trading of art only expected to increase, transparency of data is of the utmost importance.
However, with most of the current use cases being blockchain solutions, widespread adoption is essential for successful prevention of fraud.
“It only works if everyone takes part, so we are talking with the major players so it becomes industry standard ... and so that it actually becomes part of the day-to-day,” said Bröcker.
Kemp added that Everledger expects to add two additional asset classes to its ledger sometime in 2016.
“We are in talks with a number of lead luxury brands and fine goods manufactures where identification of an indelible digital incarnation of the object is important to the object's provenance and supply chain security,” she said.
She explained that where her firm's place the supply chain is when knowing provenance is necessary. From there, Everledger develops a business model around each industry it is approaching.
The company expects to generate revenue by selling its data, charging for search and recovery of data, and potentially licensing its platform to third-party developers.
Image by Shutterstock.
Disclaimer: CoinDesk is a subsidiary of Digital Currency Group, which has an ownership stake in Everledger.
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