While some media like to focus on Bitcoin’s connection with dark markets, the technology could actually make legal markets more secure. For example, it could protect the art market from the world’s third most lucrative crime—art forgery.
Two British men, John Drewe and John Myatt, ran what The New York Times describes as the
20th century master scam, the largest fraud ever in the world of contemporary art. The men met in 1986. Myatt painted copies of the works of celebrated artists such as Matisse, Braque, Le Corbusier and Giacometti, while Drewe passed them off as originals in the art market.
At the time of their arrest in 1995, they had sold over 200 pieces and made close to $2 million. The scheme wouldn’t have succeeded, however, if there were a more secure process of verifying and certifying works of art.
According to The New York Times:
Forging a Giacometti or a Braque was the easy part. The genius of the con rested in faking the provenance.
Provenance in the art world is the recorded history of a work of art. Drewe was good at falsifying such a record once he received a piece from Myatt. He started by making the piece look old. Pouring coffee or dust on it, or putting it under a doormat for days did the trick of aging a painting fast.
The real work, however, lay in developing a believable paper trail. A prospective buyer, an art gallery or an auction house needed to be convinced that a work of art was genuine. To achieve this, Drewe donated thousands of dollars to art establishments, by which he enticed those who ran them to give him access to their archives. Then he fraudulently catalogued the forged pieces, sometimes by tearing pages from records and gluing new ones in their place.
Another part of his document falsification involved tricking monastic priests and the families of the deceased artists to sign certificates for his forgeries. He also paid friends to claim past ownership of art pieces, which created a false paper trail.
The Drewe and Myatt scam happened to come to the attention of the public, but it is just one of the numerous cases. In 2007, NPR ranked art forgery as the third most lucrative organized crime after drug and arms trafficking, with $2 to $6 billion annually changing hands.
A report by the account firm Deloitte states that forgery is the biggest concern of art stakeholders around the world, including financial institutions, which treat art as an asset. From the report:
Authenticity related issues are a unified threat to the art market: around 75 percent of all stakeholders surveyed agree that ‘authenticity, lack of provenance, forgery, and attribution’ are the biggest threats to credibility and trust in the art market.
The blockchain, the decentralized ledger underlying bitcoin, could offer a perfect solution for securing provenance in the art world. The ledger is accessible to everyone, allowing no one the ability to change records arbitrarily, but only through a consensus. It could store hashed data about a piece of art—such as its year of creation, it’s chemical composition and the artist’s identity—as a unique and immutable digital representation or identification.
In addition, the blockchain could keep track of each transfer of ownership. Anyone who buys art could examine its digital print before paying for it, and then the seller could make a transfer on the blockchain using encryption and smart contract functionalities.
With this system, there would be no catalogues to steal, no room for creating a false history, nor any opportunity to build fake identities.
Buying a piece of art through the blockchain would also eliminate much of the cost that comes with third-party authentication services. If you wanted to buy a piece of art, you could just access its history on the blockchain. You would need to involve experts only when there is doubt about the matching of its physical properties with its digital print.
With reduced ability to introduce forged pieces into the market, the cost of insurance would go down.
The art world has already introduced innovative forensic systems, such as carbon dating, that identify art pieces in terms of their age and chemical compositions. Several startups are already building art provenance systems on the blockchain. Verisart of Los Angeles launched in March 2015. Peter Todd serves as a board adviser on their team. Todd is one of the best-known bitcoin core developers.