Purchasing artwork can get quite complicated, ranging from shelling out an exorbitant amount of money to paying maintenance fees.
Take, for example, the sale of a rare painting by India’s foremost abstract artist, VS Gaitonde. In February this year, it sold for Rs 42 crore at Pundole (an auction house) in Mumbai, making it one of the most expensive pieces of modern or contemporary Indian art in the world.
In the art world, this is just the tip of the iceberg.
“In the traditional fine art industry, a buyer spending millions of dollars on artwork only receives a one-page document as a certificate of authenticity. There is no technology to prevent its manipulation,” says Asif Kamal, founder of —a Web3 company that seeks to democratize art through non-fungible tokens (NFTs).
Artfi plans to tokenize physical artworks and then break them down into pieces (a process known as splitting) – all of which can be owned by anyone, anywhere in the world in the form of NFTs .
Its platform will buy and sell these NFTs which represent an investment in iconic, top-notch artworks from world-renowned artists such as VS Gaitonde, Sacha Jafriand more.
“In the traditional art world, collectors also lack transparency and proof of history and previous sales etc. With NFTs, in the form of genuine digital certificates, it is possible to record proof of ownership and transfer on the blockchain,” the founder said. recount The story deciphered.
Bringing new perspectives to the art industry
Asif knows his way through this industry. Having run Alturaash, an international art house and auction house, he knows the business. Although the challenge is daunting, the company expects the fractionation to eliminate the problem of exclusive ownership.
Once the startup receives a physical artwork on consignment – a process involving trusting an art gallery or auction house with an artwork for sale – the startup tokenizes it and then splits it the painting. It can be anywhere between 5,000 pieces to 10,000 pieces.
It then opens the NFTs for sale to anyone interested. “By splitting the art, we sell to hundreds of buyers, not just one. And buyers are free to trade these NFTs on a secondary market. As such, the nature of the fine art asset turns into a tradable asset,” says Asif.
It is this bet on splitting that led the project to lift $3.26 million at a $100 million valuation in a private investor-led funding round.
He is now on his way to amassing an extensive portfolio of works of art. So far, Artfi has consigned the art of MF Husain and VS Gaitonde, as well as Sacha Jafri and consigned his museum collection (worth over $10 million), and has $16 million in assets under management, awaiting conversion into NFT.
Of course, Artfi is not the first to do so. Masterworks, a non-Web3 player in the fine art segment, is already enabling users to own an exquisite work of art, starting at prices as low as $20 each.
Some well-known museums and auction houses such as Sotheby’s and Christie’s are also experimenting with Web3.
What sets Artfi apart from others
Until consignment, Artfi’s process is similar to that of any other art museum. Post this, things work differently.
The startup breaks down the digital version of the art into a grid of thousands of smaller pieces (say 10,000 pieces).
According to Kamal, each of Artfi’s pieces is one of a kind, as they have predefined coordinates assigned to individual NFTs.
The advantage here is that these NFTs, once online, can be bought and sold by retail investors on Artfi markets as well as secondary NFT markets, unlike exclusive closed markets which do not allow buying and selling. in all markets.
In addition to this, the startup is exploring ways to allow holders to receive a portion of royalties on future transactions made, as well as some features to stake their NFTs.
Skepticism around NFTs has revolved around their lack of connection to real-world assets, or a lack of utility. The project solves this problem by not only allowing customers to own part of a physical good, but also by granting holders exclusive access to its museum in Dubai (where the physical version of these paintings is displayed).
When a suitable sale opportunity is identified, Artfi may consult with NFT holders and sell the artwork at a higher price and redistribute the sale proceeds to all holders. This is done in exchange for burning NFTs, a process that allows these assets to maintain a stable price.
As blue-chip NFT markets (such as Bored Apes or CryptoPunks) are going through a bear season, the tokenization of digital and physical assets (as well as their fracturing) is attracting more and more attention.
Unlike blue chip NFTs, which often have a high barrier to entry, NFTs issued by companies such as Artfi are easier to acquire and could appreciate in value over time, especially since they are linked to assets such as paintings. “These NFTs are more affordable and accessible than a Bored Ape,” says Asif.
Artfi joins companies like Estate Protocol and FanTiger, which use similar technologies in real estate and music, respectively.
A difficult but promising future
Artfi, which is building an end-to-end ecosystem to democratize the fine arts, has its work cut out for it. Not only must she acquire, record, symbolize and divide art, but also build a market, maintain and manage her museum and resell her art at the right time.
Asif says conceptualizing the flow was a challenge when he first started thinking about launching his project. But now, a few months later, the process is now clear enough for the team to start building each piece, he says.
Then there is the issue of fluctuating demand. Although Asif is confident that Artfi’s offerings will have sufficient demand, if there is a drop in traffic, he can also use his private network of interested parties to participate in the drop.
As is the case with crypto, Artfi also faces legal hurdles in what it attempts to perform. Masterpieces must go through a time-consuming, jurisdiction-specific process to allow people to invest in top-notch works of art.
It involves buying a painting and filing it with US regulators – the Securities and Exchanges Commission (SEC) – as a public offering or IPO, after which it can sell “shares” of that painting to users. . This limits the scope of Masterworks’ offering to those located in the United States, and in particular those with bank accounts in the United States.
Asif also admits that such ideas are difficult, if not impossible, to implement in jurisdictions hostile to tokenized asset ownership. Bringing real-world assets to the channel hasn’t been easy. Artfi is incorporated in Saint Vincent and the Grenadines (SVG), through which it issues these NFT and token issuance licenses.
Despite these challenges, Asif believes Artfi could succeed by unlocking value on both sides.
On the one hand, it aims to create a new asset class of fractional NFTs and art for retail investors. On the other hand, it aims to incentivize traditional fine art players (part of an art and collectibles industry with a market capitalization of approximately $1.7 trillion) to exploit the emerging use cases of Web3 technology and expand their reach.