







An Andy Warhol painting is up for auction -- on a blockchain. Or to be more precise, 49% of Andy Warhol’s 1980 work "14 Small Electric Chairs" is currently on sale.

For the first time ever, the painting will be sold in shares -- a concept made possible by blockchain technology. By purchasing digital certificates with digital currencies like Bitcoin or Ether, participants can bid for fractions of Andy Warhol’s masterpiece, which is valued at over US$5 million, and sell it later on the Ethereum blockchain.





“Perhaps fractional ownership would not appeal to a purist — a traditional collector who likes to be a keeper of his acquisitions,” says Eleesa Dadiani, owner of London’s Dadiani Fine Art, the art gallery responsible for the auction. She describes the blockchain-based auction as "un-privatizing history," a way of opening artwork to the public domain as opposed to having pieces disappear into "a bonded warehouse or someone's property."





It appears to be working. Launched last week by the gallery’s luxury marketplace Dadiani Syndicate and blockchain platform Maecenas Fine Art, the auction, originally scheduled for a six-week period, is now expected to last just three or four weeks due to far higher than expected interest.





Head of strategy at Maecenas, Juan Dominguez, is pleased with all the attention. He told me that the company’s customer screening officer — who deals with know your customer (KYC) regulations — is “very busy with many new member applications.” People need to apply to the Maecenas website, confirming their identity and address, before they are able to bid on auctions.





Once people have signed up and been approved, they are able to view the artwork up for auction — in this case “14 Small Electric Chairs” — and deposit Bitcoin, Ethereum’s Ether or a cryptocurrency called "art," created by Maecenas and sold in an initial coin offering late last year.





Once the auction starts, participants can submit a bid for a share of the artwork. Users submit the maximum amount that they wish to bid, as well as what they think the entire piece is worth. This kind of auction, known as a Dutch auction, runs for up to six weeks, or until the funding target is reached. When the auction closes, a blockchain-based smart contract will collate the bids and determine the final price per share of the painting.





After the auction is over, those who placed a high enough bid will be issued their share of the painting, which they will see on their Maecenas account. For now, Dadiani Fine Art will hold the physical painting, though ownership is split between successful bidders. Unsuccessful bidders will have their cryptocurrency returned to their account in whatever form they submitted it.





The Warhol auction, which Maecenas claims to be the first blockchain-based art auction, uses a smart contract developed by Maecenas. And it's just the beginning. Maecenas and Dadiani are already well into talks to secure the next piece of fine art to be auctioned via the blockchain.





“The next painting is going to a big one — think along the lines of a Picasso, Rembrandt, or a Monet,” said Dominguez. “The success of the Warhol auction will spur on the next one.” Maecenas is hoping it will be able to announce the next painting in around a month.





People have speculated about the potential of blockchain, the technology that underpins Bitcoin and other cryptocurrencies, and how it could change the way fine art and other alternative investments are bought and sold.





Blockchain technology allows transactions to be permanently recorded on a database shared between computers, without relying on a trusted third party to authenticate or process it. Immutability and security are written into blockchain technology. When no single authority is in charge of the ledger, no one may remove or alter entries.





Blockchain could potentially bring efficiency and transparency to the buying and selling of art, which is currently a fragmented and opaque marketplace, overrun with fraudsters and scams. But blockchain could also mean an uncertain future for art-market middlemen like traditional dealers, auctioneers and auction houses.





The world famous British auction house Christie's has been exploring how to use blockchain for auctions of everything from fine wine to classic cars. Last week it gathered blockchain experts for a day-long conference in London — entitled “Exploring Blockchain — Is the Art World Ready For Consensus?” — aiming to “spark innovation and collaboration” in the auction industry.





In general, however, the art world has been slow to adapt to new technology. This is something that the owner of the gallery Dadiani Fine Art is keen to change.





“I approached the auction from a dual position of both art dealer looking to preserve traditional values and integrity of fine art, and a technology buff who wants to see things evolve,” Dadiani said.





The minimum bid in the Warhol auction is US$5,000, with a cap of 100 individual investors, something in place to satisfy regulators. The auction has attracted people from all over the world, according to Dominguez.





“They're all sophisticated investors, meaning this is typically not their first fine art investment, and we’ve seen interest from both from the crypto scene and from the traditional art market,” he said. Bidders have so far hailed from Asia, the Middle East, Europe -- almost everywhere except the US. To limit potential risks, those from the US were not allowed to take part.





“When you are spearheading something and you have no previous or lateral demonstration of successes and failures, you expect things to go wrong," Dadiani said. "So far it has all gone to plan. But then again this was not a whimsical endeavor, it is something that we’ve all been working on, in one form or another, for a long time and we all knew this day would come.”





Maecenas is not releasing the total amount invested so far, but according to Dominguez, a small number of people have substantially pushed the total up, something he said was expected.





Dadiani says, “The reception has been mixed to some degree but mostly positive; the blue-chip market is fairly liquid but there is always demand for any opportunity to increase liquidity.” What has stood out for Dominguez, however, is the volume of people that have tried to sign up to take part in the auction, many of whom had no prior knowledge of blockchain and cryptocurrencies — and this is without any kind of paid-for advertisement.





“The Warhol auction is not something we publicly advertised,” he said. “And those who have bid often had to learn about crypto and blockchain first. We’d expect this to get easier with future Maecenas blockchain auctions.”





Billy Bambrough is a London-based writer.



