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Blockchain is a potentially revolutionary technology for all sorts of industries, from finance to food safety, social media and retail. A startup plans to use it in the notoriously opaque world of fine art to verify authenticity.

Codex has developed a decentralized database for the market for art and collectibles like antique cars and jewelry. This protocol would help bring transparency to one of the most valuable aspects of any item in that category: its provenance. Provenance is the history of ownership of a work. Proving that pedigree is currently a painstaking and long process often done by hand, sifting through paper documents and receipts, and is often inconclusive.

Lack of proper provenance is what helps make it easier for con artists to produce fakes. Without it, many other transactional aspects, like insuring pieces or lending against them, become difficult. Codex announced a $5 million investment on Tuesday from Pantera Capital, one of the most prominent hedge funds investing in the blockchain. Joey Krug, Pantera's co-chief investment officer, joined the startup as an adviser.

Creating a decentralized ledger as Codex proposes would give both sides of a transaction direct access to provenance information — the identity of the object, its path of ownership and authenticity — all of the things that influence value. At the same time, the owner's identity would remain secret, which is often an important issue for large, wealthy collectors. The decentralized aspect of the blockchain, which stores and verifies coded information across multiple computers, eliminates the costly middleman and the risk and suspicion that sometimes comes when information is held by a single entity.

``Collectors have always balked at disclosing their assets to a central authority,'' says Mark Lurie, chief executive officer of Codex. ``Now, with the blockchain, they can prove ownership without compromising privacy. This will enable art and collectibles to flourish as a financial asset class, resulting in a larger, better, and fairer market for collectors, intermediaries and artisans.''

Codex isn’t the first to see the benefits of blockchain in the art world. Verisart is a Los Angeles-based startup founded by Robert Norton, the former chief executive officer of Saatchi Online and Sedition Art, that launched in 2015. Verisart’s mobile app uses the bitcoin blockchain to let artists, collectors and dealers verify provenance in real time. Artchain.info is another startup using blockchain to generate certificates of authenticity.

With offices in San Francisco and London, Codex is backed by Bessemer Venture Partners and FJ Labs. It also has a consortium of industry stakeholders including LiveAuctioneers.com and AuctionMobility.com. Lurie and Chief Operating Officer Jess Houlgrave are drumming up fundraising from institutional and accredited investors to support the development of the protocol.

``We believe in Codex’s vision and its ability to radically transform how business is done in the fine arts and collectibles industry,'' Pantera’s Krug said. ``We have also seen first-hand the amount of new cryptowealthy investors looking to diversify and store value. Through Codex, cryptoinvestors will have the ability to leverage the art and collectibles asset class for this purpose.”

One of the major applications Codex is developing for the blockchain is called Biddable. The software will allow holders of cryptocurrency to bid in auctions. Every time a piece of work is bought or sold, the provenance background and documentation will be entered on the blockchain, ensuring it travels with the artwork, allowing future buyers to authenticate the work and creating a record so that the piece is searchable in the blockchain.

Currently, auction houses lose significant revenue when bidders renege on items they win. To prevent that, the auction houses usually require extensive financial disclosures just to participate. Some potential bidders balk at the required disclosures and as many as 20 percent of new applicants are rejected, according to Codex, especially international buyers and holders of cryptocurrencies who don't have translated or verifiable financial records. Codex says Biddable will allow auction participants to deposit cryptocurrency into a smart escrow contract, which would deter reneging on bids, saving auction houses substantial lost revenue and making it easier for collectors to bid.