For centuries, Fine Art and Collectibles has been a unique asset class, offering both financial returns and portfolio diversification, as well as bringing emotional fulfillment. Unfortunately, those interested in Fine Art and Collectibles are often deterred from participating due to high barriers of entry and skepticism surrounding verifiable values. Issues surrounding the accessibility and transparency of the art market are underlined in the 2017 Deloitte Art & Finance report, which uses a full year of research and deep market analysis to identify the key strengths, weaknesses, and challenges of the art market today. The information highlighted in the report provides vital data on the central issues facing the art market, and more importantly, gives insight on how technology could be used to solve them.

One of the most important takeaways from the report is the continued increase in the demand for luxury assets. The report finds that the population of Ultra High Net Worth Individuals (UHNWI) is expected to rise by 43% in the next 8 years. Currently, an estimated $1.62 trillion of UHNWI wealth is allocated to art and collectibles, and this number will continue to grow. It is estimated that in the next 8 years this already incredibly high number will increase to $2.7 trillion.

This growing UHNWI population has created a demand for luxury assets, and this demand will only continue to grow in the future. As a result, many wealth managers are looking to diversify. In fact, according to the Deloitte report’s survey, 78% of wealth managers now state they think Art and Collectibles should be included as part of a wealth management offering.

Many of the problems presented in the report center around the art world’s inability to affectively deal with such an increasing demand. With an increasing demand comes a desire for a more sophisticated and dynamic approach to managing art-related wealth. There are a number of unsolved challenges in the art and collectibles market: verifying authenticity, lack of provenance, forgery, and attribution remain threats to the market’s reputation. As the wealth and management industry continues to grow and expand its investment in art-related services, there is a parallel heightened concern regarding the lack of transparency in the art market. Overall, the unregulated nature of the art market remains a key hurdle.

Finally, the report presents a case for the modernization of the infrastructure of the art market in order to improve transparency. The Responsible Art Market Initiative (RAM) published its first set of guidelines in the report, stating that as the art industry continues to grow, and art values climb to record levels, expectations will emerge in respect of market conduct. Moreover, a vast majority of industry professionals and collectors agree on a need to modernize business practices to meet the expected standards of a transparent, trustworthy, and developed marketplace.

However, all is not completely lost behind this opaque veil. Some key takeaways from the report confirm that innovative approaches to the market’s weak points also provide rich opportunities. And while there are various initiatives to improve transparency and the infrastructure around the Art and Collectibles market, these efforts are thus far and small scale. So where do we go from here?

The 2017 Deloitte Art & Finance report states that blockchain could revolutionize the art industry, and we at Codex Protocol agree that blockchain is the future of art market modernization.

Unlike all other large asset classes, the Art and Collectibles market lacks a title registry. This is problematic because it hinders the ability to buy, sell, securitize, insure, and lend against the asset class, as well as prevent fraudulent actors. Before now, a central registry to establish a work’s true value would have been impossible because it could not have been trusted to safeguard information and remain neutral and impenetrable. This is extremely problematic because the majority of the value of a work of art is related to its provenance (ownership history) and authenticity. The Codex Protocol team wants to fix this, and the answer is blockchain.

We are proposing an entirely new approach. In order to demystify the provenance of art works and collectibles, we are bringing provenance onto the blockchain. We are creating a title registry that tracks a work’s history of ownership through a neutral and decentralized verification. This is the best way to ensure an item is authentic, because it is vetted by a number of experts that are not invested in profiting from its sale. This will finally bring clarity and consensus to valuations.

We are solving one of the art world’s greatest problems by creating a transparent public infrastructure coupled with a decentralized consortium of experts to validate authenticity.

We at Codex Protocol are sure that our approach will be accepted and adopted because we are backed by a consortium of 5,000 auction houses and trusted industry stakeholders committed to establishing and supporting the highest standard of validation and valuation. Codex is excited to be creating what no other organization has built yet: a consortium that ensures a new industry standard, finally correcting some of the biggest problems facing the Art and Collectibles market.

We at Codex Protocol are building real-world applications for blockchain, and we are positive that the widespread adoption of this approach will bring the art market into the future.