Nile

Today, more and more people desire to purchase artworks. Just four years ago, when I mentioned Yayoi Kusama, Kim Whanki, and Park Seo-bo, people would ask “are they celebrities?” Now, the same people mention that they have seen a piece at Paradise Hotel, a collaboration in Louis Vuitton, and ask me to link them when there is a good offer available. In the past, when I contacted investors to attract funds, most venture capitalists used to look at me with suspicion when I said that I would divide and sell the ownership of artworks through blockchain. Some of the CEOs even tried to persuade me to continue my career as an accountant or gave me life lessons on how to stay on the right path. Today, most of them greet me by saying "I want to invest in the company, are there stocks available?"

There are numerous factors that have changed the world, but among them, the perception of art is shifting from an object of enjoyment to an object of investment. Most people become interested in financial technology if it creates income; interest arises when my money has been invested or if I am studying to invest. If stock investment had simply built up economic literacy, no one would be as interested as they are today. For a long time, art has been considered a slush fund, a tax evasion tool for the wealthy, but certainly not an investment. However, for the traditional rich, art has always been both an object of enjoyment and an object of investment. They have been steadily acquiring art since a long time ago and in their portfolios, there are stocks, real estate, and art. According to the annual wealth report by KB Securities, art works account for more than 20% of luxury goods purchases. It is certainly a smaller proportion compared to stocks and real estate, but art has always been present in their portfolios, reaping record-breaking returns.

Then, why has only the wealthiest been able to invest in art?

First of all, art is quite expensive. Artworks by famous artists cost tens of hundreds of millions, billions, and even hundreds of billions of KRW. While high-end cars that everyone dreams of such as Rolls-Royce, Lamborghini, and Ferrari, do not exceed 2 billion KRW(approximately $1.6M) no matter how expensive they are; the price of art pieces by artists such as Picasso, Chagall, and Monet, which we cannot even ride or sleep in, is ineffable. Surprisingly, even the works of an artist you have never heard of in your life are traded at a higher price than a Rolls-Royce. It is easy to find works by artists such as Yayoi Kusama and Lee U-fan, which were a few hundred or tens of millions of KRW when purchased from galleries or artists, sold for hundreds of millions or billions of KRW after 5~10 years. Wouldn’t it be normal for everyone to be interested? However, it is uncommon to hear stories of art investment given that the entry barrier is high due to its price, and most people give up on the purchase itself.

Secondly, the issue of asymmetry of information. Words such as "closed" and "special" represent the art market since it is difficult to obtain information such as price, or to establish a network for purchase/sales in the market. Buyers and sellers often trade without knowing the exact information or price and in the majority of the cases, one party has far more information and experience than the other, leading the transaction to end unilaterally. After all, it is a market where information is money. In order to succeed in art investments, one must understand the market and be familiar with the artist and work, and if not, get assistance from a reliable source. Due to the exclusive nature of the art world, most individuals get help from someone rather than participating on their own; if the entire process of decision-making and trading is entrusted to advisors, there is a high possibility of moral hazard. This is why companies and funds, which used to believe in financial power, IT technology, and famous galleries and auctions, get a taste of failure.

Lastly, the management of art pieces. Various handling issues can arise, such as placing expensive works in ordinary homes where temperature and humidity cannot be controlled, where sprinklers operate with liquid rather than gas, and limited insurance coverage. The cost of fixing these problems is significant, and may not be solved at all. Most of the works are sensitive to light, temperature, humidity, and so on, and if they are slightly mismanaged, mold, discoloration, or cracks may occur, significantly reducing the value or price of the work. In the end, the issue of management inevitably acts as an entry barrier for the public to own and invest in artworks.

The wealthiest were able to monopolize investment targets that were difficult for the public to access due to the reasons described above, earn abnormal returns, and even enjoy values that cannot be monetized such as appreciation of art and high-end culture. But the world is changing. Through social media, online platforms, and NFTs, the interest of the public has reached art; and the latest technology, including blockchain, has opened the way for the public to participate in expensive works by famous artists that only the wealthy could purchase.

The combination of art investment and blockchain technology, which started in the form of fractional investment, is expected to take a step forward through DAO. The governance system of DAO will enable the separation of professional advice and decision-making. Through the governance system, DAO members can participate in purchasing and selling decisions as independent art collection and investors, establishing themselves in the art market as influential collectors. Everyone will be able to enjoy the artistic value to the fullest by securing a dedicated space to display works and by forming a cultural community.

The global art market, which was worth 80 trillion KRW(approximately $65B) in 2019, is expected to grow to 100 trillion KRW(approximately $81B) in 2023. The Korean art market has oscillated within a band of 500 billion KRW(approximately $3B) for the past 10 years, and rapidly grew to 1 trillion KRW(approximately $6B) in 2022. Global interest in Korean artists continues to grow; Frieze, one of the world's top three art fairs, was successfully held in Korea, and global auctions and famous galleries such as Sotheby's and Christie's are seeking to enter the Korean market. Today, the Korean art market is emerging as the center of Asian art culture the whole world has their eyes on.

Now is the time for us to seize new opportunities in the art world.