How will NFT’s provide the fix to frauds in the art and retail industries?

How Art & NFT's Are Linked

The art market is estimated at $50 billion a year and the world of high fashion, or Haute Couture, is valued even higher, Louis Vuitton, Gucci and Chanel combined are valued over $50 billion. With such a high value placed on art and consumer goods markets this will always lead to a thriving black market of forgeries and knockoffs. A study released by the Organisation for Economic Co-operation and Development (“OECD”) and the European Union Intellectual Property Office (“EUIPO”) in 2019 estimated the counterfeit market is worth over $500 billion. Putting an end to the counterfeit market has been a losing battle for decades.

A non-fungible token (NFT) could help reduce this shadowy industry of forgeries and counterfeits.

To simply explain NFT’s they are a digital certificate of ownership of a virtual item that is backed by the blockchain. Blockchains have three core strategies, cryptography, decentralization and consensus, there measures make it very difficult to fraudulently change. With the Ethereum blockchain and the move to ETH 2.0 further improvements are coming in the way of proof of stakes and sharding. I will cover these concepts in another article but think of the blockchain as a digital string that connects everything that has ever happened to a digital asset with numerous layers of security.

Currently it requires professionals with highly specialized machines to assess whether a work of art is authentic. Even then it can come down to the opinion of professionals. The painting titled The Polish Rider is believed to be a Rembrandt however there are some in the art world who believe it is not by the famous painter. Currently there is nothing to prove it is an original Rembrandt worth millions apart from people’s opinions of how the painting has been done and the use of brush strokes and how some of the detail in the face appears to resemble Rembrandt’s style.

How could a NFT fix this issue and potentially stop the forgeries market?

NFT Artwork

The creation of an NFT is quite a simple process, there are apps that can create you one in minutes. The ease of creation does not take away from the security levels and history attached to the NFT through its blockchain. A NFT could be minted with a picture of the art piece and any accompanying info. This unique code for the NFT is then attached to the painting. Now you have the physical asset, the painting, and a digital asset, the digital copy of the artwork and further details such as artist, history etc. To put it simply the code on the painting is linked to the NFT and vice versa.

Individually the NFT and artwork do not do much to stop forgeries, however, together they provide undeniable proof the artwork is authentic. This is achieved simply by the fact of ownership of both the physical art and the NFT. The NFT cannot be copied, and counterfeits cannot be made. By having this digital asset that has all the details of the art and by showcasing the history of ownership you can prove the piece of art you have is original because the unique identifier for the NFT is the same as the physical artwork identifier code.

Essentially you are creating a digital certificate that is sold with the physical asset to prove what you have is what it is. Someone selling a copy of the artwork would not have access to the NFT or be able to create a duplicate NFT, therefore you would know the artwork is a copy and not the original.

The above scenario is currently playing out in the reverse order. Artist Beeple, who sold his digital artwork at Christies for $60 million, sells his digital art via NFT and then sends you a physical asset in the form of a plaque with the details of the NFT.

The above example is happening in the fashion world where watch makers like Patek Phillipe and others are creating NFT’s linked to the physical item, even stores such as Luxe Watches is creating NFT’s linked the physical watch. Both scenarios allow owners to prove their watch is original both physically and virtually.

This is a simple use case for the NFT market, digital assets linked to their real-world items in order to prove authenticity and history of the item. For example, you could prove without a doubt that your watch is a Rolex and it was first purchased by Obama because the NFT would have all this information. That Rolex is now worth a lot more.

Where else are NFT’s popping up in the fashion industry?

Nike, Dolce & Gabbana, Gucci and many others are creating digital assets for use in the metaverse. A prime example, Gucci sold an NFT on the Roblox platform for $4,000 which represented one of their handbags, the real word handbag costs less than the digital version.

The metaverse opens an entirely new market for fashion brands and the early adopters are paving the way for this next wave of buyers in the metaverse. NFT’s are more than just a jpeg of a monkey, just like the internet is more than just a way to send messages to people’s computers or how your phone is used for more than just making calls.

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