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According to this article, some very expensive art pieces are going to be auctioned, and "the auction will be conducted on the Ethereum blockchain. A smart contract will determine the final price for Warhol’s painting".

If I understand correctly, the smart contract collects the money from all bids, calculates the maximum bid, keeps the money from that bid, and returns all other money to the losing bidders (is that correct?).

What I do not understand is the final paragraph: "At a recent convention in London, the co-founder of blockchain identify company Codex Protocol, Jess Houlgrave, stated that over 40 percent of all art pieces on the market are fraudulent. In this regard, blockchain’s benefits immediately come to mind – specifically the maintenance of traceable records on a public database that art collectors can view to verify their pieces."

How can the blockchain say anything about a certain fungible piece of art? How can the blockchain prevents the owner of a real artwork from replacing it with a fake artwork and selling the fake as real?

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This usually done through external services that verify the authenticity of the art piece. Is like a notary that gives you a stamp, that you publish on the network. This stamp can be used to crosscheck with the public record and verify that the seller is the actual holder of an authentic piece.

Note that you really do not need blockchain for this, but also there is no particular reason also for not doing it with blockchain.

Yet there is an advantage, if the third party publish the public record that verifies ownership, it cannot change it later to mislead people.

Finally, notice that this imply that in first instance people trust the third party.

Hope this helps

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