Even as one of the oldest sectors in the world, the art industry is still very much on the rise. In 2017, the global art industry was valued at almost $64bn, according to UBS and Art Basel, registering a growth of 12% from 2016. It is clearly an industry that is making many people very, very wealthy.
Yet these staggering figures conceal the vast disparity that exists within the industry, where the money and power lies in the hands of very few. Artists and collectors often end up on the sour end of the deal, losing huge amounts of money to middlemen cuts, often missing out on secondary and tertiary sales of their own work.
In steps Portion. Portion has made it its goal to democratize this ancient industry using a brand-new technology: blockchain. According to Portion's website, it "bridges art, luxury and crypto" adding that "through Portion's smart contracts and distributed technology, art and collectables enters a free market."
After first releasing its blockchain prototype on November 1, 2016, the company is now in its beta stage and is set for iOS application launch for Apple and Android in January 2019. To understand the broader implications of Portion's work in the art industry and the world of blockchain, we spoke with Portion COO Peter Engleman.
Innovation Enterprise: Why is Portion using blockchain in a legacy industry where traditional payment methods seem to have worked so far?
Peter Engleman: We use blockchain because it helps streamline a lot of the processes, the time limits and the constraints. The nature of blockchain means it can flatten out organizations by creating this standard registry and increasing transparency. The art market is one of the most opaque and the second most unregulated market in the world (just behind drugs). By implementing blockchain you're taking away the power that a few players have and really democratizing the industry.
On the payment processing side, Portion appeals to those already leveraging cryptocurrency. But you also have artists who are really interested in cryptocurrency and this is a way for them to get involved in blockchain in a traditionalist and low risk way.
IE: I guess a lot of people don't understand blockchain yet, so you're offering an easy way for them to get into it then.
PE: It's our ethos that in two years no one will be talking about blockchain as an interesting "thing". It's just going to be how smart businesses operate.
In a lot of the conversations we have with artists and galleries we don't go deep into the blockchain. We just try to make it as user friendly as, say, sending an email so it's so easy everyone can get into it. We see Portion as an opportunity to go beyond the hardcore blockchain and crypto fans, making the technology a bit more mainstream by obacerating a lot of its complexities.
IE: Your concern is that if you push the blockchain too hard, it will end up having the opposite effect and put people off?
PE: Yeah exactly. We have a lot of people who love the blockchain and cryptocurrency, but for Portion to become more mainstream and grow the way we anticipate it will it has to be an afterthought. It needs to just be really, really good technology that helps improve industries and make things more efficient. When we send an email or dial into a call, we don't really care what the background technology is, it's just important that we communicate.
IE: This year you're holding a Christmas giveaway. Can you tell me a bit more about what you hope to achieve with this initiative?
PE: It's about demonstrating Portion's brand and core ethos. All the goods are aligned to art and collectables for the younger collector, so we have Basquiat skateboard decks and Burning Man tickets, that sort of thing. All these products fit the culture of what our community is, and we want to drive that energy outwards and continue to build and grow our community.
As we're going into launching our security tokens in 2019, the message we want to push is that we'll be paying dividends. We want to be seen as having the "Robin Hood effect" where we give 100% dividends of exchange fees and this giveaway permeates that story and that core value. On top of that we'll be rolling out physical goods into our exchange platform just when that's wrapping up.
IE: I love that phrase "The Robin Hood" effect.
PE: That's what we like to think of ourselves as!
IE: How would you respond to claims that the blockchain hype is over?
PE: A lot of people I talk to are sitting on the sidelines and letting other people make mistakes before they decide on their strategy. This actually creates an opportunity for startups and smaller companies like Portion – the super agile and nimble – by giving them a chance to catch up and surpass legacy firms.
People saying that the hype is over actually benefits businesses like Portion because it gives us the opportunity to out-innovate and out-maneuverer some of the bigger organizations that are too scared to invest in or explore this fascinating technology.
IE: Is there value in getting rid of the work blockchain altogether like Forrester recently proposed?
PE: You certainly shouldn't just say you're a "blockchain company" because that's like how people said they were an "internet company" in the 90s and we all know where that went. Blockchain should just be a component of how things are done and not a value proposition.
IE: How important is the community proposition to your customers?
PE: It's all about community. The businesses of today are all about taking power away from the customers and making profit out of it, but the businesses of tomorrow will give power back to the customers.
This is the ethos of blockchain and of Portion. We are creating a value proposition where everyone wins, that makes everything easy and profitable and cuts out all the intermediary processes, fees and headaches for the artists and the collectors. Driving that community is what will sustain growth.
We built Portion because we looked around at the art industry and saw that it needed transparency. There were too many fees, as well as too many bottlenecks weighing down the industry and misaligning the field. That's where blockchain comes in and creates the decentralization that flattens it all out and helps build a community where otherwise a lot of people are excluded.
IE: How do artists benefit from this technology?
PE: The current platform is for the exchange of digital art and we will be rolling out the platform for physical works soon. Part of this means we are giving artists new means of expression with digital art, but we will soon provide a platform for traditional means of expression via physical art.
Inherently, Portion takes a lower fee than traditional intermediaries, it's normally 10% on either side but with art tokens its 0% buy or sell side, so all profits are held by the artist. We are also building a royalty structure whereby the artist can start capturing royalties on secondary and tertiary sales of the goods that they are otherwise unable to capture.
Portion is all about community, decentralization and flattening out the system so it benefits everyone in the industry, not just giving all the power and money to a few.