Revolutionizing Art Collecting with Blockchain

It seemed inevitable that the world of fine art investment is now experiencing decentralization and democratization through blockchain.

In recent months, there has been a surge in the development of NFT art collector DAOs. The premise is that by sharing the costs of what would otherwise be a prohibitively expensive asset, people can form communities that allow them to co-own digital art.

Salon is a new investment fund that aims to revolutionize the art collecting industry by assembling world-class collections of modern artworks using the principles of Web3 and blockchain technology.

How Salon Dao Works

Salon token holders are granted staking and voting rights by the fund, which operates like a decentralized autonomous organization (DAO). Salon’s business concept is deceptively straightforward: investors simply need to purchase and stake the Salon cryptocurrency in order to take part in the process of discovering, purchasing, and caring for the collection’s artwork.

Salon was founded in January (2022) by social media marketing manager Jordan Huelskamp, who wanted to create a decentralized, blockchain-oriented art fund in the aim of disrupting the conventional art market.

Huelskamp, who previously worked for Apple, said recently that she believes her multidisciplinary education will help her spot macro patterns in the art business that can be capitalized on and pooled into a DAO. 

With this goal in mind, Huelskamp commissioned the first tangible acquisition for Salon by purchasing a work by Hanna Hur named Nine (2021) via Kristina Kite Gallery.

Huelskamp has stated that she is hoping Salon’s operations would attract “next-Gen collectors,” many of whom do not have access to primary or secondary art markets.

“Investment-worthy acquisitions require art market understanding and access to top galleries and artists,” Huelskamp stated in the Salon whitepaper. “Conscientious investors hire seasoned art advisors to assist them negotiate the market, or they use their vacation time to build their social capital by visiting international exhibits in the hopes of gaining access to key works.”

Investors Only (for now)

For the time being, participation in the Salon DAO will be restricted to accredited investors only; those who do so will form a legal entity known as a limited liability company (LLC) in the U.S. state of Delaware.

By offering the token as a DAO, participants can pool their resources to propose and develop new acquisitions in return for Salon units.

It’s a novel approach to doing business, but thus far the results have been mixed. Since art world access is similar to tech industry data in that both may be mined for value but are challenging to scale, it stands to reason that this is the case.

Veteran art dealers may spend more time on a yacht or in the Hamptons, but it’s hard to put a price on that kind of access, much less tokenize it.

Not So Easy

Critics of so-called “art as investment” startups like Masterworks and Otis argue that would-be art consultants rapidly find out that it’s not simple to make a quick buck flipping blue-chip, investment-grade art. Law professor at the University of Kentucky Brian Frye told Artnet News that “adding blockchain to the mix doesn’t necessarily make things any easier.”

His final point was that these models don’t take into consideration what he terms the “cartel-ization” of the art market, in which major corporations dictate prices and shut out smaller competitors.

According to Frye, the fact that demand exceeds supply makes it impossible for non-specialists to make money in the secondary art market. In other words, the business model for purchasing and selling a Picasso would be a breeze if everyone had access to works priced well below the market.

Therein is the problem. Few people have access to fine art-mostly because individual pieces can be stunningly expensive.

The First Art Collective

The concept behind Salon isn’t exactly ground-breaking. Le Peau d’Ours was founded in 1904 by a group of Parisian art merchants and is frequently credited as the first private investing club in the history of art. In more recent years, Evrim Oralkan and Jessica Oralkan’s venture Collecteurs has been working to create a platform where collectors may showcase and discuss their works.

The Scalability Problem

According to Frye, scalability is the main problem with these models. He argued that the expansion of such networks is constrained by the fact that prosperous merchants within them have little motivation to share information about works of art that could be sold for a profit.

Finally, he expressed his skepticism about projects that promised enormous financial returns on investments in art through the use of fintech, blockchain, or any other means. “Tokenizing access to a dealer’s network, thereby reducing the dealer’s own shares in what is effectively a one-person enterprise, is a necessary condition for obtaining artworks at prices below market value.”

“Imagine for a second that Larry Gagosian (a renowned American art dealer) suddenly tokenized access to his network,” Frye added. “The incentive (for Gagosian) just isn’t there.”

Huelskamp claims she will utilize her knowledge of web marketing and data analytics to help make Salon’s user-driven collector community stand out. 

The founder of Salon remarked, “While Salon’s early members truly believe in art for art’s sake, we also embrace art as an asset class, and hope to offer an innovative answer to some of the art world’s various financial impediments.”

When asked how much money Salon has raised or how many people are part of the DAO, the company is oddly silent.

Final thoughts

Art should be available for everyone and tokenization and decentralized art investment are ideas whose time has come. Salon has a good concept: the success of the project will come down to how well they execute. This may be a daunting task because at present Salon is only available for “accredited investors”. You’ll have to fill out a form and then you’re directed to fill out additional forms proving that you’re accredited. 

At least at first glance the process doesn’t seem very democratic. I was interested in joining and investing in art but was turned away for not being ‘accredited”. A disappointing end to researching and writing about a project that ostensibly has great potential.