Background of the Project


1.development of Blockchain technology and digital currency In 2009, the first block of Bitcoin was born. A geek with the pseudonym “Satoshi Nakamoto” brought the blockchain to the world. The blockchain, a distributed ledger technology, began to attract people’s attention. In 2015, the Ethereum blockchain was successfully operated, and its smart contract technology widened people’s imagination of the digital world. The blockchain 2.0 era came. After experiencing the 2017 ICO boom and the exchanges battle in 2018 and the first year of the public chain, how to make the blockchain bring real value and innovation, has become the third-generation blockchain5s key point. The birth of blockchain technology ensures that information cannot be tampered with, reduced costs, enhanced security, and more protection on privacy. More importantly, this is a mechanism in which everyone can participate and avoid a strong centralization. It is a “trust” machine for human beings to enter the digital era. Industry opportunities brought by blockchain technology applications.

Trust is the foundation of asset exchange. Blockchain technology uses a new encryption authentication technology and decentralized consensus mechanism to maintain a complete, distributed, un-modifiable ledger, allowing participants to ensure the security of asset management, exchange, and related information via a unified ledger without having to know each other and build trust. This is of great significance for asset registration and asset exchange.

1、reduce the risk of trust.

Blockchain technology has open-source and transparent features. System participants can know the operating rules of the system, verify the authenticity and integrity of the book contents and the history of the book construction, which ensures that the asset exchange data and history are reliable and not tampered, in order to improve the traceability of the system and reduces the trust risk of the system.

2、Improve the efficiency of asset management, exchange, and settlement.

The blockchain uses distributed storage and accounting. All exchanged data is displayed in real-time on a global shared spreadsheet platform. Real-time clearing makes the exchange data more transparent and the exchange efficiency is greatly improved, thus effectively reducing the cost of asset exchange and Systemic risk.

3、Reduce asset management costs.

The original asset registration and exchange often face the problems of a long process, multiple steps, and information asymmetry. The blockchain can simplify the exchange process, reduce the exchange of asset information among different asset investment institutions, which can save a lot of manpower, material resources and time, and is of great significance for improving the liquidity of asset investment value.

4、 Improve the level of intelligence.

Since all file or asset information data can be represented in the form of code or ledger, smart contract and automatic exchange can be implemented on the blockchain by setting up the data processing program on the blockchain. For example, a smart contract can write an option to the agreement to ensure that the contract is automatically executed and defaulted. In 2019, the tenth year of the birth of Bitcoin, the blockchain is calling for new assets and values to be built and run on it, to get rid of the “air currency” doubt, and truly become the value Internet recognized by billions of people. The physical world, after entering the digital age, also needs the blockchain to solve the problem of trust, in order to achieve the free flow of value and the optimal 04 Artfinity whitepaper allocation of resources. How to achieve asset tokenization has become the symbol of the arrival of the blockchain 3.0 era.

2.Art Industry Overview

The basic components of the art market mainly include the creation, production, development, circulation, collection, and auction of artworks. The artwork created by the artist flow to the collectors through the agency of the gallery or art dealer, which is the primary market for artwork trading; the collectors resell to the auction company, and then the company sell to other collectors through public auctions, private contacts or online e-commerce, which is the secondary market for artwork trading. In addition to the artwork trading market, there will be some service-oriented and cross-industry business models. They are also an indispensable part of the scalability and growth of the art industry. The main areas include self-owned art investment and art finance services, art market consulting, art storage and logistics, art education, etc.   2.1Global Art Market Overview

In 2018,the total sales of the global art market was about 67.4 billion US dollars, an increase of 6% year-on-year. The second-highest global art market in the past decade has shown positive growth for two consecutive years. In 2018, dealer sales increased by 7% year-on-year to approximately $35.9 billion, and sales of art and decorative art and antiques for public auctions reached $29.1 billion, an increase of 3% year-on-year. Although the auction market is still stable, there are large differences between different countries and price ranges, and dealers of different sizes have also performed differently. Similar to the situation in 2014 — the highest point in the past decade (total annual sales of 68.2 billion US dollars), the growth of total global art market sales in 2018 is also mainly driven by high-end business growth, especially in the high-end market in the US. Strong. The world’s top three markets — the United States, the United Kingdom, and China together accounted for 84% of global sales in 2018, the same as in 2017.

  2.2The development and problems of the Chinese art industry 1、China’s art industry has experienced a period of rapid development and subsequent bottlenecks in previous years. It is currently at the stage of selfreflection, diagnosis, adjustment, and finding breakthroughs in innovation. 2、The complete art industry chain should focus on art trading, including art evaluation, mortgage, fund, pawn,insurance, logistics, etc., and even extend to art financial products. However, in China, this market has never formed an industrial chain system, and it is only in the period of free development of individual groups. 3、3.Looking at the current business model, the trade of art in Mainland China has the characteristics of privatization, fragmentation, speculation, and poor resource circulation. From the perspective of supply and demand in the market, art trade still presents a situation of oversupply and conformity. On the one hand, the solution of this problem depends on the overall improvement of the level of national aesthetic education, on the other hand,it is necessary to eliminate the”distrust” caused by the above-mentioned business model. Art industry asset identification and circulation problems 1.Identification problem There are serious problems in the art market, such as forgery and fake sales, false identification. According to institutional statistics, 70 to 75% of every 1 billion art trades in China are fraudulent, and the global annual market for forgery and fraud in art and collectibles is as high as $6 billion, accounting for almost 1/10 of the total trade volume of art. The crisis of trust brought about by the fraud of art has seriously restricted the healthy development of the art industry. Although there are already many evaluation and appraisal institutions in the art industry, some so-called “authoritative” appraisal institutions, and experts provide identifications through experience, “eyes”, and even “purchase” appraisal certificates. At present, China’s art certificate does not have any legal effect. In the long run, the existing identification system of “‘centralization55 has the following problems:

1、Art appraisal assessment lacks scientific standards and normative programs.At present, the evaluation and appraisal of art in China is still based on the expert appraisal method based on individual subjective experiences, such as visual inspection and hand feeling. Most of the identification points of this method are difficult to describe accurately and scientifically. As far as the industry is concerned, experience helps to eliminate counterfeit goods. However, the direct result of the lack of uniform scientific standards and normative procedures is the lack of supervision in the art appraisal industry. There are no rules and regulations to follow, and the development is mixed and chaotic.

2、There is a lack of uniform access threshold for art appraisal assessment.Evaluation of an accreditation body or assessment of an expert, not The qualifications and the approval of the relevant audit procedures include the admission criteria, procedures, and qualifications of employees. At the same time, the legal construction of the Chinese art market is relatively lagging behind, and the laws and regulations related to the appraisal of art have not yet been introduced. It is difficult to meet the current situation of the art collection, investment, and consumption of the art. Some civil engineering units and academic research institutions are engaged in appraisal and evaluation and issued certificates for society. Some individuals also use the identity of appraisal and evaluation experts to evaluate and collect fees for the public. There are many blind pursuits of money, but there is no corresponding supervision and Investigation.

3、“Centralized” artwork identification is very likely to cause benefit transfer.

3.The of the artwork and the actual value of the art have long been monopolized by galleries, art auction platforms, and evaluation agencies. Due to the sky-high profits of the art industry, institutions and sellers can collude to resell counterfeit goods to buyers. And the accreditation body or expert does not need to bear the legal responsibility for the appraisal. The industry problems are caused by the professional qualifications and professional ethics of the experts, as well as the lack of management mechanisms and the lack of legal supervision. Therefore, the art industry needs a ”decentralized55 blockchain traceability platform to store the source and attribution of art in encrypted form, In order to establish a trust mechanism shared by the industry.

2.Circulation problems

1、 Safekeeping and transportation.1The Chinese art industry chain is still missing many important components, such as art insurance. Industry experts said that the Chinese art insurance market has 1.8 billion to be developed. Although the market is so huge, China’s art insurance market is still blank. Insurance helps to reduce the damage caused to individuals after the art has some problems, and contributes to the establishment of a standardized identification system for the art market to counter the risk of counterfeit goods.
In the Western countries or regions where the art insurance market is very mature, there is a very complete industrial chain, from art valuation to auction, transportation, storage, maintenance, and repair, each is made up of professional commercial companies. The work that the insurance company needs to do is simple. China’s repeated embarrassing incidents revealed the serious lack of laws and regulations in the Chinese art industry chain, which made the whole system in a disorderly state without regulations.

2、 High transaction costs.

2 lncreasing transaction costs is a common means of limiting high prices in the art market, and the cultural relic is one of the victims. The cultural relics industry chain mainly includes artists, cultural relics, collectors and auction companies. The rental rate of traditional cultural relics trading channels is generally above 30%, the auction channel fee is >25%, and the transaction cost is as high as 50-90%. In addition, the price of cultural relics is huge and cannot be split into small transactions or investment. The high trading threshold keeps the people away and causes the problem of circulation.
Cultural relics originally had the opportunity to become hard currency like real estate, securities, energy, and gold, but due to high transaction costs and high trading thresholds, they are now degraded into niche games. If you can lower the trading threshold of cultural relics, reduce transaction costs and improve liquidity, cultural relics will become a huge market as real estate and become an important part of family wealth and corporate asset allocation.

3、 Lack of financial support.

3In addition, the current status of art finance is also due to the imperfect industrial art chain. Today, the Chinese art market will surely follow the path of commodification, asset tokenization, financialization, and securitization. It is precisely because of the excessive financialization and securitization under the premise that the road of art asset tokenization in China has not been consolidated, which has caused problems at all levels of the art market. Due to the liquidity gap, the total market value of the A-share main board is 50 trillion yuan, which is more than 10 times the market value of the new three boards of 5 trillion yuan. When the size of the artworks is 2 trillion yuan, if it can leverage high-tech technology, such as the Internet or Blockchain, to improve the effective mobility of cultural relics. The Government departments can adjust policies to improve the reliability and integrity of cultural relics transactions, we believe that the future art market space is expected to double.