It seemed inevitable that the world of fine art investment would now see decentralization and democratization through the blockchain.
In recent months, there has been an increase 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 become co-owners of digital art.
Salon is a new investment fund that aims to revolutionize the art collecting industry by assembling world-class modern art collections using the principles of Web3 and blockchain technology.
How Salon Dao works
Lounge token holders are granted participation and voting rights by the fund, which operates as a decentralized autonomous organization (DAO). Salon’s business concept is deceptively simple: investors simply need to purchase and stake Salon cryptocurrency in order to participate in the process of discovering, purchasing, and caring for the artworks in the collection.
Salon was founded in January (2022) by Social Media Marketing Manager Jordan Huelskampwho wanted to create a decentralized, blockchain-oriented art fund with the aim of disrupting the conventional art market.
Huelskamp, who previously worked for Apple, recently said she believes her multidisciplinary background will help her spot macro patterns in the art business that can be capitalized on and aggregated into a DAO.
With this objective, Huelskamp commissioned the first tangible acquisition for Salon by purchasing a work by Hanna Hur named Nine (2021) via Kristina Kite Gallery.
Huelskamp said she hopes Salon operations will attract “new generation collectors”, many of whom do not have access to primary or secondary art markets.
“Investment-worthy acquisitions require an understanding of the art market and access to the best galleries and artists,” Huelskamp said in the Salon white paper. “Conscientious investors hire seasoned art advisors to help them negotiate the market, or they use their vacation time to build their social capital by visiting international exhibitions in hopes of gaining access to key works.”
Investors only (for now)
For the time being, participation in the DAO Fair will be reserved for accredited investors only; those who do will form a legal entity known as a Limited Liability Company (LLC) in the US state of Delaware.
By offering the token as a DAO, participants can pool their resources to propose and develop new acquisitions in exchange for Salon units.
It’s a new approach to doing business, but so far the results have been mixed. Given that access to the art world is similar to tech industry data in that both can be mined for their value but are difficult to scale, it stands to reason 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, let alone symbolize it.
Not so easy
Critics of so-called “art-as-investment” startups like masterpieces and Otis claim that would-be art consultants quickly discover that making a quick buck flipping top-notch artwork isn’t easy. University of Kentucky law professor 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 ignore what he calls “cartelization” of the art market, in which large companies dictate prices and exclude smaller competitors.
According to Frye, the fact that demand exceeds supply prevents non-specialists from making money in the secondary art market. In other words, the business model of buying and selling a Picasso would be child’s play if everyone had access to works at prices well below market.
Here is the problem. Few people have access to fine art, mainly because individual pieces can be incredibly expensive.
The first art collective
The concept behind Salon is not really revolutionary. The Bear Skin was founded in 1904 by a group of Parisian art dealers and is often considered the first private investment club in art history. In recent years, the Collecteurs company of Evrim Oralkan and Jessica Oralkan has worked to create a platform where collectors can present and discuss their works.
The problem of scalability
According to Frye, scalability is the main problem with these models. He argued that the expansion of these networks is limited by the fact that the successful dealers within them have little incentive to share information about works of art that could be sold for a profit.
Finally, he expressed his skepticism towards projects that promised huge 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 stake in what is effectively a one-man business, is a necessary condition for obtaining works of art at prices below market value.”
“Imagine for a second that Larry Gagosian (a renowned American art dealer) suddenly symbolized access to his network,” Frye added. “The incentive (for Gagosian) just isn’t there.”
Huelskamp says she will use her knowledge of web marketing and data analysis to help bring out Salon’s user-driven community of collectors.
The Salon Founder said, “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 response to some of the various financial hurdles of the art world.
When asked how much money Salon has raised or how many people are part of the DAO, the company is oddly quiet.
Art should be available to everyone and tokenization and decentralized investment in art are ideas whose time has come. Salon has a good concept: the success of the project will depend on the quality of its execution. This can be a daunting task as, at present, Salon is only available to “accredited investors”. You will need to complete a form and then you will be asked to complete additional forms proving that you are accredited.
At least at first glance, the process does not seem very democratic. I was interested in joining and investing in art, but was turned down because I was not ‘accredited’. A disappointing end to researching and writing a project that apparently has great potential.
I write about blockchain, crypto, NFTs, and other disruptive technologies and innovations.