Digitalizing the art trade: Sotheby’s became friends with eBay, but can it warm up to blockchain?

In recent years, Sotheby's successfully adopted to digitalization, shifting many of its auctions to online marketplaces. Nowadays, however, Blockchain technology is threatening to dramatically disrupt the $60 billion art market and to diminish Sotheby's role in the supply chain of art.

For nearly two and half centuries Sotheby’s was able to preserve its position as one the world’s preeminent gatekeepers of art without altering its operations. And so, the auction house’s executives were daunted at first when asked to digitalize their organization.[1] Nonetheless, in recent years, Sotheby’s successfully embraced technology: from adopting information systems to moving its auctions to online marketplaces. In doing so, it has improved its services and significantly expanded the reach of its business. Nowadays, however, Sotheby’s management is facing a new wave of digitalization: Blockchain technology is threatening to dramatically disrupt the $60 billion art market and to diminish Sotheby’s role in the supply chain of art.


New forms of digital disruption

In 2016, Sotheby’s $4.2 billion auction sales resulted from three primary value add activities: (1) serving as an intermediary between sellers and buyers, (2) securing the transfer of art work, and (3) authenticating art and assessing its value.[2] Blockchain mitigates much of the need for a middleman to fulfill each of these functions. Through blockchain, market players are now able to record bids and validate transactions. Start-ups, such as Maecenas, are looking to democratize access to art.[3] By accepting cryptocurrencies they are reducing the high transaction costs associated with art trade and enabling investors who cannot afford multi-million-dollar artwork to acquire shares in a piece and collectively purchase it. Furthermore, blockchain promises to solve problems regarding the opaque money trail in the business. The authentication blockchain enables also introduces opportunities to trade forms of digital art, which were previously difficult to exchange due to the complexity of recording original ownership and preventing piracy.[4]

The disruption, however, is expected to have some limits. Marcelo Garcia Casil, co-founder of Maecenas, admits that establishing the value and authenticity of a new piece of art will still require the expertise housed in organization’s such as Sotheby’s. But once a piece has been authenticated for the first time, since it will be recorded on the blockchain, there will no longer be the need to repeat this process each time the artwork changes ownership.


Sotheby’s digital leadership (with limits)

Sotheby’s has demonstrated awareness to many of these concerns, declaring “embracing technology more effectively” as its second key strategic priority.[5] Indeed, in recent years, it has lived up to this promise. It first leveraged technology to systemize information about its global network of clients, enabling Sotheby’s to provide clients with a consistent experience when they arrive at offices in different cities. In addition, the organization reproduced its extensive catalogues online. Most significantly, in 2014, Sotheby’s partnered with eBay to live-steam its auctions.[6] In doing so, it allowed small-scale collectors who were previously excluded from its auctions to participate in the process and it exposed millions of others to the Sotheby’s brand. Since opening the platform on eBay, Sotheby’s has continuously expanded its online offerings, creating functions on its website as well as mobile and Smart TV apps for online-only bids. The online sales of art have also enabled Sotheby’s to supply relatively cheaper art, which it previously could not justify selling in its physical auctions due to the low profit margins. In 2016, online sales reached $155 million.[7] Observing the profitability of this new business model – which no longer requires extensive production costs associated with traditional auctions – Sotheby’s management has rapidly increased the number of online auctions. The market share of online sales is expected to continue to grow at a 25% rate over the next decade.[8] In the long run, Sotheby’s announced that it intends to leverage blockchain technology to preserve ownership over artwork; however, its management has also explicitly stated it has no plans to use cryptocurrencies.[9]



A path forward

In order to preserve its leadership, Sotheby’s should accelerate the adoption of blockchain as a means to record provenance of artwork and, in particular, leverage it to begin trading with digital art. At the same time, while it further expands its online presence and opens up to a new customer base it should not abandon two key aspects of its traditional operations. First, it should ensure it preserves its relationship with high-end clientele, which allow it to remain an authority in the legacy art space. Second, it should promote live online auctions that provide an experiential aspect of art purchasing. In doing so, beyond simply functioning as a distributor of art, it can differentiate itself from competitors that merely provide a more “Amazon-type” purchasing experience.


Open questions

  1. Will Sotheby’s be forced to adopt cryptocurrencies in order to compete with other start-ups and small art galleries? Will doing so diminish its credibility among high-end clientele given some of the negative associations with cryptocurrencies?
  2. To what extent will embracing blockchain to validate art ownership diminish the role of Sotheby’s experts? How long will they remain relevant?


(Word count: 781)


[1] Conrad De Anelle, “Sotheby’s and Christie’s Adapt to Digital Age,” New York Times, March 11, 2016,

[2] 10k

[3] James Titcomb, “Fancy buying shares in a masterpiece? This site will let you,” The Telegraph, May 20, 2017,

[4] M. Philos Zeilinger, Technol, 2016,

[5] Form 10-K Annual Report, p. 7, Sothbey’s, Feburary 27, 2017,

[6] John Dizard, “Auction houses embracing digital technology to sell to the new global rich,” Financial Times, September 18, 2014,

[7] Form 10-K Annual Report, p. 8, Sothbey’s, Feburary 27, 2017,

[8] Conrad De Anelle, “Sotheby’s and Christie’s Adapt to Digital Age,” New York Times, March 11, 2016,

[9] Matthew Wall, “How Bitcoin is infiltrating the $60bn global art market,” BBC, July 25, 2017,

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Student comments on Digitalizing the art trade: Sotheby’s became friends with eBay, but can it warm up to blockchain?

  1. This was a very interesting read and relevant issue to consider given the rise of blockchain and its growing number of potential applications. I agree that, for the purposes of accrediting the age, journey, and ownership of a piece of art, blockchain could become an incredibly important disruption to this industry which has relied on human records and appraisals to date. That said, Sotheby’s should use blockchain as a tool to inform its operations, not as a replacement for them. I disagree somewhat with the argument above in that I believe Sotheby’s will continue to provide a critical value-add to art auctioning by leveraging the information from the blockchain to determine the value of a given piece, even after the item has been bought initially; because value changes over time, depending on shifting preferences, new historical learnings, and demand, the blockchain will not inherently capture an appropriate price for a given item. Sotheby’s cites in its online brochure that every item offered for sale at auction is presented with a pre-sale estimate “determined by specialists based on factors like the recent performance of comparable items at auction, overall art market, condition, and rarity”…in addition to provenance. As such, even after a piece has been authenticated for the first time and captured in the blockchain, there will remain a need for the organization’s internal expertise to continue to assess its value for auction.

  2. I disagree with Katie, the model is currently inefficient as Sotheby’s serves as nothing more than a middle-man making the market less efficient. With the rise of the digital age, the role of Sotheby’s has changed from determining provenance and value to providing a service and making a market. As technology continues to penetrate these historically ‘market-maker’ driven industries, Sotheby’s is faced with a challenging predicament: adapt or slowly fade away. Given their role, name recognition, and Rolodex, I think Sotheby’s should opt for the former and partner with eBay to build out an entirely digital experience while leveraging blockchain technology to systemically catalog the entire art world. By creating the master catalog, Sotheby’s can help to create a marketplace for art that efficiently matches buyers and sellers. Blockchain can serve two purposes: determining provenance and authenticity, while maintaining the privacy of buyers (something very important to large collectors). Given that privacy is of the utmost importance for many buyers, it is logical for Sotheby’s to adopt crypto-currency as a further means of protecting buyers’ identities.

    To further cement Sotheby’s role in the art market, I think they should also pioneer the first art initial coin offering (ICO). By purchasing a prominent piece of art and launching an ICO, Sotheby’s could establish itself as the future of the art market and provide legitimacy to a profound, yet oft misunderstood asset class of the future. Through the ICO, individual collectors could purchase a portion of the total value of the underlying work (initially set by Sotheby’s). The ownership would benefit the individual by allowing them to participate in any appreciation of the artwork’s value (which would be determined by an efficient market, led by Sotheby’s), while society could benefit by allowing the work to be displayed at a museum for all patrons (and owners) to enjoy, rather than sitting on someone’s mansion.

  3. I enjoyed this piece as well and had not been aware that auction houses were moving into digital to such a degree. I am in agreement with Katie that blockchain is unlikely to become the unique source of verification for a piece of art due to the changing nature of valuation. One additional aspect of this to consider is that despite Sotheby’s original determination on provenance of an item, these conversations can often be complex and unclear. While high worth pieces and more recent works often have clear provenances, older pieces in particular frequently do not have as clear of a provenance and therefore become more of an art rather than a science to determine (pun intended). While Sotheby’s experts are certainly among the best at determining the history of a piece of art, there may be ongoing disagreement as to the provenance, and especially as new information becomes available over time those determinations could change. For example, this is why certain pieces of art change from being attributed to the artist to instead being by “School of Rembrandt” etc. as additional research reveals that the artist him/herself likely did not make the work, but instead someone who was strongly influenced by their style. One digital technology I think could be helpful would be machine learning, if there were a way to apply that to comparing pieces of art to each other based on content and provenance to anticipate when a piece of art is more likely to be a forgery, which Sotheby’s resources could then further investigate.

    As far as cryptocurrencies generally, I believe that given Sotheby’s reputation for being one of the top auction houses in the world, they will resist cryptocurrencies until they are a fully respected currency or sell only low value items through that means to attract first-time buyers. I think the idea you mentioned of selling digital works is an interesting one that would likely attract a new audience, as this form of payment would resonate more strongly with the intended buyers for those works.

  4. So interesting, Daniel! I hadn’t known about the influence of digital on auction houses. Two points stick out to me:

    1. Sotheby’s has a very high end brand and reputation. I wonder if by partnering with eBay, they put some of that at risk. eBay has a slate of offerings, but many of their products are cheap or knockoff, and they aren’t seen as high end like Sotheby’s is. I’m glad to read that their initial online sales have been successful, but wonder how Sotheby’s can make sure that the eBay experience reaches their target audience and also is differentiated from “normal” eBay. It looks like the website they use does look a bit more upscale, but I would be interested in exploring this. Online platforms can make things more accessible and democratic, but in the world of high end art, I wonder how much this is truly the goal.

    2. One place where Sotheby’s currently is differentiated is in their ability to authenticate art and assess the value for a new piece. I wonder how much this will still be relevant (not digital) for people who want to continue to appraise the value of their artwork. There is some level of subjectivity inherent in the process, and wonder if that can truly be digitized. Additionally, on the idea of “influencers” I wonder if some of the people at Sotheby’s help build excitement or momentum around specific artists, pieces, or time periods that makes some artwork more trendy and popular than others. In a digital world, will there be people who are intimately familiar with the pieces who can help shape our collective taste for artwork in the same way? And if not, what does that mean for art?

  5. This was a very interesting read– in particular your point about blockchain as a method for transferring ownership of digital artworks.

    In regards to Sotheby’s role as a middleman as discussed in earlier comments, I’d like to draw attention the risk mitigation (financial and reputational) Sotheby’s provides. These risks are inherently present every time a major artwork or artist’s work is put to sale. Major collectors and dealers like Larry Gagosian famously purchase artworks by artists whose catalogue they own a disproportionate piece of, in order to maintain the impression of a high valuation ( If a work fails to sell, the buyers in alternative channels (private sale, art fair, sale through gallery or broker, etc.) now have the power to demand a lower price. Sotheby’s therefore offers guarantees and other financing arrangements to mitigate these risks. The power dynamic has continued to shift towards sellers in this competitive market (effectively two-party with Christie’s), as auction houses offer slices of the buyer & seller premiums (their service commission) to sellers to secure important works for their most prominent auctions.
    As a result, I don’t believe blockchain will impact the role of major auction houses in the buying and selling of important works at all. The middleman here is a necessity given the extreme illiquidity and almost total lack of pricing visibility in this marketplace.

  6. Thanks for the interesting read Daniel. I was particularly impressed with the $155m online sales figures for Sotheby’s, that’s a meaningful number in e-commerce. I think democratizing the art auction is a step in the right direction for the industry and I’m glad to see it seems to be working. While online sales is a clear impact of digitalization I am skeptical that blockchain will hurt Sotheby’s relevance for a few reasons. First, regardless of the blockchain, I believe people spending meaningful dollars on art purchases will want independent verification of the physical work and trust associated with a qualified auction house. Second, this is a marketplace where finding buyers and sellers is non-trivial. One of the major value adds of Sotheby’s is maintaining relationships on both sides and marketing to both sides in order to bring people together for the highest likelihood of a transaction. Third, art is a very unique market in which the middleman plays a role not just in the marketplace but in the intrinsic value of the property. Choosing which artists to market and support is part of what makes the works of those artists valuable and cannot be easily replaced. Finally, in addition to bringing together buyers and sellers, Sotheby’s provides other means of facilitating the marketplace, such as providing guarantees to both buyers and sellers. [1]

    [1] Josh Spero, “Auction houses: art market on the block,” Financial Times, February 18, 2016., accessed November 2017.

  7. I found this to be a particularly unique use case of blockchain, given much of the discussions we read about tend to deal with cryptocurrency and money transfers, etc. While I agree that blockchain will certainly play a valuable role in verifying the transfer of artwork, I do believe that the social element that Sotheby’s and other auction houses provide will still remain relevant. To many of the points raised in the comments, individual buyers, when making multi-million dollar purchase decisions, will want to consult with art experts and physically inspect a piece before bidding on it. Therefore, I think the value of Sotheby’s will actually increase; the only aspect that changes is how the transaction is recorded. Building off of this, it appears to me that the common thread for all use cases for blockchain is this notion of eliminating the middleman in all transactions. This works to some extent, but loan officers, lawyers, and art experts will still be required to conduct “analysis” that cannot necessarily be done by a computer. Therefore, institutions such as banks, auction houses and law firms will become even more specialized and more efficient.

  8. Thanks for your post, Daniel! I had never considered the issues related to owning and tracking digital artwork.

    As an art history fan, when you brought up the point about cryptocurrencies allowing investors who can’t afford expensive pieces the opportunity to buy shares in a work of art, I was initially taken aback because I view art as not only a financial investment but also an emotional investment (and I would want to own the full piece of art and be able to display it!).

    I agree that blockchain will prove useful as it saves time and costs to authenticate artwork, assuming that Sotheby’s has already performed the initial validation legwork. In response to your question, I think that Sotheby’s experts will still serve an important role, especially to luxury buyers. Blockchain will enable buyers to easily educate themselves on an artwork’s value and ownership background from the convenience of their phones, but Sotheby’s experts will provide an extra level of customer service that is inherent to luxury brands [1]. Sotheby’s experts can answer more qualitative questions not found on the blockchain platform, such as how a specific piece of art relates to an artist’s broader portfolio.


  9. Great post and analysis about the impacts of digital innovations and trends that are having an impact on industries across the board! I think that all of the points you made only go to highlight how disruptive digital innovations such as blockchain can improve the marketplace and bring added value to society. Though, as you made clear, blockchain can only do so much as seen in the authentication and verification of the piece of art. It will be interesting if blockchain – a different industry – can innovate a means to lock a digital verification stored in a blockchain to a tangible item in a manner that cannot be exploited or altered.

  10. Very interesting read indeed. I agree that blockchain tech could make players in the art auction space less valuable. However, I struggle with the notion that blockchain could ever replace the critical role of authenticating art. How would a decentralized network authenticate an art piece that it doesn’t physically interact with? For this reason, I am skeptical that Sotheby’s or a similar company would ever die. However, I do think there are valid use cases for blockchain in the art market. As Daniel alludes too, one such use case is maintaining immutable proof of authenticity on the distributed ledger. Counterfeits and fakes are huge issues in the global art market — imagine a blockchain system that could deliver with 100% accuracy the authenticity of an art piece. One would likely be able to see previous owners, prices paid for the artwork, history of where the art was transported, etc.).

  11. So interesting! While I agree with some other comments that Sotheby’s essentially operates an easily copy-able and inefficient middle-man business, I’m still saddened that this powerhouse’s business model in under attack. There is something to be said for the name and its process in making one feel a sense of extravagance when dropping millions on art. That said I think Sotheby’s has no choice but to adapt or risk becoming irrelevant. The name and experience they provide will probably buy them some time – but not a lot.

  12. Fantastic article, Daniel! While in Australian I had the fortunate enough to hear Associate Professor Robyn Sloggett, Director of the Centre for Cultural Materials Conservation from the University of Melbourne give a talk on modern art fraud. Your article addresses many of the topics she raised.

    The biggest challenge in art fraud will always be authentication. Even great institutes such as Sotheby’s have fallen victim to the cunning of the modern art frauds but blockchain innovations will definitely dampen the incentive to commit fraud to begin with. One particular challenge is the disconnect between when a forgery is detected compared to when it was committed. Often a fraudulent work is authenticated by being sold in lesser known market such as country estate auctions. Through this process creates provenance – the person can say “I bought it at this auction and I know the artist previously lived in the area”.

    Blockchain creates an incorruptible way to track provenance to its inception which ensures that whenever a fraud is detected it can be immediately be connect back to the original source. This drastically dampens the incentive the incentive for the fraudster as they previously only focused on one end of the supply chain – manufacturing and first sale – now they are connect to every and all future transactions, increasing the risk of exposure.

    Great to read about the connection between technology and art!

  13. This article provided an innovative use of the blockchain technology. In verifying and authenticating art technology replaces the experts. The article is pointing at the core question that always props up in projects involving automation: Will the society loose the experts and their trait. The answer is seen as unfortunate to some and valuable to others (valuable in the sense that it is a more robust way of preserving information).

    Like all online venture, this also has a catch, what if some hacker gets better at coding than the data scientists who are building the walls?

    It is prudent that Sotheby’s doesn’t accept cryptocurrencies due to the current uncertainty in its price and sustainability. However, there may be a day when this technology matures and this new financial currency stabilizes itself as the default mode of payment.

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