How are the physical artworks tokenized?

Tokenizing physical artworks involves linking a tangible, real-world piece of art to a digital token on a blockchain. The goal is to create a secure, verifiable, and transferable digital representation of ownership while preserving the value and authenticity of the physical artwork. Here’s a step-by-step breakdown of how physical artworks are typically tokenized:

1. Art Authentication and Verification

Authenticating the Artwork: The first step in tokenizing a physical artwork is to authenticate it. This typically involves confirming its provenance (the history of ownership) and authenticity through expert verification. This process ensures that the artwork is genuine and has not been altered or forged.

2. Digital Representation of the Artwork

High-Quality Digital Imaging: A crucial aspect of tokenization is the creation of a high-quality digital representation of the physical artwork. This can be a high-resolution photograph, a 3D scan, or a video that closely replicates the visual properties of the piece.
Metadata: Along with the digital image, relevant metadata (such as the artist’s name, title of the artwork, year created, medium, size, provenance, and certification details) will be attached.

3. Creating a Smart Contract

Smart Contracts: A smart contract is a self-executing contract with the terms of the agreement directly written into lines of code. When tokenizing an artwork, the smart contract governs the rules of ownership, transfer, and transaction on the blockchain.
- The contract can specify:
  - Ownership rights (e.g., full ownership or fractional shares)
  - Revenue sharing (e.g., artist royalties on resale)
  - Permissions (e.g., whether the physical artwork can be loaned or displayed in exhibitions)
Token Standards: Typically, fungible tokens (FTs) are used to represent the artwork on the blockchain. A fungible token is a type of digital asset that is designed to be identical in value and interchangeable with other tokens of the same type. Fungibility is a fundamental concept in traditional finance and economics, and it is closely associated with government-issued money, also known as fiat currency. Cryptocurrencies like Bitcoin (BTC), Ethereum (ETH), US Dollar Coin (USDC), and Ripple (XRP) are all fungible tokens. Each Bitcoin is worth the same amount as any other Bitcoin, and they can be exchanged or transferred easily.

4. Minting the Token

Minting Process: The physical artwork is "minted" into a token on the blockchain, meaning a unique digital token is created that represents ownership of the artwork. Minting involves:
- Generating a unique token ID for the artwork.
- Attaching metadata (image, description, provenance, etc.) to the token.
- Storing the token's transaction history on the blockchain for transparency and security.
Blockchain Network: The token is then deployed onto a blockchain, where it will remain immutable and traceable. Popular blockchains for tokenizing art include Ethereum,Solana, Tezos, Flow, or even Binance Smart Chain, each of which has different strengths (e.g., gas fees, energy efficiency).

5. Linking the Token to the Physical Artwork

Digital Certificates and Provenance: The tokenized artwork is linked to the physical artwork through a process that typically involves the creation of a "digital certificate" or a unique identifier (such as a QR code) embedded within the physical artwork. This can serve as proof that the physical artwork exists and matches the digital token.

6. Fractional Ownership (Optional)

Fractionalization: The physical artwork can be divided into shares represented by tokens. This enables multiple investors to own portions of the artwork, typically by issuing a certain number of tokens that each represent a percentage of ownership in the physical asset.
- This process involves creating a pool of tokens where each token corresponds to a fraction of the physical artwork’s ownership. The owners of these tokens share in the artwork's potential appreciation or sale.

7. Ownership Transfer and Trading

Smart Contract Execution: When someone purchases the tokenized artwork, the smart contract automatically updates the ownership record on the blockchain. This ensures that the buyer is listed as the new owner of the artwork and is provided with access to the corresponding digital certificate.
Secondary Market Trading: Tokenized artworks can be traded on secondary markets, allowing new buyers and investors to purchase and sell fractional or full ownership of the artwork without needing to physically transfer the art.