The Art Exchange lists an artwork on the platform and once the art piece goes live, any person can register their interest in purchasing its fraction. To set a bid, a user has to indicate the share they want to buy and the highest price they want to pay for it. For example, a user can state that they want to purchase 10% of painting for not more than $1,500 and the platform will freeze the necessary balance on the user’s account. If the purchase is jointly funded, each user will get their respective share in the form of tokens, otherwise, the users are refunded. If users overbid the value of a painting, they may pay less for the share they indicated.
The security tokens indicate the legal ownership of a particular painting under the specified conditions (“mandate.”) The conditions are predefined before the sale and typically include causes on the painting resale, such as the minimum period after which the painting can be resold, the minimum price for which it can be sold before this period is over or the number of votes needed to decide on reselling. For example, the clause may state that the painting can be resold not sooner than three years after its collective purchase unless there is a buyer that is willing to pay 300% of its value on the moment of purchase. Alternatively, the painting can be sold before the period is due if at least 60% of shareholders vote this to be the right move. The mandate ensures that co-owners of artwork are aware of the risks and opportunities that are associated with their investment so they can make an informed decision. Every ownership comes with a degree of uncertainty and/or potential financial loss inherent in an investment decision.
As tokens indicate the legal ownership of the artwork, they can serve as a collateral for peer-to-peer derivatives that users can trade on the platform. It is also possible to attract liquidity and borrow against the tokens.
As specified in the mandate, the co-owned work can be stored in a safe warehouse, be on display in a museum or exhibited in one of our partner’s spaces. The co-owners can agree on lending the work for a museum or gallery exhibition.
If the painting is sold following the mandate, the proceeds are distributed to the shareholders proportionally to their ownership.
Please note that in order to participate in collective ownership, it is mandatory to complete KYC procedures, requested by the regulator. We reduce the scope of the procedure to the minimum and use a third-party provider to make it as effortless as possible.