A Message to Our Readers
In today’s multi-media environment, it is so easy to become overwhelmed with too much information from too many sources. MANIFEST will present important, objective, practical information on the economy, politics, technology and investing to not only inform our readers but to present an insight into how QPG makes decisions on the strategic direction of the Company and the impact on how we will inform our Mission in the world. Some “forward-looking statements” are presented in real time and may involve adjustments as anticipated results evolve. We are obligated to our readers to be useful with information that is factual, friendly and easy to understand.
Volatility in the Art Markets
The $65B art market is presently in a reversal from the frenzy on a November evening in 2022 when in a single night, $1.5B worth of paintings was sold at Christie’s auction house in New York City. Masterpieces by Vincent van Gogh, Paul Cezanne and Gustav Klimt were auctioned off from the collection of Microsoft co-founder Paul G. Allen. Emotions run high in an industry that can experience exhilirating peaks and then experience unexpected downturns.
High interest rates and inflation are some factors that contribute to this slowdown. Also, the supply of modern and legendary masterpieces for sale has decreased as potential sellers hold their investments because of uncertainty about what will happen next.
Contemporary artists are significantly affected by negative factors that treat paintings as commodities for speculation. And what are collectors who view artworks as financial assets supposed to do?
The outlook for the global art market in 2024 is a tale of two vantage points from two geographical frames. Political and economic volatility means that large U.S. and British markets may face further challenges in 2024, while China will likely continue to deliver outsized growth in sales. The trends that dominated the market reflected a mix of optimism, a stronger focus on sustainability, debates around Artificial Intelligence’s impact on art and the continued popularity of contemporary art that features stylized or romanticized portraits of friends and colleagues that explore intimate relationships known as hypersentimentalism.
Japan, Brazil and Italy have shown heightened buying interest compared to previous years. Paintings remain the most desirable pieces, followed by sculptures and works on paper. (Interesting fact: There is a decrease in collectors planning to sell their works, dropping from 39% in 2022 to 26% in 2024 in anticipation of an increase in value of their artists’s work.) The optimism cited is a baseline of resilience from the collectors within that sector.
(Source: ARTLAND Magazine 2024)
The art world aims for more sustainability with Eco art, also known as environmental art. This type of art explores environmental issues and the relationship between humans and nature. Eco art employs natural materials and sustainable practices to create thought-provoking pieces that inspire humans to promote a sustainable planet. QPG will be actively exploring artists to feature who are committed to addressing ecological changes before it becomes too late to reverse them.
Hypersentimentalism is a counterpoint to an artist’s digital interactions and social media. The artist seeks to draw attention to personal, intimate connections that are not electronically controlled. The speculation issue is a concerning challenge for contemporary artists.They remain frustrated by a system that treats paintings as commodities for speculation and thus subject to volatile price fluctuations, distorted pricing and a threat to overall market stability. These fluctuations impact an artist’s career and dealing with the consequences exerts significant influence on their lives. “You are buying a piece of my life, a little history of me and my people,” said artist Amani Lewis.
This year, gallery professionals from 68 countries were surveyed by artsy.net to highlight particular factors that influenced their businesses. Factors cited included collector behavior, discounted pricing, artists driving the most sales and prominently, rising business costs. The respondents reported participating in fewer art fairs and noted specifically that online marketplaces are essential to their businesses both for meeting new collectors and closing sales. The overall conclusion of the report was that the challenges in the art market were met with resiliency and the highest proportion of respondents experienced no change in their sales cycle timelines.
It’s important to elaborate on some highlights of the survey. The costs of running a gallery for the vast majority of the respondents was most challenging. Approximately half of those surveyed reported cutting day-to-day administrative expenses, particularly gallery assistants, and the cost of participating in art fairs was the highest barrier to entry. Online marketplaces were considered a more impactful source of meeting new clients and the picture is largely one of overall stability. Galleries across all groups said that email newsletters and in-person events were the most important marketing channels.
Gallery discounts offered to collectors ran the gamut from less than 50% of their inventory sold in 2023 to 18% of gallery owners offering no discounts at all. Ultra-contemporary artists, e.g., Jeff Koons, Damien Hirst, David Hockney and Jean-Michel Basquiat are most important to most gallery businesses.
Joint gallery representation has been effective for many galleries to cut costs and uplift their artists. A context note: Large galleries are defined as having 25 or more full-time employees. Small galleries are defined as having 3 or fewer full-time employees. Some 68% of the respondents in the survey have a permanent, physical location.
(Sources: Arun Kakar – Artsy’s Art Market Editor & The New York Times Newsletter “The Morning” 8/18/24)
Investing in Art Remains A Risk Worth Taking
Art investing presents a unique set of opportunities and challenges for engaged collectors across the economic spectrum. Art markets are potentially volatile, susceptible to fluctuations in trends and specific art aesthetics that characterize a particular movement; not to mention the economic environment. Authenticity and provenance are additional challenges and due diligence is mandatory to avoid counterfeits. The time investment and contracted costs involved in the process can be substantial.
No matter where you land on the economic spectrum, the liquidity issue is always relevent to the whole picture, no pun intended. High-net-worth individuals concerned with economic uncertainty turn to alternative investments like art and collectibles. While they can access liquid assets like certificates of deposit, marketable securities, e.g., stocks and bonds, ETF’s (Exchange Traded Funds) and gold, they are not challenged by the illiquidity of art. Selling art can take time, finding the right buyer at the right price can be complicated, especially if a sale needs to conclude quickly.
High costs and fees are usually involved in the buying, storing, insuring and selling of art, especially if valuable pieces are involved. Investment returns are traditionally reduced considering transaction fees and commissions involved in any sale. Despite all these challenges, there are still numerous opportunities for substantial returns for individuals willing to take the plunge.
NFT’s Have Changed The Art Market in Fundamental Ways
The term NFT art hit the headlines in 2021. The hype was intense and auction prices soared into the stratosphere. These blockchain-generated digital assets swirled in a complex story of rapid growth, significant shifts in value and never-ending surprises. It is a narrative that reflects the typical downside of digital innovation and investment. General awareness of the art form was insufficient for people to see it as a viable alternative to traditional physical art. Then there was the additional factor that NFT’s could be an alternative option to purchasing classic artwork in addition to being an autonomous artistic expression in digital format.
With the creation of cryptocurrencies and blockchain technology, NFT’s emerged as unique digital tokens typically bought with cryptocurrency, representing ownership of a specific item or piece of content such as digital art, music or videos. They are not traditional digital files that can be continuously copied and shared. The value of NFT’s are distinguished by their uniqueness and scarcity, encoded and verified on a blockchain.
The verification on the blockchain is a game-changer. The blockchain transparency and immutability assures the authenticity of the NFT and is crucial to distinguishing original NFT’s from copies. Ironically, the NFT boom was stimulated by the Covid-19 pandemic when digital culture took center stage. Suddenly, digital artwork and collectibles attracted attention as people realized that they weren’t just buying a piece of digital history, they were purchasing a status symbol that could ultimately become a speculative asset.
The NFT market expanded into various sectors including music, gaming and even real estate in virtual worlds. NFT’s presented new opportunities for artists and creators to monetize their work. Here was a new platform to sell unique pieces, increasing their recognition and gaining new revenue streams.
Quantum Projects Group will make available exclusive, custom-designed merchandise, market event VIP access and concert tickets in its DAO (Decentralized Autonomous Organization), an exciting option available in the Discover Arte platform for NFT progress. Artist’s interaction across a spectrum of media will include signed hardcover book events planned by token holders.
After the frenzy of the pandemic era, the NFT market began to show signs of strain which led to a significant spiral downward. The decline was due to a combination of factors. The market was saturated with an overwhelming number of NFTs. Contributing factors: the possibility of substantial, quick returns waned, the principles of supply and demand came into play and the realization that NFTs might not retain their value contributed to decreased buyer interest and market prices.
Macroeconomics cannot be underestimated. The NFT boom coincided with economic uncertainty and the impact of the Covid-10 pandemic. Higher inflation became the norm, interest rates increased and tighter money policy was felt all around. As the world stabilized and markets pivoted to normalcy, the appetite for high-risk investments like NFT’s diminished. An overall decline in the cryptocurrency market was attributed to the Terra Luna Project which caused a $40B crash in 2022. Terra was a blockchain network that specialized in stable coin creation. (Stable coins are a type of cryptocurrency designed to maintain a stable value by attachment to another asset like fiat currency or a commodity.)
The FTX crash in 2022 was another contributing factor. The Bahamas-based cryptocurrency exchange collapsed due to a lack of liquidity and mismanagement of funds coinciding with a large volume of withdrawals. The devaluation of digital currencies meant that investors had less capital to invest in NFT’s. The resulting liquidity crunch was a significant blow to the NFT market which relies heavily on the health and stability of the broader crypto ecosystem.
Despite these significant factors, there is a reasonable argument to be made about the practical future of NFT’s albeit one that may appear different from the frenzied peak of their popularity. Essential to understanding the future of NFTs is to recognize their foundational technology and the unique value approach they offer. Blockchain technology, the foundation of NFTs, provides a level of authenticity, rarity and security in the digital world previously unattainable. This technological advancement means that NFT’s have a potential utility that extends far beyond the speculative art market.
Beyond digital art, NFTs can corroborate digital identity, property rights in virtual worlds and authenticating and monetizing digital content for creators in music, literature and other arts.
Bitcoin and Ethereum Protocols Explained
Quantum Projects Group’s extraordinary collaboration with EPEIUS, a technology and branding company with offices in Los Angeles and five other global cities, creates advanced solutions to global security and compliance standards in the Web3 universe with secure and scalable tech stacks on the Bitcoin and Ethereum blockchains.
EPEIUS is tasked with the creation of two blockchains layered upon Bitcoin and Ethereum protocols to create Non-Fungible Tokens (NFTs) on the Discover Arte platform, one of two new affiliates of QPG, that will empower a global market of millions of participants to invest, trade, and speculate in a curated proprietary Quantum Projects Group art collection, (Prestigious World Assets) from Old Masters, e.g., Leonardo da Vinci, Rembrandt van Rijn, Johannes Vermeer, Albrecht Durer to Contemporary icons, e.g., Jean-Michel Basquiat, Andy Warhol, Jackson Pollock and Robert Motherwell.
The Contemporary Collection will feature an expanding roster of participants as the DiscoverArte blockchain introduces smart contracts to empower artists, artist’s representatives, art dealers, private collectors and gallery owners to join a proliferating community reaping the benefits of advanced technology for transparency, security, publicity and financial rewards in the somewhat intimidating art world.
Introduced in 2023, the Ordinals protocol involving Bitcoin, the blockchain, and bitcoin, the cryptocurrency, revolutionized the creation of Bitcoin NFT by inscribing data to individual tokens called “satoshi’s.” satoshi’s serve as foundational data in which additional inscription is meticulously added. Inscriptions act as storytellers within this transactional landscape, enriching each transfer with contextual depth and significance. Transactional notes, messages, or digital assets give these silent satoshi’s purpose and meaning. They capture the objectives of both senders and recipients within the structure of block space limitations. Every satoshi is given a serial number based on the order in which it was minted (created.) These numbers are called ordinals and they allow the blockchain to track the location of every satoshi and who owns it.
The Ordinals protocol assigns more information to the serial numbers of each satoshi, the smallest Bitcoin unit. This extra data is called an inscription. A single bitcoin can be divided into 100 million satoshi’s, each worth 0.00000001 BTC (bitcoin.)
The BRC-20 standard stands as a central milestone in the realm of tokenization (the process of representing a real-world asset as a digital token stored on a blockchain.) Why?
The BRC-20 tokens harness the power of Bitcoin’s Ordinals agreement capitalizing on its unparalleled convenience, immutability, and security.
In contrast to conventional token standards like ERC-20 on Ethereum, BRC-20 tokens simplify tokenization by bypassing the complexities of smart contracts. BRC-20 tokens use the simplicity of Ordinal inscription enabling easy creation and transfer of tokens for a wider audience. By the way, the BRC-20 token’s smart contract elimination points to a criticism; limiting functionality and versatility across certain applications. Another caveat is the token’s connection to the Bitcoin ecosystem limiting scalability, exacting high transaction fees, and challenges implementing complex token functionalities that could result in token burns (loss of tokens.)
As the landscape of blockchain technology continues to evolve, the success and sustainability of BRC-20 tokens will depend on continuous innovation, increasing adaptation, and refinement in response to the challenges of enormous opportunities.
Bitcoin Runes, an innovative token standard, launched in April 2024, following the fourth Bitcoin halving. The Runes protocol simplifies the process of issuing native fungible tokens on the Bitcoin network offering a more user-friendly approach to tokenization. (A fungible token is a digital asset that is interchangeable with other tokens of the same type and has the same value.) Fungible tokens are a key part of the cryptocurrency ecosystem and are often used as digital currencies and stores of value.
Examples of fungible tokens include most cryptocurrencies like bitcoin (BTC), Ethereum (ETH), and stable coins (a type of cryptocurrency that aims to maintain a fixed value over time by pegging its value to another asset such as fiat currency, e.g., the USD or a commodity, e.g., gold) like Tether (USDT.) Fungible tokens can be broken down into smaller units that have the same properties, e.g., you can own or send a fraction of a bitcoin.
The Rune’s simplicity has the potential to stimulate innovation within the Bitcoin ecosystem empowering token developers to explore new applications. Lower transaction fees are possible by ensuring smoother and more efficient transactions thus reducing network congestion within the Bitcoin ecosystem.
The Ethereum blockchain is employed to utilize Smart Contracts, computer programs that automatically execute agreements between parties when certain conditions are met. The ERC token is the most widely used standard for NFTs. ERC stands for “Ethereum Request for Comment”, a protocol standard for proposing improvements on the Ethereum blockchain.
ERC-721 is a Non-Fungible Token Standard that implements an Application Programming Interface (API.) It’s a set of rules that allow software applications to communicate with each other. APIs are used in many ways every day. The application that sends the request is called the client and the application that sends the response is called the server. Common everyday uses include e-commerce transactions on Amazon, eBay, and Shopify, travel booking site information, mobile payments, and different aspects of mobile banking and changing your thermostat temperature from your phone.
The ERC-721 API token was the first standard for unique NFTs, enabling the representation of singular assets such as artwork, collectibles, and in-game items. ERC-721 tokens can only be traded one at a time. They are not divisible into smaller units and incur high transaction costs for creating and transferring.
ERC-721 tokens are easily updated with information regarding ownership and transferability. The transparency and immutability of the token give the user a decentralized, secure experience. The tokens are the most widely supported by NFT marketplaces; easy to buy, sell, transfer, and trade.
The uniqueness of the ERC-721, the top choice for creating NFTs, is the creation of one-of-a-kind digital assets including artworks, collectibles, photographs, DeFi projects, e.g., Chain Link (a decentralized oracle network that can increase the functionality of smart contracts) and Compound (a decentralized platform where users can deposit their crypto holdings into liquidity pools to earn rewards) and in-game items.
One caveat regarding the ERC-721 token, it cannot be divided into smaller units where fractional or partial ownership of certain projects is desired.
ERC-721A is very similar to the original ERC-721 standard but simpler. It supports on-demand minting, reducing costs. It is more gas-efficient, especially for multiple NFTs and it’s suitable for collections of high-volume NFT’s. This token also has better metadata management.
Caveat: The better transfer and minting capabilities of this token are costly, especially for single NFT mints. Each contract can only represent a single type of NFT.
ERC-1155 tokens are compatible with ERC-20 and ERC-721 standards and can be used for fractional ownership or as a form of currency. The standard enables a single contract to manage multiple token types.
ERC-1155 tokens can be traded in bulk and support batch transfers, increasing gas efficiency. Most notably, ERC-1155 is useful for complex applications like gaming. The gaming performance is responsible for this token’s trickier characteristics including a lack of metadata strict enforcement and inconsistencies in storing metadata sometimes lead to disjointed user experiences.
SEC Approval of Bitcoin (BTC) Exchange Traded Funds and What It Means
The Securities and Exchange Commission (SEC), the arm of the government responsible for regulating financial markets, said in a statement in January 2024 that it would approve 11 spot bitcoin ETFs proposed by asset managers including Fidelity, BlackRock, and Grayscale. Bitcoin investors are rejoicing as Spot Bitcoin ETF’s (funds that directly track the price of an underlying asset such as a commodity or cryptocurrency by holding it in reserve) offer an accessible and direct way for investors to tap into the crypto market. Spot bitcoin products operate by owning entire bitcoins which is essentially a digital vault managed by registered operators like Fidelity et al. This allows the fund to mirror the movements of the BTC market.
The price of bitcoin began to break higher in the last quarter of 2023. With the official sanction granted to the big institutional players it will be easier for mainstream investors to buy the cryptocurrency and the crypto bulls hope that their spot bitcoin ETSs can accelerate the large-cap token to its legendary past performance. It has been a long road to approval since the journey began in 2013.
The Winklevoss twins, Cameron and Tyler, met Mark Zuckerberg at Harvard and were involved in what would later become the creation of Facebook subsequently made famous by the film “The Social Network.”
They sued Zuckerberg in 2004 alleging that he stole their idea to create Facebook from them. After a legal battle that lasted four years, the twins eventually settled with the Meta CEO for $65M. They invested some of that money in bitcoin, which was in its nascent years at that time and they became the world’s first-known crypto billionaires.
This new chapter in the bitcoin story began in the United States when an entity affiliated with the Winklevoss twins sent the first application for such a financial product to the SEC. Politics and red tape plagued the process because of some major concerns about the cryptocurrency’s historic reputation. It was considered primarily as a speculative and significantly volatile asset. It was linked to money laundering, ransomware, and terrorist financing.
A spot Bitcoin ETF tracks the price of Bitcoin by holding Bitcoin in reserve and backing each share of the ETF with the cryptocurrency. This allows investors to gain exposure to bitcoin’s price without having to buy, store, or manage the cryptocurrency themselves. This approach makes sense if long-term performance is important to you. However, you could prefer direct-asset ownership of Bitcoin if you are concerned about the regulatory or legal assets (property of the IRS) of cryptocurrency.
Spot bitcoin ETFs have management and brokerage fees and annual fees that can range from 0.19% to 1.5%. Spot bitcoin ETFs trade during traditional market hours, unlike bitcoin which trades 24/7.
A Conversation with Joe Kaufman
Joe Kaufman is the Chief Executive Officer of EPEIUS, a programming company, in partnership with Foolproof Labs, to deliver user-friendly products running on patented blockchain technology.
Augmenting Epeius’s original mission to create technology with foundational blockchain principles, it will support Quantum Projects Group’s objective to reinvent the way in which masterpiece art is presented to a global market with a progression of immutable data-driven global systems.
Working with QPG over the last year, Epeius is using tools developed and honed from previous experience with clients in the defense, gaming and data industries like healthcare to deliver the best of a merger between the Web2 and Web3 universes. The global team assembled by Epeius and Foolproof Labs has the skill sets, trailblazing understanding of data, blockchain software and mobile applications, to drive client engagement and capture value for the participants in the DiscoverArte and ArteAware platforms.
Here is a conversation with Joe Kaufman to begin an ongoing dialogue that will illuminate the scope of this association.
1. Could you explain actions taken to promote high engagement on the Discover Arte platform, the first of two platforms, created for Quantum Projects Group? What are the different data points to assemble for our clients to provide an entertaining, informative, and easily navigated experience?
DiscoverArte must position itself as the leading access point for the most elite pieces of humankind’s culture and expression presented for review, understanding and potential ollectability (fractionally or in total.) This is accomplished by progressing beyond the standard museum experience and stepping outside the confines of the art gallery world.
DiscoverArte, and subsequently ArteAware, will proffer a fully-formed experience that any global tech-abled individual can participate in with a comprehansive provenance and historical overview of each artwork from experts in a transparent and highly-regarded standard for capturing and preserving the quintessence of such prestigious assets.
DiscoverArte and ArteAware present an unrivaled encyclopedic base including archaeological insights, graphical mapping, and cultural context that may have shaped the art into becoming what it is. Historical colocation of art combined with timeframes helps us to verify the authenticity and situate the artist in his particular milieu.
Blockchain is sui generis in the ability of a shared, immutable data layer to encourage any student, historian or researcher to explore the provenance of any artifact in DiscoverArte and ArteAware. DA and AA will become a basic data source of art and records of legitimacy. DiscoverArte will place the beauty in each piece into a phenomenal immersive experience to persuade a participant into becoming a member of the community and asset holder while ArteAware adds the educational and membership advantages to develop global awareness and appreciable value.
2. In your opinion, what are the main complications regarding trust when purchasing premium artworks both as a Prestigious World Asset (the actual physical work) and a distinctive digital collectible (an NFT?)
PWA’s, NFT’s and any asset on Earth with a high concentration of value becomes a magnified attack vector for those looking to capture value without permission.
Some of these attacks come with physical force, many now arrive digitally. Removing the ability to gain ownership via traditional social engineering, halting the ability of a physical asset processed through our Certifying Authority for Prestigious World Asset (CAPA) and using our Deed of Ownership (DOO), Proof of Existence (POE) and Asset Fractionalization Protocol (AFP) means provenance cannot be claimed if a physical asset’s possession is illegally obtained.
Integrating that with the ability for collateralization, underwriting and financial liquidity to be extracted without a physical asset changing locations, means trust is now part of the prestigious equation. Tech brings the finest, most precious assets into a new world, enhancing their value and ensuring appreciation in that value.
3. What guardrails are considered to ensure that QPG is compliant with current legal systems and regulatory agencies, both domestic and international?
All of our software builds are in rigorous and ongoing review by our legal officer. We have been building in the data sector, compliance, blockchain, crypto and user management field for decades. Each niche presents its own challenges and just as blockchain and merkle trees have vastly evolved since Haber, Bayer and Stornetta started using them in 1992, so too has remaining in full compliance with data management increased in complexity as the global pool of regulations has evolved. All of our products are developed using the best methods and adhering to SEC guidelines. When necessary, certain products are placed in the jurisdiction that best supports their development.
4. In a previous conversation, we talked about the framework of ESG (Environmental, Social, Governance) impact to the environment and society in the DiscoverArte platform. You briefly explained the social and environmental impact, two of the pillars of ESG. The thread in that conversation was sparked by the subjective nature of art considering CLIENT BASE + ESG and a TOKENIZED TAX PRODUCT. Could you expand those thoughts for our readers?
For DiscoverArte, begins with the premise that Prestigious World Assets (PWA’s) such as fine art are both
1) worth capturing and preserving to the value of humankind and
2) constantly at risk from loss or harm due to the fragile, valuable and culturally significant nature of the items.
Working from that premise, the Platform immutably captures both the provenance, historical formula for preservation of assets and the historical record of all who have performed work on the asset. In addition to the provenance layer of preservation, aka the recipe or formula that experts in restoration, art history and sociology use to keep the pieces viable, we capture the 3-Dimensional scan of images down to micronic levels or more specifically down to the ridge depth in a brush stroke. This not only makes certain that future generations have the highest quality records of a piece’s history available but that such a piece can never be fully lost to the ravages of time.
We see that in a world of challenges, the history of a people is always a target for those looking to conquer and erase from the Earth. A society without history is a society no longer able to expand upon itself and its understanding.
So, ESG for DiscoverArte begins at the preservation level. From that point, the ability to grow value in educating end-users, expanding products for teaching and providing digital access to art as well as helping nations under threat preserve their most at-risk heritage is next.
5. How would you describe the brand presence of Quantum Projects Group to the high-end art market?
DiscoverArte, QPG’s advanced art platform, delivers a sophisticated and elegant gateway for merging the world’s most prestigious assets held in curated collections with advanced innovations in tech from an industry leader.
Through the integration of AI, blockchain, cryptocurrency, NFC Chips, Intelligent User Management,Virtual Reality and Augmented Reality, DiscoverArte transforms precious art of all types into highly secured, immutably captured, and digitally layered properties. This provides the asset holder with an expansive array of liquidity and financial tooling options while mitigating an asset’s risk from loss and protecting its digital heritage.