Jess Houlgrave on Blockchain for the Art Market
Jess Houlgrave and the Codex Protocol — Artnome

  Just a few short months ago there were quite literally just a handful of people with experience and knowledge of both blockchain and the traditional art market. Jess Houlgrave, Co-founder & COO at Codex Protocol, was so far ahead of the curve on this front that the curve did not exist yet when she began her exploration.  I met Jess briefly at the Rare Digital Art Festival in NYC a few weeks ago, but had been following her research for a few months. I caught up with her for an interview to learn more about her unique background and the roadmap for the Codex Protocol. Codex is a blockchain based decentralized title registry for Art & Collectibles. This interview goes deep into the details of the Codex Protocol and Houlgrave's thoughts on blockchain and the art market. I like including longer form interviews like this on Artnome as more space is sometimes required to go deeper into a subject and to avoid repeatedly covering the same intro-level territory. That said, if you are short on time, you can read a short high-level overview of Codex Protocol in my post titled "Why Use Blockchain for Provenance". If you are completely new to the topic of blockchain I'd recommend starting with the article "The Blockchain Art Market is Here".Jason: Hi, this is Jason.Jess: Hi Jason. It's Jess here. How are you?Jason: Good. How are you doing?Jess: I'm good. Thank you.Jason: I'm excited to continue our conversation. I did a little research on Codex Protocol before our call, it looks like you've been around in a quasi-stealth mode since about November of last year? Is that right?Jess: Yes. So we've really been working on this full time since September. So yeah, kind of quasi in stealth mode. We haven't been hiding it particularly, but we haven't been publicizing it. We really wanted to make sure that we have everything in place and ready to go. We thought that at the beginning of this year there were some great events and things were really picking up, so we felt it was a good time to make that announcement and go out.Jason: That's great. So I'd like to start a little bit with your personal background. I've been researching the intersection of data, technology, and art for a couple of years now. You seem to be one of the few people I've run into that has a solid footing in both the art market and blockchain, and with a finance background as well? To me, it looks like you were maybe a year or so ahead on the blockchain thing when you were going to school at Sotheby's. Not as many people were talking about it -- so maybe share a little bit of your pre-Sotheby's background, what led you to go to school at the Sotheby's Institute, and then how you brought blockchain into the mix?  Jess: Sure. So you're right. My early background was really in finance. I did an MA in economics and management at Oxford for my undergraduate degree. Then I joined Credit Suisse in the investment banking team, and then I spent three years managing a portfolio for a Canadian pension fund. In kind of early 2016, I really wanted to do something a little bit different. I wanted a break from working in finance, and art has been a very long-standing passion of mine. I like collecting works. I like producing works. I work with a charity in London which provides creative opportunities for young people in disadvantaged areas. And so art has always been very important to me.I have a lot of friends who are artists or gallerists or involved in the arts in some way, and so my desire to do something a bit more entrepreneurial led me to going to Sotheby's Institute to do another master’s degree. And I really wanted to expand from just having general interest in art to thinking about moving in that direction from a career perspective. At the same time, a really good friend of mine -- an old friend from university -- was heavily involved in blockchain and crypto. He was running a fund and investing, and he's a developer, as well, so I was spending a lot of time discussing blockchain. Through that, really, and through trying to just learn more about the fundamentals of the technology, I noticed that actually there was a huge opportunity within the art world for blockchain, and so I decided that that was what I would write about for my thesis.You're right. It was very early and we had the competition of like who can supervise this because no one had really written about art and blockchain. There were -- what I thought when I started the research -- just maybe like five or six projects happening, and so I went ahead and actually found that there were a lot more than five or six that were -- there were a whole load. And so I spent the best part of a year really just researching and writing about the various applications of blockchain for art.Jason: Very cool. That's an interesting background. I've only discovered blockchain fairly recently and I sort of stumbled in at a time when the world seems really hungry for information on it. So I think you've timed it well in terms of being on the cutting edge of something that there's a lot of interest and hunger for more knowledge around.Jess: Yes, it's definitely growing at the moment and a lot of people seem really excited about it, which I think is great as the the first step to really making things happen.Jason: Yeah, for sure. So I took a look at the website and read up a little bit on the LinkedIn page about Codex Protocol. It looks to me like you're solving several problems, and starting with two out of the many that can be solved. It'd be helpful if you gave maybe just a high-level elevator pitch and a little bit of a high-level overview of the problems that you're solving and the technology that you're introducing.Jess: Sure. So essentially Codex Protocol is designed as industry infrastructure for art and collectibles. So it's fine wine, classic cars, jewelry, fine art, anything else that sort of fits into that category of items. And the really distinct thing about this category is the primary value driver is provenance information. It's the ownership, the identity of the object, the authenticity of the object, where it's been shown, all of those things that kind of contribute to the identity is a really big important value driver. And at the moment in the industry, a lot of that information isn't really held in any one place. It's very hard to access, it's very hard to research. And without it, that makes doing a whole load of other things, like insuring items or lending against items, very difficult.So what we want to build is really the infrastructure that the entire ecosystem can use. So Codex becomes a decentralized kind of title registry and store of provenance information for objects. And it's designed to be open source so that anybody will be up to build on it. We are building the first couple of applications and we have ideas for lots more, but we really want to do this in conjunction with the industry to make sure that what we're building is useful to them, and also, if there’s other people who want to build things on top of the Codex, it will help them and encourage them to do so. And as part of our fundraising, we're trying to make sure that we have enough funding that we can not only build the applications that we want to build, but actually support people financially to build on top of this, as well.Jason: That's fascinating. So the model, then, is to build out a technology, and then anybody from an auction house to a gallery to a collector could use the platform to identify provenance for their given collectible or artwork. Would they also be contributing? So when it comes to the blockchain, obviously you and I share a great love and passion for blockchain technology, but without data, it's not particularly interesting, right? So does the model that Codex Protocol will be supplying provide a lot of the provenance information? Or by keeping it open, will others be contributing with Codex Protocol as sort of a central repository? Or will people sort of have their own equivalent to like a private cloud but on the blockchain? I'm curious to hear a little bit more about that.Jess: So the technology itself is decentralized, which means that the information isn't held by any one third party. That's one of the great things about blockchain, and that's why it's really exciting for Codex Protocol, because for the first time we can store information without the need to trust a third party. Collectors for a long time haven't been willing to trust a centralized third party with information about the works that they hold, but knowing that it's decentralized and that there’s privacy involved, you can have your provenance of your works stored on the blockchain without having to disclose your identity to anybody. It's really exciting and that's really the key development here in terms of blockchain.So we create a non-fungible token -- an ERC721 token -- which represents the item, and then to the item we can store metadata. The data itself isn't stored on the blockchain -- that will be stored off-chain, but there will be a link so that any provenance information that's attached can be uploaded and linked to the token that represents the item. So Codex itself isn't designed to provide that provenance information. The ecosystem as a whole already has great ways of finding out provenance and of checking and verifying provenance, but the problem is that research is done sometimes for one piece of art and then the next time it sells, that provenance hasn't stayed with the art. So you can imagine a piece that goes through an auction house and people spend a lot of time researching it, they spend a lot of time collecting data -- a lot of that data is just things like paper receipts and old catalog exhibition notes which then sometimes get lost from the item, and two or three sales down the line, you don't have any of that provenance to back it up. And as a collector, having that would actually help you preserve value. So all of those pieces of information, those receipts, can actually now be stored in a digital way so that they are stored on the blockchain.Jason: Great. That's really helpful. So to me that sounds like it's assisting them from here forward, right? So you'll create an inventory of artworks and wine and collectibles which will all have their own token, and then as those works have a life moving forward, all of the provenance documentation associated with them can be centrally stored and trusted because it's decentralized. Are you looking to tap into historical information to add, as well?Jess: Sure. Firstly, nothing is centrally stored. Everything is stored decentrally, which is really important because the art market is hundreds of years old and will continue to go for hundreds of years, and in the absence of me and my co-founders, if something is centralized, who's who and who runs this and who keeps this information, and so it's really important that it is just decentralized. Nothing is held centrally, and in the absence of us, Codex would still continue to exist.And to the second point, which is around historical information, we would really like people to put historical information on the blockchain, and that's not in a way that we're trying to verify that information, but we're just trying to make sure that it's there. At the moment, as a buyer of a work, if you're doing research, you have to go and find those pieces of paper and you make a judgment call over what information those pieces of paper provide you and whether or not you're satisfied by them. We can't go back in time and verify provenance information historically, but we can still make sure that that information is in the data, so that as a buyer or as an owner of an object, you can still have that data. You need make a call on the value that you attribute to it, but there’s no reason we can't include that in the metadata. It's just, it's there for people to use rather than being a sort of a stamp of authentication or a verified historical record, if that makes sense.Jason: No, it makes perfect sense. So I've spent the last three years trying to gather catalogue raisonné and trying to digitize them to build this sort of mammoth singular analytical catalogue raisonné database. So I talked to a lot of folks in the catalogue raisonné space, and I know that there is a problem where, let's say, there are certain galleries that put out catalogues raisonné for artists whose work they're selling. Maybe a conflict of interest, or there could be five catalogues raisonné that are conflicting for the same artist. So I see that as a problem of having a single authority or a handful of authorities that are deciding officially what artworks are in and which ones are out. So by decentralizing it, it seems like you would open it up so that everybody has the ability to look and see when things are changed. But how, if at all, do you limit or decide who can change the information on the blockchain? Jess: So it's open source, which means that in practice, anybody can make a change. You wouldn't be able to change a token that you didn't own. As the owner of a token, you will be able to give the ability to make an amendment to somebody else. We have an advisor, Abe Othman, who's a Ph.D. from Carnegie Mellon. He specializes in reputation systems and incentive systems. So at the moment, the status quo is that most collectors are really happy buying from well-known galleries. Collectors make a judgment call over what they're willing to buy, what they're willing to trust, especially when dealing with the ones that are less well known. We don't see that really changing because that's sort of the nature of the market, and we're not trying to dictate who can and cannot do things. This is designed for everybody to be able to use.But what we are trying to do is to look at reputation as a tool that could be really helpful in the way that it can then help buyers evaluate the kind of the entity or the intermediary. So it's actually just providing you with more information to help collectors make judgment calls.Jason: Got it. Okay. So here's an overly simplified question -- and sorry if I don't have this part down -- so who would own the token? Let's say I bought a print by Picasso or something like that and there’s a token out there that exists for it and I want to update the provenance. Do you then identify and recognize me as the owner and issue me access to the token? Or anyone can claim access to the token? Because it sounds like you would need ownership of the token in order to update the provenance, but I'm not really clear on that point.Jess: Right. So at the moment, we think that most of the tokens, which represent works -- the non-tangible tokens -- will be created through our auction house partners. That's "Biddable," the first application, and we think that most things in the short term will be created by them. That may well follow with a lot of other applications. We'll have galleries or artists or anybody else to create titles. But if you just imagine a single piece, when it goes through one of the auction houses in our consortium, they create a token which represents that work. They can then transfer that token to the person who owns the artwork. That doesn't mean, though, that your identity has to be revealed because essentially you just hold that token in a wallet and you don't need to disclose that that would belongs to you, if that makes sense.Jason: It does, and I see that as a huge part of the value. There are a lot of people that perhaps wouldn't mind sharing that information about the whereabouts and buying and selling of artworks for art historical purposes, but they want to protect their personal identity. So I see that in the CryptoArt world where maybe people are making some artwork that's a little over the top and they don't necessarily want to tie it back to who they are in real life, but they want to be able to monetize it. So it's a similar process and it seems like a great opportunity.So if I look at something like Ascribe or Verisart, my understanding of those business models is that they're really trying to work at the ground level with artists who are producing works now to create tokens. Would it be fair to say that your focus, it sounds like, is more at the auction house level? So existing goods that are going in and out of auctions, you're using the auction houses as sort of a proxy for the authority on when a work should be tied to a given token, given that they have a lot of provenance research and intelligence on hand. And through that daily -- I'm sure thousands of works and collectibles get sold everyday across the dozens of auction houses -- that'll generate continuously and ever-expanding provenance of works, kind of built on the authority of the auction houses versus starting just with artists? Is that sort of a differentiator for Codex Protocol?Jess: It's certainly not wrong. I would slightly nuance that by saying we're not building for the auction houses. The underlying tech is designed to be used by anybody. So we actually really hope that a lot of the projects that are out there will work with us and we would love to see more applications for galleries or artists themselves built on the Codex, because the title registry works best when it's used by the whole industry. Having lots and lots of different registries for art and collectibles doesn't actually really benefit the industry as a whole.And so we would like to work with as many different industry stakeholders as possible, and we've already had lots of discussions with different people who do different things in the market, whether that's insurance, whether that's in the gallery space, whether that's in the storage and logistics space. We want to build that infrastructure for everybody to be able to use. What the auction piece does is really drive fast-adoption of the Codex Protocol because in the consortium, through our software providers, just over 10 million items per year go through them, and so you can imagine that it becomes a really efficient way of populating the title and driving adoption. And hopefully once it becomes the standard, I guess, more and more people are incentivized to build on it, more and more people are incentivized to use it and that becomes really useful for the whole ecosystem.So you're right. There is a differentiation between the Biddable application and what other people are doing, but actually this is infrastructure that anybody can use and it's really designed to support all those applications. It's just that we don't have the capacity to build all of them at once, and so we're just starting with the ones which we think are going to help drive adoption, and then over time, we really want to see a lot of those other things built on the same protocol. And whether that's a third party doing it themselves or whether people would like to partner with us, we'd really like to expand the consortium and to encourage more and more people to start using the underlying technology.Jason: Great. That sounds cool. So you're saying that the long-term goal is to help everyone or be open and available to everyone, but capacity-wise, you have to start somewhere.The world of collectibles, art, and wine is pretty vast. Is there a particular area you're focusing on within the world of art and collectibles and wine, or a fairly broad focus to start with?Jess: I think it's going to be fairly broad. A lot of that decision will actually be made by the ecosystem -- that will be people who think that this is really exciting and really want to embrace it, and there will be those who see less value in it. The important thing for us is that firstly, we build the underlying consortium because we think it's important and most of the people that we speak to think it's important. And I've been amazed this week at how many inbound emails and messages I've had from people saying, I've been thinking of a project that’s like this and I'd really like to build on your infrastructure.' And that's really exciting because that collaboration is really what's going to help the ecosystem more generally.So that's what's really exciting for us is this can be used by anybody. We've had a lot of excitement from the auction space because for them, this is really exciting. We're giving them tools to accept cryptocurrency at auctions, which is great for them and great for their collectors. So there are different benefits to a whole group of stakeholders that the applications could bring, and we will work with people to make sure those applications come about.  Jason: Great. So will we see people paying in Bitcoin and Etherium at Sotheby's or Christie's or the other major auction houses this year? Is that a reasonable assumption in your opinion?Jess: Yeah. I think by the end of the year, we'll certainly be able to use cryptocurrency to buy a lot of items at some major auction houses.  Jason: Very good. Can you share a little bit about how you are financing Codex Protocol? I know for a lot of folks we're seeing more and more ICOs pop up, right? And I don’t make the assumption that my readership necessarily know what an ICO is. So can you talk a little bit about your financing? It looks like you've got some traditional venture capital investment but are looking to do an ICO offering, as well. Can you help explain what that looks like and the thinking behind your structure for financing?Jess: Sure. We are supported by Bessemer Venture Partners and FJ Labs, both of which are traditional venture capital funds, both of whom have supported my co-founder before in previous projects, both of whom know the auction market space very well, and whom are really excited by this. We are now doing a token-generation event, or what some people would call an ICO. That happens in two stages. The first one is to raise money from accredited investors, which is the process that we've just started. The second process will take place once the infrastructure is actually built out and can be used, and that would be later in the year where the tokens will be able to be purchased by anyone.And essentially what the tokens do in the Codex ecosystem is allow you to change titles, to transfer them, to add information to them. So the tokens themselves have a functionality within the ecosystem, and we really hope that people who are interested in the ecosystem will want to buy and hold tokens because holding the tokens do two things -- they encourage the overall ecosystem to use the protocol, which makes it more and more successful; and they also encourage individuals to make sure that they're keeping their records up to date, which sort of strengthens the protocol, as well. Jason: Great. And who are some of the early adopters of the technology or folks that you're working with within the consortium or partners or anyone you can share on that front that folks should know about?Jess: Yeah. So the two main partners in the consortium at the moment are Live Auctioneers and Auction Mobility. Live Auctioneers provides software to auction houses, and they have an online auction site. Auction Mobility is also based in the US and offers solutions for auction houses. So both of those companies are very strong in producing technology, and our technology will just plug directly into theirs. It's pretty seamless because we're working already with those partners to make sure that what we're building is useful and it's going to be used and is helpful and exciting for the industry.Jason: And then, is the Biddable Dapp available already? Is that something that folks can get now?Jess: No, so that will be ready in the second half of 2018. We are building that at the moment. We're testing it with our partners and making sure that it's all up and running, and it'll be out later this year.Jason: Okay. I do want to ask you a little bit about your thoughts around the new CryptoArt, crypto-collectible space. But before I get to that question, is there anything else that Artnome readers should know about the Codex Protocol?Jess: Let me just double check if there's anything I'm missing. I guess the only other thing I'd say is we are really excited about the Biddable piece in terms of improving accessibility for people. At the moment, even to participate in auctions, people have to make a lot of financial disclosures, they have to send bank statements, they have to be approved 36 hours before an auction, and that can be particularly difficult for buyers who are participating, for example, in a western auction but don't have bank statements written in English or in the right language, and it becomes very hard to verify their financial status, and therefore, they often get excluded from participating at auctions, which is really unfair. Biddable will help solve that because we'll just use a cryptocurrency deposit mechanism to make sure that the auction house has comfort that if somebody wins an item, they will actually pay for it. That means that for buyers who traditionally found it hard to access auctions, this hopefully makes it easier too.  Jason: So if I were to play it back -- I think that this is an oversimplification -- but the parts that are exciting to me are that you can protect and retain your anonymity and protect your identity and participate more fluidly in the market. What Codex Protocol is helping with is increasing the ease of participating in the market and protecting your identity. It's actually making it also dramatically easier to gain information on the works themselves. So getting information on the works themselves goes up, but not at the risk of people having to disclose personal information that they don't necessarily want to share, which is a long-standing concern in the art world.Jess: Exactly. Yeah, that's absolutely right. And once you have that, then it makes other things easier. So it makes insuring things easier, it makes the concept of shared ownership easier, it makes it easier for artists to preserve sort of resale royalties. So it kind of opens up a whole load of possibilities for the art world which I think is pretty exciting. It will help artists themselves to monetize their work more effectively and to make sure that they can participate in the value that they are creating, which for me, is kind of one of the most exciting things, as well.Jason: I agree with you on that. That's a lot of where my interests are at actually. As a transition point from that, I know you have a really good understanding of what I refer to as the traditional art market -- which maybe isn't a fair term, but it's just the way that I'm separating it from a lot of the new stuff going on around blockchain -- but then, you're also pretty tuned in to all the CryptoKitty, CryptoPunk, Dada.NYC, Rare Pepe kind of stuff. You even shared the stage with DJ Pepe last weekend. I'm curious, I don't think I have quite as in-depth the knowledge as you do on the more traditional art market, but I do see that there's potential for sort of a bottom up/top down approach where a lot of this CryptoArt and these CryptoArtists could become pretty important. I see them as really reflecting a lot of what's going in this generation. It's fairly traditional that artists that people don't fully understand at first can eventually move up and become more accepted by more traditional collectors. I'm curious what your thoughts are about the potential for what we would call, I guess, CryptoArt or rare digital art to move into more of the art collecting mainstream.  Jess: I think you're right. I think for a long time, artists have played a really important role in society and a really important role in how can you explain new technology and how culture changes as a result of new technology. And we saw that with some of the early web artists, for example -- and we're seeing it now with artists who are exploring the blockchain -- and that's both artists who come from a blockchain world and who are excited about cryptocurrencies and the technology themselves and are exploring that concept through their art. And there are also artists who are coming from sort of the more traditional background who have noticed that blockchain is a real phenomenon and is increasing in its importance in the world at the moment, and who are therefore beginning to explore it.And I think both of those groups are going to become really interesting artists to follow, going forward, because they are artists who at the moment are kind of a little bit on the edge and a kind of not in the mainstream, but actually they're exploring a really important topic. And as blockchain becomes more mainstream, more people will get involved in it. People will start looking at the art world for explanation and for insight into what blockchain is. I think these artists have a really important role to play there.Jason: Great. And are you a collector? Do you have any CryptoPunks or CryptoKitties or crypto-anything?Jess: I do. I do. I'm really excited by some of the work that's being produced. I think it's fun, it makes blockchain accessible to people. It also encourages people who are not traditionally from a blockchain world to take an interest, which is really important.I think in any technology, it's really important to have diversity in the people who are building it and thinking about it and working on it because that way, the technology is the best that we can build. And so for me, I think blockchain and art can be kind of mutually reinforced in one another. And so I'm a big fan of it, and I have a CryptoPunk, I have some Kitties, I have one or two of the other bits and pieces.And yeah, there's some really cool work that's been produced by these artists and I think in the long run, just like any new kind of art movement or medium that will kind of become absorbed into the canon.Jason: And then I guess, to conclude, any predictions on 2018 vis-à-vis blockchain and the creation of art or blockchain and the art market? Just kind of open field in terms of as an expert in both areas, where do you think it'll get to within 2018?Jess: I'm really excited about 2018 for a lot of reasons, I think. The Biddable application that we're doing is really going to change the auction market. Being able to buy with crypto at auction, I think, is very exciting for a lot of people. I really hope that some of the technology we're building, as well, encourages other people to collaborate, and people who've been working on blockchain art projects which have kind of been maybe a little under the radar or they haven't been able to develop as fast as they want, we are really hoping to kind of help them and bring people together and support the whole ecosystem. I'm really excited for that. I'm really excited to collaborate with lots of people in this space to try and affect change. And I think from the art market perspective, I think we're seeing some of the prices that some of the blockchain art has been going for, it's certainly hitting the radar of more and more people who are in the mainstream art world. I frequently have contact from galleries, from well-known artists who want to learn more and I think that's really exciting too. Jason: Awesome. Well, thanks Jess, I really appreciate you taking the time to talk with me.Jess: Thanks, Jason. Have a nice day.Jason: Take care. You as well.Jess: Bye.Jason: Bye.   
