Unless you have been living under a rock for the past year or so, you have probably heard of NFTs. Non-fungible tokens are cryptographically signed tokens on the blockchain that represent digital or physical assets.
They could be any kind of artwork, a piece of real estate, product or any intellectual property. Music-NFTs and the blockchain in general are set to disrupt the music industry – the decentralised nature of the technology could be the remedy to the problems that plague the centralised, top-down music business.
Disclaimer: I do not recommend investing in digital art and speculating on a rise in value in the short term. I do not recommend investing in anything that you have not thoroughly researched.
This article is NOT intended to lure you into investing in cryptocurrencies, NFTs or any get-rich-quick schemes.
It has become almost a cliché, but I have to say it. I am not a financial advisor and this is not financial advice.
The hype around NFTs – predominantly screenshots and digital artwork – has made a few investors a lot of money, and a lot of people FOMO’d in and lost their investments, were scammed or otherwise duped.
The negative connotations are understandable. Yet every new technology gives bad actors an opportunity to manipulate others into parting with their hard-earned cash. Websites can be used to scam people, as can emails, WhatsApp messages, even phone calls. Hell, banks scam people out of their money every day, investing savings in stocks and bonds, the profits of which are not shared with the customer.
Musicians are being scammed daily by Spotify, and it has become the norm.
This article is not about speculation. It is about the possible developments in the music industry over the next 5-10 years with a technology that could be used to automatically compensate content creators for their art, eliminating the inherent problems of a system in which the product has become worth less than its distribution.
In 2021, the internet and Twitter especially went crazy over NFTs when 8-bit cartoon works of “art” were bought and sold for hundreds of thousands, if not millions of dollars as the hype went viral. It was a classic case of the Gartner Hype Curve – a new and exciting technology pumped the expectations of speculators and the perceived worth of the computer-game-render NFTs went through the roof.
As we see on the chart above, the peak of inflated expectations gives way to the trough of disillusionment as early adopters caught in the speculation trap lose a large investment, or latecomers to the party arrive only in time to watch the cleanup. It’s only then that once the initial hype dies down, that people tend to sit down and map out real use cases for new technologies that could solve problems in the real world.
You don’t have to look far to find the obvious pitfalls of NFTs as a new technology. Wherever there is a chance to make money quick, scammers will gather and hack out a way to entice millions to part with their hard-earned cash in exchange for whatever is being flogged.
And people fell for it. They saw the gains early investors made during the NFT bubble and they FOMO’d in. Everyone wants to make a quick buck. The first ever tweet by former Twitter CEO Jack Dorsey was sold for $2.9 million last year. The investor then tried to resell it for $48 million, only to have the auction close at just $280.
I decided to sell this NFT ( the world’s first ever tweet ) and donate 50% of the proceeds ( $25 million or more ) to the charity @GiveDirectly
— Estavi (@sinaEstavi) April 6, 2022
🖇 https://t.co/cnv5rtAEBQ pic.twitter.com/yiaZjJt1p0
We can laugh at old Estavi, to whom the $2.9 million was probably peanuts. But it gets worse. Counterfeits of art were minted and then sold as NFTs, in one case work done by a deceased artist. Real people got carried away, investing in overpriced pictures of Apes and screenshots of memes, only to have the rugged pulled out from under them when the bubble burst.
But what is the actual problem here? Is it the pictures with no intrinsic value? Or the code built in the smart contracts built into the NFTs? Or is it the desire to become unfathomably wealthy overnight and throwing all caution to the wind, just because “it’s the new thing and everyone is doing it”?
As of early 2022, a large majority of NFTs are created on the Ethereum network. Next to Bitcoin, Ethereum is the best known and most popular blockchain network. It has provides the platform for development for a myriad of crypto projects not limited to the NFT industry. Yet there are some inherent problems with Ethereum that are well-documented, but yet to be resolved, despite several updates in recent times.
The first and foremost issue is that Ethereum has a huge problem with its current exorbitant gas fees. Gas fees are essentially the cost of making a transaction on the blockchain. It is so expensive to transfer tokens on the Ethereum network due to the high congestion of the network and inherent technical issues that have yet to be resolved.
The high cost of minting NFTs on the Ethereum blockchain could (and probably will) lead to an exodus to alternative blockchains like those mentioned above.
Another massive issue with NFTs and the blockchain in general is the processing power needed to perform computations. Mining and minting currently require enormous amounts of energy – so much that the price of electricity may exceed the value of mined coins in the near future. The power consumption of a single bitcoin transaction is the equivalent of the consumption of a US household – over 73 days! Ethereum is not much more environmentally friendly, despite recent updates to Eth 2.0.
So is this the ultimate argument against blockchain, NFTs and the entire crypto ecosystem? Well, despite what most media outlets will have you believe, blockchain is not inherently environmentally unfriendly. There are other options such as Tron, Hedera Hashgraph and the XRP Ledger that have a much smaller environmental footprint than the stalwarts of the space.
How efficient is your favorite public DLT? Spoiler alert – mine is super duper energy efficient. @hedera @Cardano @Polkadot @tezos @ethereum 2.0 2/@ucl pic.twitter.com/91tcUJr2Lj
— Christian Hasker (@chasker) September 8, 2021
As mentioned above, there are a number of competitors waiting in the wings to knock BTC and ETH of their top spots in the crypto industry. The entire space is in development, having taken only baby steps since the inception of Bitcoin in 2012. The environmental issue is one that must be solved before mass adoption can take place.
Whenever a new technology emerges, new problems arise as systems are manipulated for the personal gain of bad actors looking to capitalise on emerging trends. The internet was the wild west before regulators developed laws preventing the misuse of user’s personal data, a process that is continuing until this day.
As we saw last year, NFTs and the crypto space in general currently lack a framework protecting people from being manipulated or exploited. Ironically, the hype around Bitcoin, NFTs and cryptocurrency exchange practices have brought the industry into the limelight, forcing lawmakers to map out regulations before the development of serious use cases.
Before music NFTs really take off, I expect major changes to take place in all areas of the crypto industry. There is a lot of work to be done by all involved with the space.
Most of all, the damage done by the hype surrounding NFT scams and exorbitant sales of digital art must first be repaired. Still, there are many possibilities that could benefit a number of industries, including the music business.
Let’s dig into it!
NFTs have the potential to solve a lot of problems that have arisen in the digital era and bridge the gap between the physical and digital marketplace. Music NFTs could possibly completely change the music industry landscape, giving artists more control over how and when they receive payment for their work. Much like the mp3 and Napster did when suddenly music was available anywhere online, music NFTs are set to disrupt the paradigm that has been in the firm grip of major labels and companies like Spotify and co., who for decades have reaped the rewards on the back of musicians’ creativity.
In the digital era, physical music sales have been on the decline for decades. Sure, vinyl has made a strong comeback, but compared to the revenue made by streaming services that have completely taken over the industry, tangible music product sales are but a drop in the ocean. Artists receive next to nothing for a play on streaming platforms, regardless of whether they recorded, produced and uploaded their music themselves, or were backed financially by major labels who take their cut every step of the way. The system isn’t fair to artists, whose intellectual property forms the backbone of Spotify’s business and yet receive a pittance for supplying their art to the platform.
A music NFT is created by encrypting and signing a piece of music on the blockchain. The NFT certifies ownership of the piece of music, displaying it’s authenticity. Meta data such as the composer, songwriter, producer and any other stakeholders could be signed into the NFT ensuring fair compensation down the road, should the piece of music be sold at a later date.
A fan may buy an NFT and then sell it for a profit at a later date – but the original stakeholders will automatically be compensated with a certain percentage for the increase in value by the in-built smart contract that comes into play with the second transaction.
Artists may choose to distribute NFTs as tickets for concerts in the physical and digital realms, back stage passes or sneak previews of songs or albums. Fans have the opportunity to invest in their favourite musicians and hold an asset in the digital realm that is unique and of intrinsic value.
NFTs, when authentic, are exclusive, collectible and could increase in value. Artists are able to track their products in the digital marketplace as well as receive a cut of further sales.
NFTs are poised to completely overhaul the music industry, especially in the streaming sector. Every artist (and pretty much every music fan) knows that musicians aren’t being paid enough by streaming platforms for their products.
With the technical offerings of NFTs, new platforms are set to arise giving a fair share of streaming revenue to all stakeholders of a piece of music – automatically per smart contract.
Imagine a streaming platform based on blockchain technology that gives each person involved in a piece of music their share of revenue based on the smart contracts built into each NFT. A record company mints an NFT by uploaded a WAV and entering the information of all artists, producers, songwriters and publishers involved in the creation of the music. For every stream or digital download, the smart contract is triggered, in turn triggering a monetary transaction to every person or entity invovled. No one gets cut out of the deal, which was drawn up in the traditional manner way before the music was produced.
Another use case could be the following: an artist uploads an album which they own 100% of the recording and publishing rights to. They wrote the music themselves, recorded it using their own funds and released it with the help of an indie label. The indie deal gives the label 40% of the digital revenue in return for marketing and physical CD and vinyl production costs. The 60/40 split is entered into the music as it is minted.
Whenever a stream occurs, the payment made by the listener to the streaming platform could be split amongst the stakeholders of each song. The monthly subscription could be directly linked to only the artists that a user listens to, giving them their fair share as written in the music NFT smart contract.
With this kind of technology it could one day be possible for artists to earn substantially from the main product of their art – their music. I sincerely believe that this transparent new marketplace provides the foundation for a new paradigm in the music industry based on fairness and equality.
One could see NFTs being used as an investment mechanism for music fans to provide funding to an emerging artist. Much like investing in a company on the stock market, listeners could take an active role in helping artists develop by financially supporting them towards the creation of new music.
An artist offering NFTs of their next album prior to its production essentially removes the need for a record label who traditionally provide funding. Musicians and fans could become intertwined in a financial relationship – the value of the initial investment could rise over time giving fans an incentive, both emotionally and financially.
We already see similar systems in crowdfunding and subscription services like Kickstarter and Patreon, yet without any possible rewards for fans, other than the exclusivity of receiving new content before the general public.
Do fans need such incentives to support artists in their development? No, probably not. The popularity of Patreon shows that content is enough to satisfy hardcore fans to give generously on a monthly basis for access to new art and music. But could it revolutionise the value of digital music and draw more people in to supporting artists and providing much-needed financial stability? Maybe…
Concert ticketing is an area that has been plagued by middlemen, both legal and illegal, as ticketing agencies, venues, scalpers and bots all hold out their hands for a share of the spoils. An increase in prices due to a fans reselling their tickets can directly benefit the artist when a built-in smart contract is activated to give them their fair share of the price.
Regardless of the fact that the music industry is still taking baby steps when it comes to NFTs, there are several options to get started now, if you so choose.
In order to mint your first music NFT, you will need a crypto wallet, funds to purchase cryptocurrency and an account at a crypto exchange as well as at your chosen music platform.
Before you get started, check out each music NFT platform and find out what you need for minting, as some allow you to bypass the crypto purchase and pay directly with credit card.
You can open an account to purchase cryptocurrency at one of the following (amongst many, many others):
Suitable Wallets for holding crypto once you have purchased include:
Getting involved in cryptocurrency is a deep dive and one you should take time to examine and approach with caution. Prices are volatile and at times it can feel like a rollercoaster ride in a casino in the middle of the wild west.
However, I believe that Blockchain technology is here to stay and will have a major influence on every single industry on planet earth, the music business included. Getting into the scene early in 2022 will give you a head start as an artist as a new digital paradigm is born.
Here is some great content you can consume to further your understanding of NFTs, cryptocurrencies and the blockchain in general.
YouTube: NFTs Will Change The Music Business More Than Spotify Did
YouTube: Line Goes Up – The Problem With NFTs – An in-depth (2hrs!) analysis of the NFT paradigm from a critical standpoint
YouTube: Crypto Eri – All things XRP & NFTs
YouTube: King Solomon – XRP, HBAR, NFTs
CoinDesk: State of Crypto: It’s Time to Talk About NFTs and Intellectual Property Law
If you are serious about your music, chances are you are already killing it on Instagram, YouTube and Spotify.
You’ve got an email newsletter and are hammering out updates every couple of weeks, keeping your listeners engaged and in the know.
Your website is up and running, your Bandcamp is on fire and you have been sorting those merch and album orders and getting them shipped out to your fans ASAP.
If so, I have a couple of tools that might interest you. They could take the load off you somewhere, be it off your wallet or your schedule.
They include:
Get the 5 Digital Tools For The Digital Musician sent straight to your inbox. Just let me know where to send them.
I use these tools daily and they have each made my life a LOT easier fulfilling CD orders, creating content, sending slick emails, maintaining my website AND moving forwards into the next generation of music streaming.
Enjoy!
Nick Braren is an audio engineer and musician with over 15 years experience in the studio, on stage, back stage and front of house. He is the owner and operator of Upaya Sound, guitarist and vocalist of Vandemonian, father of 2 and husband of 1. When he’s not in the studio or in the band room he’s either travelling in his van or at the beach – or both.
