With NFTs entering even the music industry, CoinMarketCap breaks down how music can be tokenized.
The popularity of crypto music, also known as audio NFTs, is making some serious waves in the creative industry, with the new music niche raking in over 20 million USD in February 2021 alone.
Industry experts predict that this nascent blockchain-based trend will benefit creators, solve endemic music industry problems and change the way we consume art in all aspects. Here is your guide to understanding crypto music and its potentially disruptive impact on the music industry.
What Is Crypto Music?
On Jan. 7, 2021 U.S. indie rock band, Kings of Leon, released their newest album, “When You See Yourself” to generally lackluster reviews.
Despite failing to impress critics, the Tennessee brothers’ album was groundbreaking in other aspects. Indeed, it was the first album from a major recording artist to be released as a non-fungible token, or NFT, an emerging digital collectible technology revolutionizing the art and music industry. Congruously, it is the first truly mainstream example of what many in the industry are referring to as “crypto music.”
The defining characteristic of crypto music is the use of NFTs. A music NFT could encompass anything from an album, song, piece of merchandise (t-shirts, stickers etc.) or album artwork. It is simultaneously a genre, medium and a media format. For example, Kings of Leon released merchandise authenticated by NFTs alongside their latest album, and the Canadian musician Grimes released exclusive content (digital images of cherubs) set to her music.
The term “NFT'' has become something of a buzzword of late in the music and art industry. In fact, I recently wrote another CoinMarketCap piece about the record-breaking sale of Beeple’s digital artwork Everydays: “The First 500 Days” which detailed NFT technology’s emerging role in the creative industry, and hinted at its potential uses by recording artists.
Let’s hear it!
What Is an NFT?
A non-fungible token (NFT) is a cryptographic token that records who owns a piece of digital content on the blockchain. NFTs are generally stored on the Ethereum blockchain, although other blockchains, such as Flow and Tezos, have started supporting them as well. NFTs are unique digital assets and as the name suggests, non-fungible. This lack of exchangeability makes NFT adaptable to securing unique items such as contracts, digital art, and this case — music.
Artists can create their own NFTs and then auction them off to their fans, who pay for them using cryptocurrency. Multiple buyers could purchase an NFT, making owning one a lot more accessible, especially if it's a big ticket item. Artists can also receive royalties every time an NFT changes hands, which puts a lot of power back into artists’ hands and ensures that they are being duly compensated for their work.
While art collectors and music fans may purchase complete/portions of NFTs using cryptocurrency, they generally cannot exchange one NFT for another. This would be like exchanging a Dali for a M.C. Escher — their respective values are not equal.
As NFTs leverage blockchain technology, they are uniquely suitable for securing intellectual property. They enable ownership tracking and establish providence. Each individual transaction is recorded, and like brush strokes on a painting, this makes the work increasingly unique and uncopyable. Owning an NFT or a portion of an NFT establishes genuine ownership an item crypto music or audio NFTs can be purchased either by auction (Christies’, or Sotheby’s) or by direct purchase, using cryptocurrency, this decision is usually made by the artist.
How Audio NFTs Are Changing the Music Industry
1. Stopping Piracy or Misappropriation of Music
NFT technology, as mentioned above, helps ensure providence and authenticity, meaning it will be harder for artists to misappropriate each other's work in the vein of the Thong Song/Vanilla Ice saga, for example, and avoid costly legal battles. It will also be harder for people to “steal” music through traditional methods like piracy.
2. Returning Control to Artists
NFT technology could turn the music industry, which is controlled top-down, on its head. The $11 billion dollar industry is dominated by the world’s top three biggest labels — Sony, Universal Music Group and Warner Music Group — who in turn control artists’ revenue. This revenue is divided between myriad entities (such as promoters, distributors, producers etc.), and it often takes recording artists a long time to receive minimal royalties. The financial woes this slow and low payment causes artists is currently compounded by the hiatus on touring caused by the ongoing global pandemic.
As tours are responsible for 75% of some artists income, many are seeking alternative revenue sources in the form of crypto music. Many musicians including Kings of Leon, Steve Aoki and Shawn Mendes are already exchanging digital art and audio NFT for cryptocurrency to augment their income. Similarly, in the course of 20 minutes, Grimes earned a whopping $5.8 million selling digital art.
3. Adding Royalties Through Resales
Recording artists can earn additional revenue or royalties following an initial sale. For example, it can be set up that every time an NFT changes hands on NFT marketplaces, the transaction could generate 10% more income for the artists.
4. Connecting Artists and Music Lovers Directly
NFTs simultaneously enable fans to own portions of the music they love, while providing artists with an avenue to securing their intellectual property.
5. Ending Concert Ticket Scalping
The use of NFTs and smart contracts could render the services offered by scalpers obsolete in the post-pandemic concert world. Founded in 2018, Yellowheart is a blockchain ticketing platform which ensures the authenticity of digital tickets. Through Yellowheart, concert attendees’ identity is recorded. The artist also has full control over how each ticket is purchased and resold, making them exceedingly difficult to scalp.
Problems With Crypto Music
Blockchain technology, cryptocurrency and NFTs are touted as an avenue towards democratizing music. In theory, any artist should be able to produce an NFT and sell it. Despite this, the majority of artists utilizing this technology are already big names. Likewise, audio NFTs and their corresponding merchandise are typically purchased by the wealthy. In sum, the present use of NFTs is making the industry less democratic and more elitist.
Analogously, minting NFTs is often cited as being extremely energy intensive, and thus an environmentally destructive process. In 2018, the mining of Ethereum was estimated to have used more energy than the entire country of Iceland. While this has since improved as proof-of-stake blockchains slowly replace proof-of-work ones, these are issues which will need to be addressed — though to what extent, no one can be sure.
Conclusion
The use of NFTs in the creative industry is already reshaping the way we consume music. Despite this, environmental and social challenges still exist. Should crypto music — through a combination of greater democratization and proliferation — meet these challenges, it may very well change the music industry faster than the invention of the vinyl record or compact disc.
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