Practical Techie: Musicians also jumping on crypto coin bandwagon
It was not exactly music to their ears for many show business entrepreneurs at the end of the last century.
The initial attack that collapsed the traditional song distribution industry came from Netscape in 1999. Then it was Apple’s iTunes, followed by Spotify, and now its cryptocurrency creeping into the $65 billion music business worldwide.
BACKSTORIES — Napster, a digital music-focused online service, was founded in 1999 as a pioneering peer-to-peer (P2P) for sharing digital audio files encoded in MP3 format that disrupted the cassette and CD song formats forever. As the software became popular, the company ran into legal difficulties over copyright infringement. It bounced back in 2002 and is still alive today as a widely used music platform.
Apple Music launched its store in 2003 as iTune with a first-generation iPod MP3 player which stored 1,000 tunes, transforming along the way the world of digital music.
In 2006 Spotify emerged in Stockholm, Sweden, and further revolutionized how music is consumed.
FOREFRONTS — Such music delivery innovations freed musicians, composers, and creators from copyright issues, exploitation contracts, small royalties under the old exclusivity system of song publishing. The challenges that musicians worldwide face with the production and distribution of their work are now getting new alterations with the emergence of non-fungible tokens (NFTs).
In previous columns, we mentioned how the NFTs are revolutionizing the art scene by allowing artists to sell their work directly to collectors. Thus, the “tokenizing” of art objects and collectibles has reduced almost to nil the need for intermediaries in the artwork business.
With Puerto Rico slowly becoming a forefront for cryptocurrency investors who obtain capital gain tax breaks for bringing their coins to the island, the flexibility of the NFT as the mode of payment for different goods is something to keep an eye on in 2022.
ROYALTIES — As we know, NFT is a unique cryptographic token recorded on a blockchain representing a digital or physical asset. Once an NFT is created, it cannot be changed or duplicated. But, as in the case of musicians, NFTs can be encoded in blockchain to allow for royalty payments in secondary markets.
A musician will “drop” an opus on a blockchain, but unlike mp3s, which download, NFT will tokenize the file. Once acquired by a collector, the new owner may want to monetize the song later on a mass market but must pay royalties to the creator.
FORMATS — The song can be represented as an audio file or video, an album cover, a concert ticket, or signed merchandise, among other forms of NFT expression.
It works the same way for digital visual arts. An artist can release a limited auction of say10,000 copies and auction them as tokens to the best bidders.
A musician or band decides what they want to sell to their fans, identifies the work on a blockchain, and mint it as an NFT on a web platform. As such, cryptocurrency music platforms are a new phenomenon, but many are popping up quickly. OpenSea, Opulous, NFT Tone, etc.
The marketing is done by the platform or directly by the musicians among their fanbase after announcing the release of their drop.
Each creator determines the value to sell their works. When a creator decides to auction an audio file, the highest bidder owns the original but not the copyright.
Thus fans or investors store the tokenized music in their crypto wallets as a collectible to sell to a higher bidder in the future.
DRAWBACKS — As with every new form of e-commerce, hurdles, kinks, and snags abound.
NFTs, like any other cryptocurrency, ride waves of bounty and downfalls. It’s, like all investments, risky business; otherwise, we would all be millionaires.
For example, in 2021, Dogecoin saw a sharp rally after Elon Musk said Tesla would make some of its cars buyable with cryptocurrency. Yet, that year another bitcoin, Binance, took a plunge when the Singapore virtual exchange announced it would close and “refocus” its operations into a blockchain innovation hub.
China’s anti-bitcoin enforcement continued as courts punished crypto miners and fraud rings last year. Also, the Russian Central Bank moved to ban funds from crypto investments.
On another stab, the International Monetary Fund advised financiers of how difficult it is to regulate crypto money without global consensus on values.