COMMUNITY
are 10,000 unique , collectable , pixelated digital art characters . They were one of the earliest NFTs created , originally given away for free . Their ownership is stored in the blockchain as they are bought and sold . The cheapest CryptoPunk is now worth hundreds of thousands of dollars , and they are used as status symbols in cryptocurrency communities .
NFTs in Music
In February of 2021 Justin Blau , an electronica DJ professionally known as 3LAU ( pronounced with a “ B ” and rhymes with “ plow ”), auctioned 33 unique music NFTs commemorating the three-year anniversary of his Ultraviolet album . These NFTs fetched more than $ 11 million at auction . The token holders received physical perks – a copy of the vinyl record , some unreleased music and custom music mixes – along with a token authenticated on the Ethereum blockchain . Ethereum is a public blockchain that provides a platform for smart contracts , which are programs inside the tokens allowing users to exchange just about anything of value automatically , without intermediators . For example , many NFTs on the Ethereum platform require a resale royalty to be paid to its creator every time the piece is sold . Imagine if Picasso ’ s estate received 5 % every time one of his physical paintings were sold , forever !
Music NFTs this year were minted and sold by Kings of Leon and Wu-Tang Clan . The Grammy Awards will even commemorate next year ’ s show with a series of NFTs .
Next Level Music NFTs – Income Participation
Music NFT proprietors are iterating . In October 3LAU gave away 49.9 % of the streaming revenue in his song , “ Worst Case ,” to 333 fans , in the form of a limited series of NFTs . Each NFT holder receives a portion of the revenue every time someone plays “ Worst Case ” on a streaming platform like Spotify or Apple Music . At the time of this writing “ Worst Case ” NFTs are worth as much as $ 43,000 on OpenSea , a popular NFT marketplace , demonstrating the already robust NFT secondary market .
Ultimately , because of their programmability , the scope and use of NFTs are limited only by our creativity . For example , Ethereum NFTs can be “ fractionalized ” or split , and several companies are reportedly working on platforms that will offer shares of royalty bearing NFTs , as well as bundles of shares , like mutual funds for music . Because no intermediary is needed – like a label or publisher – artists , songwriters and producers may be funded directly from their fans .
But NFTs are still in their infancy and have downsides . They carry security risks . What if a server goes down and causes the digital file to which your NFT points to be lost ? What if your NFT is stolen ? Potential issues abound as law and regulation play catch-up , from commodities and securities law , to privacy and tax law , to consumer protection and intellectual property law . Environmental concerns also persist because of the enormous amount of computing power required to run the computations that authenticate the transactions .
Is the Future of Music Here ?
With the staggering sales numbers and growth multiples this year , and enthusiasm from artists and fans , at this point the question appears to be less “ is the future of music here ?” and more “ how transformative will NFTs be ?”
If the history of the music industry is an indicator , music NFTs will be innovative and disruptive . Regulators will be watched closely as they determine whether to enforce existing laws and regulations or enact new ones . Royalty bearing music NFTs and fractionalized music NFTs may provide investment options to average fans that , in the past , were only available to hedge funds or large organizations .
Early on , our tendency will be to “ shoehorn in ” existing use cases into the NFT experience . These early ideas will be “ skeuomorphic ,” or adaptations from the offline world or older domains that will lead us to think NFTs are limited to those domains . Eventually , however , it will be the “ native ” uses – the ones we don ’ t see coming – that define it .
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32 November / December 2021