Cryptocurrency is a word hot on the lips of the most influential business figureheads and investors in the world. With its original form, Bitcoin, flourishing and leading the way, cryptocurrencies are reaping substantial rewards for stockholders as the digital landscape continues to evolve at a rapid rate. The success and continued upward trend of this market and the blockchain technology behind it have led to introducing other digital products and sub-derivatives into many different sectors that can utilise this technology and enjoy its benefits. The relatively new kid on the block is the NFT.
Firstly, let’s break down what an NFT is.
Putting it simply, a ‘Non-Fungible-Token’ is an uneditable record on the blockchain of who owns a unique piece of digital content. It states who owns a photo, video, music, art, tweet, games or other digital content forms. Each NFT is entirely individual and acts as a collector’s item that is impossible to duplicate, and although copies can be made and sold, they are not the original piece, hence will have less value.
Why have NFTs become so popular?
The significance of NFTs lies in the ability to securely value, purchase and exchange digital media via an online-based platform ledger. Anyone can download the file or link but, the NFT owner holds the contract stating ownership rights. Using NFTs offers authenticity to the media and prevents it from being owned by more than one person.
The rise of NFTs in music
The great thing about an NFT is that it can also act as a smart contract, giving the token’s originator a cut of all future sales. That could help producers secure a reliable and consistent source of income on their produced tracks. Imagine being the owner of several exclusive tracks. You upload these tracks as NFTs, enabling anyone to download copies of these tracks, but not their ownership. As the originator, you will take all the royalties from the sales.
The music scene started to capitalise on the craze. Daft Punk released 200 editions of their newly minted “Digital Love” NFT image, with one of the copies relisted for £15,000 by Lindsay Lohan on Rarible’s secondary market. The honour for the first digital music album sold via NFT went to Kings Of Leon whilst Snoop Dogg, Lionel Richie and Boy George have also announced a collaboration with platform Crypto.com for releasing unique digital content.
Is this the start of the end of the record label as we know it?
Not just yet; with the breakout in popularity of NFTs, you have to wonder what effect this will have on the role of record labels.
Having the ability to sell your music digitally and securing the lion-share of the revenue is undoubtedly an attractive proposition and one that will shake a few feathers. As it stands, traditional contracts allow labels to take up to 80% of artists earnings from album sales and streaming. By decentralisation, NFTs can connect fans with creators, effectively cutting out the middleman.
Some issues are still there, though; the cost of minting one NFT is approx $70, meaning it would go on sale for a min 100$ with trading fees, not a bargain for the average fan. Also, as of today, there is no authentication tool to validate if a token’s creator is the owner, and there is no system in place to calculate how royalties are distributed and paid to all the parts involved.
It will be interesting to watch this play out over the coming years as Non-Fungible-Tokens look to re-shape, re-invigorate, and energise the electronic music scene, giving an exponential amount more of the proceeds to the music’s original creators.