We all remember the Bitcoin buzz that started about five years ago. Whether you tapped into it or completely tuned it out, the advent of new technologies is only becoming more and more common, as they make their way into our daily lives. After all, technology is expanding exponentially. (Friendly reminder that IBM has an almighty quantum computer sitting in their basement - no big deal).
Though we may not all be bound to become Bitcoin experts, we are bound to become experts in adapting to the technologies that continue to change the game of every industry - technologies like NFTs, which will not only affect the blockchain game but also the entire, beloved music industry.
Before we dive into that, let's chat about the basics. Think of blockchain technology as a well-secured house and Bitcoin as the roommate with the biggest room. Bitcoin functions as fungible cryptocurrency, fungible meaning the values are mutually interchangeable. If you have one Bitcoin and I have one Bitcoin, both are worth the same amount.
NFT stands for non-fungible token. Unlike Bitcoin, NFTs earn their value primarily from being a unique piece, like a fine art painting that's the only one of its kind or a concert ticket each with its unique code, date, and seat number. Think of Bitcoin as a deck of playing cards, and NFT as that lone baseball card you dream of getting your hands on. The only reason people value the baseball card is because of its rarity, its non-fungibility; that's what gives the card its value.
It's worth noting that the most common NFTs exist on the Ethereum network. Think of Ethereum as Bitcoin's younger, cooler sibling with the smaller room in the house, who grew up with an iPhone and knows how to code his own app. While Bitcoin is the go-to digital dollar, Ethereum is on the cusp of what's to come, making way for the next level of innovation, with features such as smart contracts that allow NFTs to be stored and transferred securely.
This ability, combined with blockchain's ability to verify the owners and original creators of these tokens, is foundational to the functioning of this world. You want to make sure Joe from down the street isn't printing a copy of your original baseball card and claiming it's his. Nice try, Joe. Blockchain warned me about you.
But I don't blame Joe for trying. The value placed on rare collectibles and other NFTs has people opening up their wallets and notifying their banks not to be sketched out when they drop MILLIONS on this weird internet thing.
Bids are skyrocketing. But here's where it gets really interesting: every time an NFT is resold, the artist or original holder gets a dividend. For example, let's pretend for a moment that Leonardo da Vinci was alive and well. If he pinned the Mona Lisa as an NFT, every time someone outbid the previous person to own the original painting, da Vinci would get a cut of that check. He's accruing revenue more than once, and that revenue is likely increasing with each bid.
In this way, NFTs are revolutionary in opening up a new revenue stream for artists, both the da Vinci's of the world and musicians like Justin Blau ("3LAU") who, according to the Wall Street Journal, has made $17 million from NFTs just this past month. In the beginning of March, Blau minted his three-year-old "Ultraviolet" album as an NFT, claiming the highest bidder could also earn a collaboration with him. Not only has it grossed $11.6 million, it also "briefly held the record for the highest price paid for a single NFT" at $3.6 million. And Blau is not alone.
Illmind auctioned the rights to a royalty-free sample pack as an NFT. Deadmau5 auctioned digital collectible NFT packs, both 4,000 of a standard version and 2,000 of a "Mega" version with live show content, stickers, 3D artwork, pins and other exclusive goods. Beside the artists themselves, other aspects of the industry, such as streaming and touring, are also tapping in.
For example, ROCKI is a streaming platform that created its own blockchain that "allows artists to earn the ROCKS cryptocurrency for their streams… using a User-Centric payment system that pays the majority of the subscription revenue from a listener directly to the artists they are streaming." The company recently auctioned off 50% of future royalty rights for a song on the platform through NFT. Kings of Leon was the first to drop a full album as an NFT, also granting its ultimate buyer a life-long, VIP, and front row seat ticket to every Kings of Leon tour for the rest of time. Just last week, alt indie band Faux Real dropped the first ever "NFT live show," an NFT for a one-time real-life private concert.
As Blau told Wall Street Journal, "'I think this technology will definitely change the world, but I'm cautiously optimistic because no one really knows how to value this stuff."' Let's talk about why the world is both cautious and optimistic about NFTs.
NFTs gain their value through supply and speculation. Basically, hype runs the show. Many factors can saturate or dilute this hype, such as the influence of the original creator and the fame or number of previous owners. If you're a big name already on the hype train, NFTs are a great additional revenue source. More so, if you're still trying to put yourself on the map, finding creative ways to break through the noise and foster hype and demand through NFTs can get you on it. That hype, which determines the price of your token, can even be used to leverage growth, enticing label deals or potential sponsorships.
That growth can also take place in the relationship between an artist and their fans who are willing to bid big bucks to receive exclusive content. Next, NFTs cut out the middle man, allowing the transfer to take place directly from the creator to its new owner. This is immensely empowering for artists who don't need a middle man playing messenger and taking a major cut of the profit from this new revenue stream; however, while blockchain technology can create secure smart contracts and authenticate the owner of an NFT, this world is still quite new and unregulated.
Tokenizing an album or song is like giving someone ownership of a one-of-a-kind vinyl, except now instead of a vinyl it's an mp3 file of the song. There is never a guarantee that that file is safe once sent, even if the receiver purchased it. Similarly, if you've tokenized a piece of digital art, there is no way of verifying whether someone downloaded it and redistributed it for their own profit.
This also gets one thinking about the line between art consumer and owner. If you purchase an NFT of an artist's song or forever-concert ticket, it's almost as though you're betting on their success. Every time you profit from their song, so do they - almost like owning a share in the same, unique stock. Every time that artist levels up, that lifelong concert ticket of yours increases in value. Think of all the artists and bands you KNEW were going to blow up, think of how much money you could have made.
Will people start investing in new music, setting NFT prices based on their bet of what will blow up next? If the labels use their exclusive insight to participate or influence the market, are they taking part in insider training? If I make an account right now, is it too late to purchase a crypto kitty?? (If you're not sure what this is and you'd like to be further entertained, I highly encourage you to google it).
Whether or not this buzz is built to last, NFTs will set a precedent for the potential of new revenue streams for artists and investors alike. After all, being a creator also means being a full-time investor. Whether you'd like to buy an NFT, release one, or stay off the internet all together, one thing is for sure - like the quantum computer chillin in IBM's basement, these new technologies are not going anywhere anytime soon.