In 2021 the world turned their eyes on crypto and what it could do for creators. It was NFT this, NFT that, and it was seemingly everywhere. This was incredibly exciting - and rightfully so - crypto, web3, blockchain, whatever you call it have implications far beyond their obvious financial utilities.

In the midst of the NFT mania in March 2021 I decided to take it upon myself to tweet about a unique crypto + music use case every day. My main goal was to illustrate the magnitude of potential this new technology offered.

1: Payment Splits

The first widely read proposal of blockchain solving for music payments was from D.A. Wallach, “Bitcoin for Rockstars,” in December, 2014. This inspired so many people and is a must read.

In 2014-15, Spotify was getting a lot of negative attention for how little streaming amounted to in revenue for recording artists and songwriters. Taylor Swift and Adele pulled their catalogs from the service in protest.

The music royalty problem was mainstream, and so it lended itself as a convenient example use case of what crypto could do.

‘Blockchain’ was even mentioned in Berklee College's “Fair Music Report,” a must-read for anyone trying to understand payment flows in the DSP streaming era.

Enter Ethereum.

"A Next-Generation Smart Contract and Decentralized Application Platform"

Payment Splits was the OG music use case for Ethereum. In 2015, Imogen Heap collaborated with Consensys and released the song ‘Tiny Human,' using smart contracts to split payments between all collaborators immediately upon the point of sale.

Simon de la Rouviere was on the early Ujo team and wrote about the pilot with Imogen on the Ujo blog. Simon describes a programmable financial layer where licensing (and payment splits) can be done programmatically using smart contracts.

This was over 5 years ago. A lot has happened in crypto and music since then. Unfortunately, the royalty problem - getting payments to creators rightfully and fast - is still a big one.

2: Rights Registry (TCR)

Music has no authoritative place where rights information lives. Which means that searching, finding, and paying for the use of a song remains incredibly difficult.

Could an on-chain registry be a solution? Read how TCRs could help👇

First, Music rights are complex. Songs are 2 copyrights: Recording + Composition.

Both have a different sub-industry of either labels or publishers. Both of which are treated differently wrt what copyright law requires for licensing, what is owed for their use, and who is responsible for collecting payments on their behalf.

Songwriting rights info is critically important to every service selling music. Yet, the full rights picture can sometimes be incomplete. Who gets paid, and how much are they owed? A lot of times, it is many people, and this information isn’t highly accessible.

So shouldn’t right info be stored in one place, accessible publicly (or to the authenticated parties)? This was attempted before and in resulted in a (v expensive) coordination failure; the ‘Global Repertoire Database,” or the GRD.

The main obstacles for the GRD were the motivations for royalty collecting societies to turn over the rights info in bulk. Their job is to provide this info, match it too usage, and pay out accordingly. A single rights registry would be a threat to their business. In the wake of the GRD's failure, 'Blockchain' was even mentioned as an alternative solution to what the GRD couldn't achieve.

Enter TCRs. First conceived by Mike Goldin at ConsenSys.

A TCR is effectively a whitelist with a dispute/resolution mechanism built in via tokens.

If the music publishing and recording businesses adopted this, rights info could be incentivized to be updated in one authoritative location.

This idea was dreamt up in 2017 by an early music+blockchain group called the Decentralized Music Foundation. The DMF never made it to the public. I’m not aware of a similar attempt to solve this problem since.

Global Rights info, for recordings & compositions still doesn’t exist in one, publicly accessible place.

Tokens could provide an incentive to change that, though, and maybe then the current industry-wide coordination failure could be mitigated.

3: Programmatic Licensing

Spotify, Apple Music, Deezer, and most DSPs do not allow artist’s to upload their music directly.

This is what distributors are for. Music distribution can theoretically be decentralized. Here's the background...

In 2005 after iTunes had taken off, independent artists wanted to get in on the action. Apple had relationships with labels, who in turn gave them catalogs, but the independents were left out.

A company called TuneCore emerged and allowed anyone to upload music to have TuneCore distribute to iTunes on their behalf. This model became the de facto and carried into streaming. Soon, distributors for the majors emerged as well.

Let's oversimplify. The current supply chain of music recordings looks something like this: Label/Artist -> Distributor -> DSP

What if, instead of a ‘distributor,’ a ‘third-party,’ or more harshly, a ‘middleman,’ wasn’t a for profit company… but instead an open protocol with decentralized file storage and smart-contract employed usage policies for licensing? This was the vision of COALA-IP, “a blockchain-ready, community-driven protocol for intellectual property licensing."

Simon de la Rouviere, one of the COALA IP authors, wrote about a programmatic licensing vision when the artist RAC released his album using blockchain-based Ujo Music, “A global, open, decentralized, machine-readable licensing system: owned by no-one in particular, but simultaneously owned by everyone.”

Music licensing is an administratively dated process. It could be done at lower cost and at a much greater magnitude if it was easier to do. Similar to how advertisements are programmatically served across applications, music licensing could look similar in the future. Web3 has the necessary ingredients for this to be decentralized.

4: Artist Identity

Identity has always been a hot topic in crypto. The need for a verifiable identity matters just as much for artists as it does for anyone.

Traditionally, artists haven’t had a standard digital identifier that is verifiably theirs. They get paid through their business managers, dispute rights claims through lawyers, release their music through labels, and so on and so forth.

Having a universal identifier for artists; the individual person, would be critical for security of an artist if they wanted to begin doing those above things on their own, online.

The case for authenticating an artist’s identity online is even more important in a world where we assume revenue, rights, and media assets are all going to be on-chain, lest we expect the managers, lawyers, and labels to continue managing the revenue sources for artists.

Early on, these values plagued a lot of the thinking about how music and crypto would work together. In 2016, Imogen Heap started Mycelia to bring awareness to the problems facing musicians and shed light on what new technology could do.

Born out of Mycelia was The Creative Passport, an identity concept for artists. This project was one of the very first music related projects exploring crypto.

In 2017, the early crypto music startup Jaak published thinking on how to approach artist identity, calling their solution ‘META ID’

“with META ID, an artist is able to aggregate their existing identities (real name, Spotify, Facebook, ISNI, IPI etc) to prove who they are and support the authenticity of the information they contribute to the network, e.g “I wrote this song”, which are referred to as claims.”

META ID was as early as it was brilliant however and never gained widespread traction from the music business.

Today, solutions for artist identity remain a void, but it can still be achieved.

Using ENS, some artists are registering their names (i.e. RAC.eth) and selling NFTs from that address. They use their verified social media to confirm that is their address and in a way that is verification.

Over time, as social media platforms come and go, an artist’s ENS can remain the same and forever be linked to the NFTs it minted and sold. Someone could also even create an on-chain registry of vertical specific artists to circumvent the costs of ENS.

With crypto we are now building the relationships with artists that will last a lifetime. The listens on MySpace, follows on SoundCloud, purchases on Bandcamp, and likes on Twitter may go down whenever those platforms do, but the relationships we create on-chain, with NFTs and everything else, will always be there.

"Blockchains, such as Ethereum, allow us to utilize a shared, public ledger to create new, flexible identity systems, independent of any specific institution controlling it for us."
A Persistent Artistic Identity

The missing dimension for identity four years ago was time. Now that crypto has been here, identity has emerged. Creators entering crypto now via NFTs are doing much more than taking control of selling their work - they’re taking control of their relationship with the world.

5: Streaming Co-Op

Streaming companies are valued in the billions of dollars while artist’s receive negligible rates for their work. What if streaming companies were cooperatives?

The idea of using crypto to operate a cooperative is not new. This is effectively what DAOs are.

But ‘cooperatives’ are strictly community owned and whose governance is evenly distributed.

Major labels received Spotify equity in exchange for granting access to their catalog. When Spotify IPO’d, the labels could realize billions of dollars in equity.

Major labels and Spotify were criticized about the money being made by labels and whether or not that would make it to artists. Should they have been allowed to gate-keep their catalog’s for equity, and do they owe that money to artists?

Cooperatives could change this. For one, there is no equity to exchange. This makes traction difficult (lacks incentives), but if a network effect is achieved, those profits are distributed evenly to the owners: artists and fans.

This is very pure take on an otherwise nuanced situation. A company called Resonate is doing this today though and unlike other DSPs, the artists and fans that use Resonate are very happy and loyal.

6: Publishing DAO

Music compositions are in high demand. Look no further than the $1b+ of catalog acquisitions by Hipgnosis Song Fund.

Music publishing has a few main revenue sources: performing rights, mechanical rights, and synch licensing. The collection of performance and mechanical royalties require administrative work. Rights mgmt, collection, disputes, and even lawsuits at times. These are the primary services of music publishers.

If songwriters continue to explore selling their rights via NFTs, a DAO could exist to purchase these rights.

This DAO could then, at cost, collect performance and mechanical royalties on behalf of these NFTs, effectively being a bridge to the legacy publishing infrastructure.

In time, as more licensing events natively happen on-chain, this publishing DAO could expand their own licensing opportunities within that context.

The members, songwriters, could explore advantageous cost structures such as flat rate vs fee based memberships. The DAO could ultimately begin providing publishing deals, giving advances the same way publishers do today, if that is deemed desirable for the members.

Eventually the role of a music publisher will be diminished as we used to know it.

I think what will emerge are collectives of artists themselves voting on how technology will be used to serve them.

A Music Publishing DAO can jumpstart that transition.

7: Tipping

When RAC released his album EGO using Ujo Music he made more money on tips during the first day than he did on album sales.

Tipping artists is not easy to do. Few platforms offer the option.

Is the NFT rush positioning crypto to be the de facto method for tipping artists?

The Chinese DSP Tencent offers tipping. Western music DSPs do not. This is such an obvious use case.

It seems wild that I even need to make this a use case. Giving money to a creator you appreciate is maybe the most simple use case for crypto.

But let that be perspective: for the first time ever, we have a seamless way to directly pay musicians.

8: NFTs as Recording advance

NFTs as a record advance for angel fans.

Selling NFTs for new music is happening.
Selling NFTs for back catalogs is happening.

What if an NFT sale could cover the costs to record new music?

9: Per-Stream Payments

Processing payments is often more costly than the fractions of a penny that a music stream is worth. This makes per-stream payments unreasonable. Using crypto however, that doesn't have to be true.

10: Usage and Reporting

Receiving usage data and analytics on how much your music was played is big business in streaming. Distributors, labels, and promoters alike typically receive this info via an API feed.

If we achieve pay-per-stream using L2 (yesterday’s use case), usage data and payment data are then all in one, verified place, reducing massive redundancies in infrastructure and workflows.

This would make data sources trustless by design.

11: NFTs as Patronage

Art records were broken by the $69mm selling price of an NFT representing a fine art piece.

There is now a strong case that Ethereum provides the most robust solution for record-keeping.The NFTs you own will become your reputation.

Before NFTs were being widely implemented or purchased the design space was wide open. What would they be used for? What new experiences can they enable? What does issuance look like?

These were all questions then as much as they still remain today.

NFTs-as-a-title to art ownership are having a moment in the sun - but we have yet to see a fraction of what NFTs will represent and do in the future.

If an artist or music group issued NFTs with all music, ticket, and merch purchases they could begin to create a profile for each of their fans. They would know how long someone has been a fan and how much they’ve spent, regardless of the platform the event occurred.

12: Non-Transferable Token Social Profile

I talked about NFTs serving as proof pf patronage.

For things like reputation, licenses, or receipts, a non-transferable token might even work better.

ERC1238 can be applied in many different ways.

I personally am excited to see a future where tokens in wallets replace tokens and cookies in your browser.

13: Tickets w/ Secondary Market Price Capture

Ticket sales suffer from a predatory initial market that buys up inventory and re-sells at a profit.

This is fine - but it prevents the host from capturing of that secondary market revenue, which is often much greater in value. Of course, tokens can solve this, although an L1 Ethereum solution is not the most practical for the ephemeral nature of the token.

There is a long history of companies trying ‘blockchain for ticketing’. Today, for music events, Yellow Heart is leading the charge.

14: Label DAO

Create a DAO using DAOhaus with your friends.

Collectively fund recording advances for your favorite musicians.

Distribute the recordings with Revelatorand collect royalties on-chain through
their Artist Wallet, Original Works.

15: Music Chart Curation w Token Rewards

This was the idea for an application built at Ujo that incentivizes the curation of new music.

A tokenized leaderboard where users rank pieces of content against one another.

The basic mechanism is simple: a user can propose a piece of content (a song, an article, etc.) by submitting it to the contract, which costs some tokens. Other users can upvote that content, which also costs tokens.

This creates a token pool.

Users who were earlier to upvote a given piece of content are entitled to withdraw more tokens than those who upvoted later.

For example, an early upvoter might submit a single token to a song, but might eventually be able to withdraw hundreds of tokens as a reward. A later upvoter might submit a single token, but might only be able to withdraw a fraction of that token.

Why this particular design?

The hypothesis is that, by rewarding users who were able to spot high-quality content earlier than anyone else, we will establish a leaderboard that rewards the curation of previously-unknown content more highly than well-known content.

This model is deceptively simple.

To read about the full thinking around Ujo Charts, check out the Ujo Charts repository on GitHub.

This idea is still something I want to continue exploring.

I would love to talk to anyone thinking about tokenized music discovery and curation mechanisms.

16: Bonding Curves to Price Music Purchases

NFTs are making the case that ownership is valuable and that digital goods, although infinitely reproducible at no cost, are indeed valuable.

A token bonding curve is a unique solution for pricing digital music.

Tokenized bonding-curves were conceived by Simon de la Rouviere as a curatorial and market-making mechanic.

For music, Simon details how they could work in this article, "Solving Price Discovery of Non-Rivalrous Goods."

The idea is simple. 1 token = 1 unit (song/album,etc.).

The token can be purchased at the price it currently occupies on the curve. To receive the piece of music, the token must be redeemed. The redeemed token is then burned and the proportionate amount of capital in the contract can be withdrawn from the artist.

The result is a new set of outcomes for releasing music:

1. Speculators can buy up multiple tokens hoping to profit from reselling back to the contract when the demand is greater.

2. Price elasticity is determined fluidly, maximizing revenue of the music.

Billy Rennekamp took this thinking a step further, and proposed a way for bonding curves to sit on top of NFTs. The bonding curve tokens are considered RFTs.

Billy covers how this architecture could incorporate copyright. The NFT represents the IP while the RFTs can be the non-commercial rights consumers can purchase.

Euler Beats also uses bonding curves for pricing and uses the ERC1155 standard for ‘prints.’

This is a bit different from Simon and Billy’s examples, but equally unique in approach for price discovery.

Token bonding curves simultaneously solve for liquidity provision and price discovery. For this reason they are already widely implemented across DeFi & there will be many more variations of them.

Don’t sleep on their application in media distribution.

17: NFT-as-a-License

Possession of an NFT would be better communicated in copyright circles as possession of a license.

Using a token as a license would reduce archaic inefficiencies for music licensing. This would not only save money but also expand the market as well. Enforcement is automated, scarcity can be induced, transfers can be fluid, and secondary market can be captured.

For an analog example, Dotta License is a solution for NFTs as software license. Worth checking out the repo.

18: Non-Copyright Record Deals

Record deals are an advance payment in exchange for the recording copyright.

In a future when revenue is on-chain this won’t be the case.

Advances will be specific to a market for a specific time.

Artists will never need to sell their copyright again.

19: On-Chain Licensing for Off-Chain Rights

An NFT can represent a copyright and have associated licenses maintained as security tokens sold on a bonding curve.

I don't think it will be long before this happens either.

20: Music Crypto Community Token

Incentivize the music industry’s exploration of crypto by rewarding those curious.

Give tokens to industry individuals who have shown an interest.

Token-gate a Discord and continue to distribute more widely.

Learn by doing... & creating FOMO.

21: Community Token Fan Club

Artists have fragmented communities across platforms.

Platforms are either disincentivized to share data on followers with creators or simply can’t because of data privacy laws.

Social tokens act as a new data layer for communities.

22: Streaming Payment Advances from Usage Data

Musicians are the last to be paid when their music is streamed.

Sometimes payments take 3-6 months to reach their bank.

DeFi has emerged as a technical solution to paying artists faster.

Streaming payments are distributed slowly but the data about how many streams a song has had are shared instantly.

Using APIs on streaming data, some companies have begun offering loans with the usage of unpaid royalties as collateral.

The first company to explore this was Paperchain.

Using Centrifuge Tinlake, Paperchain collateralizes streaming usage data reports to mint stablecoins that could be provided as short-term loans. When the payment occurs, the loan is effectively paid-off.

Another company to do this is Revelator. Revelator went further and developed a non-custodial wallet where artists can request and receive payments directly.

This is an exciting use-case for music + crypto because it harmoniously exists alongside the legacy system of royalty payments yet greatly enhances it.

23: Retroactive Airdrop of Social Tokens

In October of 2020, $RAC was distributed to
RAC fans. It was distributed to people who had a record of purchasing something from RAC. Retroactive distributions are an easy way to bring fans together around an artist using crypto.

All of a sudden a lot of RAC fans held a token that entitled them to a Discord to get together. A lot of these people had never held any crypto, let alone used a wallet.

For artists that are releasing NFTs and looking at community/social tokens:

Retroactively issuing a token to the fans that have already been there is a powerful catalyst for getting a community started.

24: Scarce Sounds Marketplace

Marketplaces exist for purchasable audio packs by famous producers. A lot of Top 40 songs are created with these audio packs.Crypto could provide a way to induce scarcity and price discovery, something that current marketplaces don’t offer.

Splice, the biggest existing marketplace for audio packs has been a cash cow for producers - but it pays them a flat rate regardless of how much revenue the audio pack generates.

Marketplaces like Splice have proven the value of digital audio packages.

However… what Splice and other platforms before it don’t do:

1. Price audio pieces dynamically on the demand for them
2. Limit purchases and induce scarcity

One of the most notorious pieces of audio is the Amen Break. The Amen Break, although used in thousands of films and songs, never returned any revenue to the creators.

IF you could buy the Amen Break today as an NFT it would foreseeably be the most expensive drum loop in history.

If it was sold on Splice though the artists would have only seen one payment, the initial flat rate, without capturing the value from the cultural significance.

What if we leveraged a tokenized bonding curve to induce scarcity and price discovery for the pieces that make hits?

25: Social Token Community Fund

As more artists launch social tokens a community-style fund could offer capital in exchange.

This would offer an alternative to exploitative label deals & allow the artist to maintain their copyright.

Checkmate, legacy music industry ways.

26: Stake Social Tokens to Earn Song NFTs

Social tokens are popular for enabling access but they will be the means for much more than that.

Musicians could do the same to allow their fans to unlock rare music NFTs.

27: Market-making distribution models

Selling rights at an upfront price & surrendering distribution to that new owner will become archaic.

Tokens-as-a-license to sell future earnings, not rights, and enable a willing-buyer / willing-seller market will become standard.

28: Scarce music releases

NFTs have created a rush for “scarce digital.” Music streaming today is a lot like a buffet - $10 a month, all you can eat. Token induced digital scarcity is an untouched design space for music.

Scarcity for music could apply to multiple things:

1. Number of owners / listeners
2. Number of plays
3. Specific timeframe

The dominant thinking for NFTs is that information should be free.

Scarce access can be antithetical to this but it may prove useful for music.

The benefit of scarcity is the economics behind it.

In a music buffet, all songs are worth the same.

Scarcity would allow us to challenge the current economics of music.

Risk: Scarcity results in limiting the reach of music

Potential: Scarcity induced in a pre-market, more money would be made, curation would be a result, and music could still exist elsewhere during a wider release

29: NFTs as Synch License

NFTs w a music element to them bring to light the thorny question of what royalties are owed an to who.

For the artists and platforms selling music NFTs today - treating the NFT as a synch deal provides the most straightforward option.

A synch is when an audio piece exists alongside a visual piece.

Because most copyright owners would understandably want to approve any use of a composition or master recording alongside a visual, synch’s are negotiated directly.

This is different from an interactive stream, which if a platform offers, that then have to provide usage reports and pay royalties through various collecting agencies.

The artists, when it comes to streaming, cannot opt out of these third party services.

Web3 allows us to pay rights holders directly and immediately. Paying royalties to PROs and other CMOs seems so archaic in comparison but laws have not caught up yet.

Until they do, emphasizing the visual elements of your music NFT are a safe workaround.

30: Physical goods redeemed by tokens sold on a bonding curve

This is the story of $TAPE: the most expensive cassette ever sold.

Selling items by redeeming tokens is a great distribution option for limited-edition goods.

The first to do this was $SOCKS and then there was $FAME.

In January of 2020, I was put in touch with Jacob Horne, the person behind $FAME.

I told Jacob that I wanted to release music using the same model he sold apparel using Saint Fame. Inducing scarcity for music is hard without an app where that can be enforced, so releasing a physical good was a way to do that easily.

Once Zora became an option, I tapped on RAC who just happened to have an album coming out on May 8th of that year. Of course RAC was in, he was the first artist to release an album using Ethereum.

The plan was set was to release music on bonding curve.

The group decided a cassette would be the best format for this launch. The album would be available vinyl separately, and CDs or any other physical format didn’t do it for our nostalgia.

Little did we know we’d be making the most expensive cassettes in history.

After months of hard work by the Zora team, $TAPE launched on May 11th.

Immediately, $TAPE tokens started selling for hundreds of dollars. It was absurd, to say the least.

The manufacturing of the cassettes was slowed due to the tape manufacturing plant shutting down from COVID.

Redemptions for the physical tape were not even available and $TAPE prices settled around ~$250 over the summer.

In October $TAPE redemptions went live. At this point, this was after DeFi summer, as opposed to May, and there were a ton of new people in the space.

The price of $TAPE soared into the thousands.

As more $TAPE tokens were redeemed and people continued to purchase, the price passed $4,500.

This was the previous record for most expensive cassette tape ever sold.

Before long, we found ourselves in a cultural renaissance and an influx of new people were looking at novel tokens due to the NFT mania.

Today, $TAPE has settled back to a few thousand dollars, all because the nature of how the bonding curve sale + redemptions work.

Releasing physical goods using this method is great for allowing speculation prior to the good being redeemed.

This solves for price discovery & capturing secondary market revenue.

For music, this could be a new way to sell all tapes, vinyl, merchandise, tickets, etc.

The success of $TAPE is owed to an awesome artist and amazing team at Zora.

31: 1 of 1 Digital Records

Proof of authenticity and ownership are both important to the value of music.

These two things have lacked infrastructure to support them in a digital world. NFTs change that.

Catalog is bringing authenticity and ownership back to music.

“Catalog is a space to collect, trade, and listen to one-of-one digital records — artist-certified, provably authentic works. Artists receive 100% on their initial sale, and also set a percentage fee up front that they'll receive on every resale.”

Make it this far? Thanks for reading!

Reach out to me on Twitter if you want to chat through any of the above ideas or anything else at the intersection of music and crypto.
@jackspallone