It’s about a year now since Bas and I started writing about NFTs and becoming ever more active in Web3. A lot has changed, but I’m still seeing the field of tension I described as a two-pronged fork back in May 2021. On the one hand there’s the notion that we should break from the past and go full crypto. To put everything on-chain and by virtue of decentralizing everything we can build a better and more equitable future. On the other hand, there’s the notion that we should bring our legacy institutions and structures into Web3. To build on what already exists and improve. It’s a classic situation of revolution versus evolution, and it permeates on so many levels:
This list could be much longer, but the nature of the contradiction is clear. Time to unpick the underlying contradiction and find some valuable next steps for music in Web3.
Musicians currently active in Web3 are mostly very excited. Composers like Cristina Spinei find another source of income for their creative output that allows them to move away from working towards grant applications. Artists like RAC have said that they have earned more from one NFT than their career in music up until that point.
In an economy that tends to favour those with the most reach, this is a radical departure. It leads me back to Li Jin’s fan pyramid.
As I recently argued, the continued shrinking of the amount of superfans needed for artists to make a living wage means that we should flip the funnel. This line of thinking means that one of the first people you can align to your artistic output can be one of those cult fans.
To make that model successful in Web3 would mean that this cult fan would own cryptocurrency, most likely Ether. Look at Catalog, the 1-of-1 music NFT marketplace, where around 140 artists have sold over 350 NFTs - which they call records. That just isn’t a lot of people. And some of these will be spending Ether that they bought or mined when it was much cheaper than it is now. Similarly, Sound, a marketplace for fractionalized NFT music ownership, has 750 unique buyers. This sounds like a lot from a crypto music perspective, but equally sounds like a drop in the ocean when it comes to, for example, streaming metrics. Once you’ve made it in, Web3 allows artists to truly take the superfan theory and run with it. They only need a handful of really dedicated, deep-pocketed, fans to make that living wage.
The problem arising from the above is evident: how to extend this model of the not-that-many who own crypto to support a broader array of musicians? How do new musicians enter the Web3 model of finding your cult fans and sustaining yourself and your art? The previously mentioned Sound allow artists to suggest new artists to join for drops on the platform. Another possibility is to look at wider utility for the NFTs that are being released. One popular path to explore here is that of the value of music as expressed through its earnings.
What the recent Royal NFTs have shown is that there’s a deceptive element to asking fans to invest in the music of their favourite artists. This has nothing to do with the mission or vision of a platform like Royal. Instead, it arisest from the point of view of looking at music like an asset class in the streaming economy. The value of what’s currently being paid for NFTs at Catalog or Sound, for example, also wouldn’t equate to the income generated through future royalty incomes. Of course, the idea of investing in music isn’t new - Tim Ingham spoke of equity crowdfunding in 2019 for example. What’s new is that by selling just a handful of NFTs it’s currently possible to earn more revenue as an artist than ever before.
Thinking further along, and looking at my personal choices relating to music NFTs, there’s also a question whether the mainstream crowd is ready to adopt a new valuation for music. Paying 0.5ETH or even 3ETH for a single piece of music is a radical departure from how we valued music the past 20 years and really since we first recorded music. I’ve spoken before how we might be entering a phase where musicians will resemble Bach more than Kanye. The former was a composer who got paid to write music that many more people would hear without having to pay for it. The latter is a producer and rapper whose music people mostly consume by paying the equivalent of fractions of pennies for it. Bringing this line of thinking to its natural conclusion, then, will mean that music could become a public good where only a few pay for the creation of it.
Much is made of the ability to disrupt by decentralization. In music, we know this better than anyone. When Napster came round, downloaders began a form of decentralized file sharing.
However, there’s still a central index and every file you downloaded through Napster came from one other computer. Then came bittorrents and The Pirate Bay, which established a hash, meaning nobody downloaded the whole file directly from one place. The hash pointed to the files on a great number of computers and if I downloaded Play by Moby, for example, I would get small percentages of the record from many different people in the network.
Putting this framework onto a different layer than digital music files was bound to happen. Currency was an obvious object of attention - a hyper-centralized framework that Bitcoin aimed to disrupt.
One of the benefits of a decentralized system is that the people, the humans operating the computer nodes, can remain anonymous. This is why the major labels could win their law suit against Napster but not against sites that only hosted those hashes. With Napster, the single file of copyrighted material was shared. With a hash everything just points to that hash and there’s no central server that hosts the full copyrighted material.
As with Bitcoin, so with music, and the legacy structures and institutions play as much of a role in a decentralized world as they did before. Major financial players, think Goldman Sachs and the like, speculate with Bitcoin just like your neighbour does. Major labels experiment with NFTs just like all those independent artists on Foundation, Catalog, and elsewhere. This, then, isn’t where we find the radical break in decentralization. That can be found in the way we can organize ourselves in networks.
Humans flourish in networks. And yet, the overflow in information arising from networked communication can constrict the way we work, operate and communicate. By putting humans in decentralized networks and organizations, knowledge and information can take on different shapes. Instead of all knowledge being localized in one hub, it spreads through many different nodes. It reminds me of the change that search engines brought about. Through them people started to learn how to find something instead of knowing it and remembering it. Similarly, decentralized networks allow people to simply understand how to find information - in the broadest sense of the term - instead of needing to keep it all locked up in our own brains.
There’s no either/or here, both are happening concurrently. What I hope I’ve shown in the above is that by focusing on the specific dichotomies we find in our adoption of Web3 we often miss the point of what’s actually changing. It’s not so much about whether NFTs should be viewed as investments or digital collectibles, or whether we need to break from legacy copyright structures or incorporate them into Web3 ones. Instead, there are underlying tropes in each of these perceived oppositions which genuinely allow us to change the way we operate as humans in networks broadly speaking and as musicians and fans in networks more narrowly.