Blockchain’s first application was in cryptocurrency, where it was originally envisioned by Bitcoin creator Satoshi Nakamoto as a way to eliminate the inefficient system of middlemen required to operate financial services.
Music is another industry where middlemen have traditionally been required to bridge the gap between artists and audiences. Previously, these were record labels; now, they are streaming services. Both take a sizable cut, resulting in less money for those who create the music.
The Middle Men
This is not to say that there is no place for middlemen. There are many labels that offer tremendous value in assisting artists with the recording process, live shows, and other things that artists may not be equipped to do because their expertise lies elsewhere. However, musicians and developers who have invested in web3 believe that blockchain, cryptocurrencies, and NFTs will render middlemen who exist solely to facilitate transactions obsolete.
Web3 will do it better; it will be more efficient; it will put royalties in the right place; and it will eliminate the very expensive, predatory middlemen. Because blockchains like Ethereum and Polygon enable smart contracts, platforms and applications can be configured to automatically pay royalties to artists at the agreed-upon rate. Transactions can be carried out automatically via cryptocurrencies whenever a fan presses the play button, giving musicians a meaningful say in how their work is consumed and enjoyed.
Of course, with any new technology comes a set of challenges, and web3 – particularly the blockchain and cryptographic elements – is no exception. This is because the massive amount of computing power required to run certain blockchain algorithms is notoriously power-hungry, potentially resulting in massive energy consumption and emissions. This is undoubtedly a problem that must be addressed by any platform hoping to bring web3-based music solutions into the mainstream in order to compete with existing streaming services. One possible solution is the creation of “proof-of-stake” blockchain algorithms. These are significantly more efficient and power-efficient, but many of the most popular blockchain networks, such as Ethereum, do not yet support them.
The regulatory framework surrounding web3 technologies is another significant challenge. At the moment, the ecosystem is seen as being in a “wild west” state, with a lack of laws and oversight. As a result, scams and other nefarious activities are unavoidable. When the unwary dip their toes into these waters, it’s relatively easy for them to get burned, and what consumers may see as an acceptable level of risk when engaging in activities like financial speculation with cryptocurrencies may seem completely unacceptable when we just want to listen to some tunes with friends. Regulation is required for mass adoption; the end-user must be protected. I believe we are still quite vulnerable to rug pulls and Ponzi schemes.
There is clearly a lot of excitement about the possibilities that the application of blockchain, web3, and metaverse technologies to the music industry could unlock. Music has always been about social activities and gatherings, and new platforms based on immersive and experiential technologies offer new ways for people to share and enjoy music together. When combined with blockchains, cryptocurrencies, and smart contracts, this could mean a better deal for artists and more ways for fans to ensure their money goes to those they want to support.