BLOCKCHAIN, CRYPTO, NFTS, AND MUSIC

I’m sure you have all heard about cryptocurrency in the news. Bitcoin, Ethereum, Dogecoin, and many other cryptocurrencies have started to take over the financial investment space, but there is still a lot of controversy and confusion surrounding what they are exactly and why it is (or is not) a good investment.

This confusion and controversy is part of the reason it has taken so long for me to complete this edition of State of the Initiative, and I am going to try my best to give you all the most simple explanation of blockchain, crypto, and NFTs (they are all connected) and what that potentially could mean for music.

Bear with me.

Let’s say you are out with your family and you all are going to get McDonald’s for dinner. Everybody tells you what they want to order before you pull up the drive thru window and you tell the cashier there. You pull up to the payment window and you hand them your credit card. They swipe your card, the transaction is approved, they hand you your receipt, you pick up your food, and your family is off to eat their Chicken McNuggets and Big Macs.

In that scenario, this transaction you just made on your credit card is recorded by your bank and included in your bank statement/records. I won’t get into the balance and all that stuff because it is not relevant. The important thing to remember here is that your bank is essentially is the middle man between you and the McDonalds you ordered from.

They approve the transaction, meaning they verify that you have enough funds to purchase your food. Then, they process that charge on your behalf, and record that this transaction happened.

This concept is the building block for blockchain, which can be defined simply as a system of recording transactions electronically. The difference between a bank recording the transactions for you and a cryptocurrency is the absence of the middle man.

Blockchains can record every transaction within its system in a secure, anonymous, and verifiable manner (this is done with a public and private key, more information into the specifics here). This means that I can send funds of some kind to someone else anonymously and with no restrictions.

This is not possible with a bank. The bank has to take multiple steps to verify that you were the one who swiped your card at McDonald’s. The bank is the centralized authority that facilitates your transactions. Blockchain and cryptocurrency are the first step to decentralized finance. No middle man, no governing body or authority. Just anonymity, instantaneous transactions, and security.

Cryptocurrencies are built on blockchain. It can be defined as the digital currency under which these transactions are verified and recorded. Simply put, 1 Bitcoin is really the value of an accumulation of transactions on the Bitcoin blockchain that is worth a certain amount. So, like US currency or any currency around the world, the more circulation it has the more valuable it becomes.

But unlike US currency and other currencies around the world, these transactions, whether they are peer to peer or between various parties, the verification that this transaction happened is done by the network of crypto holders.

Check this quote out from this Forbes article for another way of looking at this concept:

“Blockchain is decentralized, which means it’s not controlled by any one organization. “It’s like a Google Doc that anyone can work on,” says Buchi Okoro, CEO and co-founder of African cryptocurrency exchange Quidax. “Nobody owns it, but anyone who has a link can contribute to it. And as different people update it, your copy also gets updated.”

Pretty cool, right? Crypto and blockchain can be a step towards a more connected world beyond governing institutions and authorities.

NFTs, or Non-Fungible Tokens, are digital assets powered by crypto and blockchain. NFTs are 1 of 1 digital items where your ownership is managed by the blockchain.

Imagine you created a meme and “minted” it as an NFT. Your original copy of a meme is a 1 of 1, meaning there is nothing like it in existence. The idea behind NFTs that makes them so powerful (potentially) is that you can not only sell them to earn cryptocurrency, you earn residuals every time they are sold again.

An example: let’s say this meme I made and “minted” as an NFT sold for 1 BTC (I wish, that would mean I made $62,000 as I write this). If the now owner of this meme sold it again for 10 BTC (or $620,000), I still earn a portion of the money they made from selling my meme!

There’s power in that. I can create art or anything as an NFT and essentially auction it off to earn cryptocurrency. This is what is happening in places like Zora. Creators are earning crypto ($$$) by selling their NFTs!

Musicians have started to use NFTs as an alternate form of income. The Weeknd, along with many other mainstream and independent artists, have made BIG money selling NFTs. This form of income is much more lucrative and reliable than streaming, and you do not have to wait 2-3 months to collect the money that you have earned!

I hope that makes sense. Check out those links for more context and explanation. You want to know this stuff. Soon, we may all be able to buy our cars, houses, and groceries with crypto anywhere.

Speaking for myself now: Though NFTs are a tremendous stride towards truly paying artists what they deserve and in a time frame that is not ridiculous, I still have some reservations about NFTs. I think people should make them and that they represent a new age of digital ownership (a space where it is hard to truly own anything); however, I do not like the idea of the cream still rising to the top. I do not like the idea that the only artists who will see real sustainable money from NFTs are either already popular or are getting into the space early.

What ever happened to making things accessible and attainable for the little guy? What is the independent artist going to do when no one buys their NFT?

I think the best way forward is to use crypto and blockchain to create access and opportunity. Blockchain makes digital ownership possible. It makes an open source music universe possible. A place where I can sell parts of my songs and earn based on their usage.

Either way, the future is bright and it is approaching quickly. Don’t listen to the people saying crypto is a scam. See for yourself and make that judgement call. There is potential in the technology. Otherwise, nobody would be talking about it. Maybe 10 years from now, we’ll all be using Dogecoin to buy Big Macs!