The resonance of Music NFT

Let’s be honest here. Web3, Web4,… Webn 🧐 I don’t think that you care, neither do I. We are here for the Music, it’s all that matter! “Will/how the changes impact us as a fan or an artist” is a different story and maybe it doesn’t even matter to listeners.

If you are curious, let’s dive in!

Just a short brief

(i) Art + NFT, Game + NFT and now Music + NFT

What was the last time you opened music from a cassette or DVD?

You may not probably recall. That’s the beauty when technology meets music. It comes with the promise of giving artists more chances to thrive and giving users a better experience with music, not just listening but also engagement.

The rise of NFT in 2021 has seen the birth of a new model in the music industry, altering the power position of the parties that keep the wheel running in Web2: Publishers and Record labels to the hands of artists and fans.

(ii) Artists don’t get paid as they deserve

In the current system, artists only receive about 12% of the royalty fees for their products, and most of it goes to the pockets of major record labels or music streaming platforms (Spotify, Apple Music, etc.). Meanwhile, artists at Web3 can earn 100% of their profits from selling their NFTs. In addition, artists also receive a royalty fee, determined by artists, for every time users trade NFT.

Problems there. Worth changing if Web3 can.

Digging into the current problems of Web2 music

(i) Power has never been in the hands of artists or fan

Before the internet era, Record Labels is the third wheel of the relationship between fans and artists 

In the 60s and 70s, musicians needed to be contracted by record labels for song rights. Therefore, record labels monopolize the entire industry because they have money, own production studios and provide distribution channels. Those are things that are luxuries for artists these days. Thus, royalties for recordings by musicians are the price in exchange for these services. Monopoly always comes with the hand of power and manipulation. At this time, artists and fans are both depended on the Record labels.

⚠️ Artists → Record labels → Fan

After the internet came, Publishers replaced Record labels to become the next third wheel 

Since the 2000s, the popularity of desktop computers and MP3s have opened new doors for artists as they can now compose at home and distribute on the Internet. With the opening of the streaming industry, many distribution service platforms like Spotify, YouTube, etc., have become alternatives for Record labels. Record labels since then have lost their exclusive privileges to production and distribution.

But again, power and manipulation don’t just disappear; it just transfers from one to another. Now, the primary control between artists and fans is the music streaming platforms.

⚠️ Artists → Publishers → Fan

(ii) Artists’ loss of ownership, a higher requirement for entry and a lower income

Fundraising: Record labels dominate the fundraising market, artists have nowhere to go.

Though with the development of technology allowing artists to be independent in producing music, in 2021, Record labels still account for 70.1% of the market share of the entire music industry compared to independent artists, so-called indie artists. The record labels remain the key player capable of providing artists with resources to produce music.

Ownership: Copyrights mostly belong to record labels and streaming platforms.

Before the Internet era, the Record labels monopolized the supply chain for the music industry, dominating the production and distribution of music products in the market. As the Internet became more popular, the Record labels’ monopoly in distribution was replaced by music streaming platforms. However, as mentioned above, the Record labels are still crucial in the production stage.

Artists depend on third parties in both the production and distribution phases. Thus, they need to share music copyrights with Record labels or Streaming platforms.

Income: artist’s income is dominated by Record labels and Web2 streaming platforms.

When artists lose a lot of copyrights to Record labels and streaming platforms, their share is as low as 12% royalties from their music.

Next, 33% of all new Spotify artists discovered happens on playlists personalized by Spotify for users. “Personalized for users” is a fancy word, but it’s actually Spotify’s playlists. Like other social media platforms, they navigate what we listen and what they want us to listen. Control from streaming platforms has become a significant barrier for artists as the review and selection processes become more challenging on those platforms. Because, as you know, that’s their golden egg for maximizing profits.

Web3 and its better offers to take over Web2 music

(i) Power back in hands of artists and fan

Web3 cut off all third wheels, Fans and Artists are closer than ever

Finally, we see the association between artists and fans have changed into a two-way relationship. Now, fans can directly contribute to the artist’s success with NFT through activities such as fundraising, voting on the development of the campaign, and more.

💡 Artist ↔ Fan

Model artist-direct-to-fan works in traditional music before

  • Neil Young, who has turned his back on Spotify and built his own streaming platform, earned himself 25,000 subscription fans with a total of $600,000 in membership fees yearly.
  • Another artist is Melissa Etheridge, who launched her own subscription platform and earned over $500,000 annually.

(ii) Artists take back ownership, entry as will and earn more income

Fundraising: No need for record labels, artists have fans

With the innovation of Web3 technology, the music industry model has shifted power from intermediaries to musicians and fans. Music NFT becomes a tool for artists to raise capital and distribute directly to their fans. Conversely, the fans themselves can become a “self-record label” for the artist by investing in that artist’s music products and receiving a portion of their copyrights in return.

Ownership: Third wheels have gone, copyrights are back in the hands of artists (and fans as will)

Artists can now raise money through fans without needing Record labels; artists can also distribute their own music on Web3 streaming platforms without needing a Publisher on Web2. And guess what? When they no longer depend on any intermediary to bring their work to the audience, the artist has full ownership and control over the work’s copyright.

Income: No more domination means a higher income

Web3 allows fans to invest in an artist’s NFT, unlocking many other income sources for artists. For example, Alan Walker collaborated with Web3 artist fundraising platform Corite to launch his NFT collection called Alan Walker Origins. In particular, users need to own 25 NFTs corresponding to the pieces of music to combine into one perfect song. The Alan Walker Origins campaign raised $355,380 for the artist. Besides allowing the artist to raise funds from the fan community, the artist can also receive a portion of the fee from each NFT transaction.

In 2021 alone, NFT has helped big-name artists raise millions of dollars in sales. Of which 3LAU earned $11.7 million for the Ultraviolet collection, Steve Aoki took in $5.8 million from the WarNymph Collection, Vol. 1 and $4.25 million for the Dream Catcher.

The new model of Web3 Music

Record labels will continue to fall further in their position with the artist. With tools and platforms like Corite and Audius, NFT enables a more direct and independent way of funding and go-to-market through Music NFT sales. By empowering fans to directly become individuals/communities to perform Publishers tasks like marketing, music distribution, or even joining the artists’ development plan for their creation and campaign, fans minimize Publishers’ power over artists’ success. These new and exciting tools allow artists to increase the value of their work while maintaining ownership of their music.

What I found challenging for Web3 Music

(i) New tech and highly independent may not be for everyone

Considering that being an artist is a profession, the ‘direct to the fan’ approach is not something that works for every artist. Daniel Allan is a case that prefers to go for third parties rather than do-it-himself in Web3. More independence in creative power, more ownership, and potentially higher income are undeniable benefits of Web3, but that’s in exchange for a much larger workload.

While third parties may no longer be the sole gatekeepers in production and distribution, their value lies in experience, resources, and connections for achieving large-scale success in the music industry.

In addition, most artists who’ve successfully raised a handful of money in Web3 are well-known artists in the tradition. At the same time, the target audience for Web3 is new and for unknown artists, it is tough for them to do everything by themselves. As mentioned above, 1/3 of new artists are discovered through the suggestions of streaming platforms. Some artists are better trying their luck on Web2 instead of Web3 streaming platforms with a limited number of users.

(ii) Things don’t change overnight, major income for artists’ products still comes from Web2 streaming

There are many alternative ways for artists to make money on Web3. However, their music products’ primary income source still comes mainly from major Streaming platforms such as Spotify, Apple Music, etc. In Web3 royalty platforms such as Corite or Audius, the artist can share revenue with NFT owners through the streaming revenue on Web2 Streaming platforms. As noted above, it doesn’t bring many benefits for users especially when Web2 media are still dominating the supply.

(iii) It’s still a new technology, hacks and exploits are inevitable

The hack happened to the Audius platform that caused a total loss of $6M in the community pool of Audius. The hacker posted four governance proposals to the Audius project, and one of them was approved. The fact that hackers are able to steal and sell tokens is a testament to the potential risks of this technology to the interests of the artists and fans involved. In this case, the artist will need to hold and stake tokens to unlock more beneficial features.

What if a more sophisticated hack led to malicious admin proposals to the platform? Users will suffer hefty losses. This is often seen in the cryptocurrency market.

(iv) Let’s be honest here. Fans just want music and that has no problem in Web2

  • The majority of current users of Music NFT products are crypto-native.
  • In users’ views, NFT products have high prices, accompanied by other costs such as gas-fee.
  • Lack of benefits and guidance are users’ biggest concerns.
  • Streaming platforms like Spotify are doing just fine by optimizing the experience for both artists and users.

The Music NFT landscape

💡 Web3 is gradually replacing most of the roles in Web2 Music, including both production (Support tools, news and research) and distribution (streaming platform, community, and other logistical tasks required by artist).

Closing thoughts

(i) Small market, good growth, positive experiment with a similar model for Web3 gaming

Music NFT has a total market share of $1.2B, approximately 1/24 times that of the digital music industry which has a total market capitalization of up to $29.4B. On Spotify, there are 11 million artists, and Apple Music with more than 5 million people. So far, the number of artists participating in Web3/NFT in general is just under 30,000 people.

As more and more artists realize that they similarly can become businessmen for the products they create, a form of direct artist-to-fan experience is emerging more than ever. According to the ConsenSys report, the number of Metamask wallet addresses has recently bloomed, reaching 30 million monthly active users, a growth of 600% in just 14 months.

Music NFT paradigm shift is similar to the current GameFi model. More and more people understand and use web3 after the success of GameFi and NFT. Thus, many traditional markets will transform into similar models applied by GameFi. If Music NFT can solve the above concerns effectively, it will be another attractive market for not only artists but also businesses, and fans.

(ii) Web3 sounds great, but we are here for the music. How/when will Web3 music mass adoption?

  • We learned from GameFi that the game experience should come first, not the monetization factor. Music NFT is no different. The monetization factor plays an incentive role, and we stay for the music.
  • Behind Spotify and Apple Music’s success stories is the massive data collection and personalization for a better user experience in listening to music and choosing songs.
  • To do this, Web3 must onboard as many indie artists as possible to join.
  • Web3 platforms need to provide utmost support for artists’ needs as it’s not only about better income but also more convenience for artists in logistics and product promotion. Let’s assume artists’ work is just performance.
  • Web3 streaming platforms must be widely promoted, and the apps’ infrastructure must be simple to optimize the user experience.

The more Web3 tooling supports artists, the more artists join Web3. Thus, Web3 will be further enhanced in terms of user data, optimizing like what Web2 is doing now. Then it will be the time for mass adoption.

Privacy Blockchain At A Glance

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Disclaimer

Examples used in this blog are simplified to help make technical concepts more understandable to our audiences. Therefore, please embrace them with an open mind.

 

 

Five o’clock in the morning.

Annoyingly loud police siren in front of the house.

“You’re arrested”.

Jack woke up and could not understand what was happening. Everything was like a real-life nightmare.

He was drawn out and treated as a criminal.

Totally helpless. He was innocent, but then how come his age, his date of birth, and even his bank account number all coincided with those of the criminal, just like somebody else has lived his life.

A stolen life.

The privacy of Jack has been severely violated, and now he is facing imprisonment for the rest of his life. Nevertheless, surprisingly, just days before the verdict is brought in, the jury has received an anonymous letter saying that Jack was not the true criminal and that the writer knows where the true criminal is but cannot reveal the name directly in this letter. If the jury and the letter’s writer arrange a private meeting, it will be difficult to make sure that they do not collude to accuse another innocent person of committing this crime.

Then how can the anonymous writer secretly reveal the true identity of the criminal to the jury in a more transparent manner?

Transparency can be ensured by blockchain, and privacy can be satisfied through some more specific mechanisms.

In this blog, we will introduce our readers to the mechanisms currently being used by some blockchain platforms to ensure the privacy of users in their networks.

Trusted Execution Environments (TEEs)

Basically, in a Trusted Execution Environment (TEE), the data will be isolated from other parts of the processor, thereby protecting them from attacks from outside actors. Regarding blockchain, this means that validators cannot reach the data computation under the hood when they are being used. Secret Network and Oasis Network are the platform blockchains that use this technology, specifically the SGX (Software Guard Extensions) processor of Intel, dedicated to providing a TEE for sensitive data.

The-case-of-Jack

Therefore, if the anonymous writer contacted the jury to reveal information about the real culprit through such blockchain platforms, he would not need to worry much about either the authenticity of the content in the letter to the jury or the information leakage as it is protected within the TEEs and the public can rest assured that neither party – the writer or the jury – are colluding to blame anyone else for doing the crimes.

However, there are still issues with TEEs. The SGX processor assumes that only the central processing unit (CPU) is trusted, so storing confidential information here and isolating them would be a safe solution. Taking advantage of this assumption, hackers will not directly attack the computer’s security system but instead take a bypass, attacking other channels of the system. This process can also be known as a side-channel attack.1

Another problem when applying TEEs in the blockchain is rollback attack. The main cause of this problem is that the state of a blockchain can always be rewinded, and the “privacy” provided by TEEs only exacerbates the issue,2 allowing them to leak confidential data to other people.

Mix-up

Mixnet is a mechanism used by the NYM Network. In the mixnet, the route of transactions will be “erased”, making it impossible for outsiders to find out detailed information of these transactions.

The mixnet is like an upgraded version of Onion Routing, a method of ensuring anonymity when communicating within a computer system. In this method, a message will be divided into many small packets, and these small packets will be encrypted through many layers in the process of being delivered to the destination. Mixnet goes a step further with this approach by re-ordering the encrypted packets, making it even harder to decrypt the original message.

data-encryption-onion-routing

After arriving at the destination, layers of encryption will be peeled off and arranged to the original for the sake of decrypting the original message.

data-decryption

For the anonymous writer, he would write a letter revealing the identity of the true criminal to the jury, then tear them down, mix them up and pack those pieces with three layers of envelopes and three special glues. Each time they pass through a mail station, only one layer of envelope will be peeled off. When all of these pieces reach the jury’s mailbox, the last envelope will be completely removed, and there will be a small hint for the jury to rearrange them in their right order so that they can read the original message.

Another transparency mechanism of this type is also used by Tornado Cash. Tornado Cash improves transaction privacy by breaking the on-chain link between the source and destination addresses. It uses a smart contract that accepts deposits of ETH and other tokens from one address and allows them to withdraw funds from another. When the transaction is completed, the transaction route from the sender to the receiver will be broken. However, privacy in this mechanism cannot be guaranteed absolutely.3

Ring Signatures

This is a method used by Monero, one of the pioneering privacy blockchain platforms in the space.

Back to Jack’s story, there will be an additional detail which says that the anonymous sender is actually a member of the Triads, whose leader is the real culprit in the crime which Jack is facing. The anonymous sender is feeling guilty and he wants to tell the truth but does not want to reveal his identity. On behalf of the Triads gang, he collected the public keys of its members and combined them with his private key to sign the letter sent to the jury. Thus, the jury can be confident that this letter was written by a member of the Triad, but no one, including other members of the gang, could know the identity of the sender of this letter. 

ring-signatures

The example above is a simplified demonstration of how ring signatures operate.

In the Monero network, privacy is also ensured through the use of stealth addresses. Stealth addresses are used both by the sender and recipient and can be used for only one time.

Zero-knowledge proof (ZKP)

This is a unique technology that helps an individual prove that he or she knows a certain truth without having to say it directly.

A fairly popular development branch of ZKP today is ZK-SNARKs. Examples of projects using zk-SNARKs include ZCash and Mina.

zk-SNARK refers to a structure in which a prover can prove the possession of some information via a secret key without disclosing that information and without any interaction between the prover and the verifier.

With the “non-interactive” structure, the cryptographic proof is only transferred once from the prover to the verifier but many times compared to the traditional method of ZKP.

In the case of the anonymous writer, when sending another letter to the jury to reveal the real identity of the criminal, he would only need to attach a cryptographic on the blockchain to prove to the public that what he knows about the criminal is completely true, and that he did not secretly communicate with the jury to blame other innocent people.

Currently, the most efficient way to create a zero-knowledge proof that has a “non-interactive” structure and is short enough to be published on the blockchain is for a structure to have an initial setup phase with a chain of references being shared between the system and the validators, known as the system’s public reference number.

Until recently, another variant of SNARKs emerged to mitigate the existing drawbacks in this technology: zk-STARKs. This solution has been developed by StarkWare, one of the famous layer 2 solutions for Ethereum.

STARK allows developers to move the computation and storage off-chain. These proofs are then put back on the chain so that any interested party can validate the calculation. Moving the bulk of the computation off-chain using STARKs allows the existing blockchain infrastructure to scale more quickly and efficiently. However, the size of the cryptographic proof of the zk-STARKs is larger than that of the zk-SNARKs, which on the one hand makes it less vulnerable to quantum computer algorithms but at the same time make it heavier for the memory space than zk-SNARKs.

Footnotes

  1. Side-channel attack: an attack where hackers aim at loopholes indirectly relating to the security layer but the hardware or other parts of the system.
  2. Rollback attack: In this kind of attack, hackers will make the system abandon high-quality operation mode that was updated but returning to the older version of lower quality and susceptible to more loopholes.
  3. If one address just deposited 10,000 ETH into Tornado Cash and then another wallet withdraws 10,000 ETH shortly after (while other addresses usually only deposit 100 – 1,000 ETH into Tornado Cash’s liquidity pool), it is very likely that these two sending and receiving wallet addresses both belong to the same entity.