Almost every day there is news that musicians have started to make substantial amounts of money selling NFT. Let's understand what NFT is, how the new trend is changing the music industry right now, and how an artist can enter this market.
NFT tokens and music
In March, there was a boom in the sale of NFT tokens, which are non-interchangeable tokens. Digital artists and musicians began to use NFT auctions to sell NFT tokens tied to their creations.
The vast majority of the lots in such auctions are objects of digital art (jpg-art, gif-files, videos and even the burnt original work), but the hype around the new technology is actively used by musicians, successfully selling their NFT and getting hundreds, thousands and even millions of dollars for it.
For example, DJ and producer 3Lau, Mike Shinoda from Linkin Park, singer Grimes and many others have already earned on the sale of their creations, tied to NFT-tokens. Canadian singer The Weeknd recently announced his intentions to release the NFT of his new song. Given the popularity of the artist, there is every reason to believe that he will get a significant amount from this deal. Russian artists, meanwhile, are not far behind their foreign counterparts. In mid-March, the punk band Pussy Riot sold an NFT cut of their video "Panic Attack," and at the end of the month it became known that rapper Kizaru put up for sale in the form of NFT-token the cover of his album "Venom.
What are NFT-tokens and how does this word mean?
Tokens are blockchain records that are used in the circulation of cryptocurrencies, the most popular of which are bitcoin and etherium. What is the difference between these cryptocurrencies? In bitcoin, all tokens are interchangeable, while in etherium you can create non-interchangeable tokens.
Simplifying things greatly, we can compare interchangeable tokens with ordinary banknotes. For example, when you pay in a store with a hundred-ruble bill and get your change, you are hardly interested in the history and further life of these bills and coins. Non-exchangeable tokens - ethereums - are unique "coins," meaning that each such "coin" has special numismatic value: you can't spend such a coin in a store, but you can sell it to another connoisseur of rarities.
NFT tokens (non-fungible tokens) are unique digital coins that, using blockchain technology, are irrevocably tied to an object of digital art and can be sold by the author of the work at auction and then resold, like any object of art.
What is an NFT release?
First of all, it should be understood that NFT auctions offer only NFT-tokens, and they are currently not tied to real physical objects. In other words, NFT-tokens are a digital merchandise or a digital autograph of the creator: you can possess them, you can be sure of their originality and uniqueness, but you can't touch them or hang them on the wall.
NFT is not a new form of creativity, but rather a new form of monetizing creativity in digital reality.
NFT's monetization mechanism is well illustrated by the story of the sale of the popular "Nyan Cat" gif for 300 ethereums ($553503 at present).
An NFT token tied to an updated version of a popular gif-meme about a rainbow seal was put up for auction. The buyer of the NFT token became the owner of a unique blockchain entry, which is now worth half a million dollars.
The description of the lot said that the buyer of the NFT-token would also receive "+10 to Charisma, +10 to Luck, and +15 to Luck". Apparently, these assets as part of the NFT-token could also go to the new owner if the lot is auctioned off again in a while.
At the same time Nyan Cat gifka continues its journey across the network, and its "non-unique" copies can be downloaded to your computer as many times as you want.
The exclusive copyright to the image remained with the creator of the picture, Chris Torres - the buyer of the NFT token was not the beneficiary of the current and future licenses to the image.
An NFT token with an animated cookie-cat was sold for $580,000. Author: Chris Torres
There seems to be no value in the NFT. Why do people pay such huge money for air?
NFTs are sold and bought for ethereums. Cryptocurrencies are not backed by gold, but only by the energy used to generate them. It is this fact that allows skeptics to say that cryptocurrencies are a bubble.
But in fact, the gold standard (in which the value of banknotes or coins is expressed in a certain guaranteed amount of gold) stopped working at the beginning of the twentieth century. All modern money is fiduciary - it has no value of its own, it is determined by the central banks of the countries issuing the currency.
But it is even more important to look at NFT merchandise from the perspective of a fan and collector. Late last year at the R.R. Auction for nearly half a million dollars sold notebooks of Bob Dylan's poems. For those who are not familiar with the work of the American musician, his records are not of any value and are just a pile of scribbled sheets. But not for the connoisseur.
Whoever bids the highest price for this artifact in a regular auction becomes the final buyer. An NFT is exactly the same unique artifact - but it will not be stored in a safe deposit box, but in a blockchain. That is, the value of NFTs cannot be explained by anything other than the faith of those who are willing to shell out a few hundred ethereums for them. But as we already know from the news, there are already quite a few such wealthy crazies living in the crypto-future world.
What kind of musicians should do NFT?
The current situation in NFT markets already resembles a mass frenzy - marketplaces are crowded with both novice cryptoinvestors and digital artists trying to sell their NFT. And if there are already special marketplaces for serious investors and digital art collectors, then novice musicians should weigh up the pros and cons before getting into the game.
Creating an NFT version of your product can be a monetization tool if you:
- A cult musician or artist whose releases or artifacts are always of interest to collectors.
- An artist whose audience is well informed about the cryptocurrency market has some amount of cryptocurrencies and disposes of them adventurously. In this sense, musicians popular, for example, among developers from San Francisco are in a more advantageous position.
- A musician working at the intersection of music and digital art. The NFT craze started with the digital art marketplace - primarily visual art. The showcases of curated NFT marketplaces now look more like 3D galleries than charts of streaming services. However, if a musician pays a lot of attention to the visual packaging of his art, his work may be in demand on NFT auctions. An example of potentially interesting for the NFT-market releases of Russian artists can be the works of Pixelord, which has already created NFT for their works. The works of musician Ilya Mazo, who released the game "SHHD: ZIMA", may also be in demand.
- An extremely fortunate adventurer. You probably remember that at the time bitcoin appeared, most financial experts thought the idea of cryptocurrencies was too utopian. In a sense, the concept remains utopian today, but now one bitcoin is worth more than 4 million rubles. And those "adventurers" who mined or bought bitcoins 10 years ago hardly regret this investment. With NFT, the situation is likely to be similar.
The collage "Everydays: The First 5000 Days" sold for $69 million at Christie's auction as an NFT token. Author: Beeple
What can I sell as an NFT token?
Virtually any digital artifact you create can become a digital art object - and it can be tied to a non-exchangeable token and put up for auction. But physical objects and even promises and commitments can also be attached to the token in addition.
Moreover - you can release not one NFT, but several, creating a number of absolutely original and authorized copies of one object. Experts of the NFT-art-market already say that the greatest interest among buyers is caused not by individual NFTs, but by a series of digital art-objects. Singer Grimes recently sold a series of works created in collaboration with her brother, digital artist Mac Boucher. Some of the works were accompanied by original music.
The obvious hype around NFT auctions gives room for imagination on what could become an artist's lot:
Music track or album. The absolute record holder here is American DJ and EDM producer artist 3Lau, who earned more than $11 million from the sale of NFT tokens tied to his release "Ultraviolet. The release itself is dated 2018 and is freely available on all streaming platforms. Buyers of the most premium tokens received a limited edition vinyl as well as unreleased tracks and special mixes, while the most expensive and unique item entitled the buyer to create a collaborative track with 3Lau.
3Lau has pioneered another application of NFT - it has created its own private exchange where the original buyers of its NFTs can resell the tokens. According to the offer, 3Lau will receive a percentage of each resale transaction of the tokens it issued.
Album artwork. Files in .jpg and .gif formats or a short static video of the release artwork can also be tied to NFT. Linkin Park co-founder Mike Shinoda posted such items on NFT auction Zora, earning $6,600 on 10 copies of animated artwork for his latest single "Happy Endings." By the way, this was the first time a major-label signee had entered the NFT market.
Release royalties. So far, the most interesting yet mysterious use of NFT tokens in the music industry. At the end of February, Canadian electronic musician Jacques Green sold NFT for 13 ethereums, to which not only a six-second video snapshot of his track "Precise" is tied, but also a share of the royalties that will accrue for that track. The creator of the song is expected to contact the NFT purchaser himself and separately secure royalty free music payment obligations from that track, under Canadian law. The lot description does not specify the percentage of royalties the NFT buyer will receive, nor does it attach links to any contracts. So far, the NFT auction transaction has brought Jacques $23,000.
Blockchain technology does have enormous potential to streamline the copyright and related rights market. Storing music file metadata in blockchain will make the mechanics of royalty payments to artists as transparent as possible, and will also solve the problem of finding content rights holders.
Unique physical objects and even ideas. Technically, physical objects - even non-existent ones - can also be attached to a non-interchangeable token. For the first time such a maneuver was performed by the art provocateur Banksy, who turned his already destroyed canvas into NFT.
You could have an NFT release tied to a unique test pressing of a vinyl edition of your album, specially released demos, and so on. If you fantasize a bit, you could technically put an artist's promise to never release a token-linked release in an NFT auction, and thus make money on the haters.
All kinds of virtual merchandise. For example, the right to be the first to listen to a new song, an invitation to a virtual concert, exclusive access to an AR mask in Instagram, a personal video message, virtual badges, or the modification of a drawn kitty. The virtual merchandise market is just beginning to develop - before the NFT boom, one of the main marketplaces for musicians was Fanaply. Explore their site to see what items and in what quantities musicians sell in the U.S., and fantasize about what other virtual goods you could sell to fans.
The work "Ethereum Delerium" (here, the version with sound) sold at Nifty Gateway for $3500. Author: Jon Burgerman
How do I make a release in NFT format?
1) To enter the crypto market with your creativity, you will need to create an ethereum wallet, into which you will put your reward from the sale of NFT. You can use MetaMask, CoinBase or Rainbow as a wallet. Simple and free registration of any wallet will take less than a minute.
2) Buy yourself some Ether. For you to be able to enter the auction, your account must have about 0.05 Ethers (about $92). This money will be spent on a so-called gas fee, which is the energy you need to initialize your NFT. You can buy Etherium at any of the many sites for rubles or foreign currency, or by using QIWI wallet and Yandex.Money service - or convert to Etherium other cryptocurrency, if you have any.
3) Bind your audio file to the IPFS interplanetary file system. Wikipedia explains IPFS as "a content-addressable, peer-to-peer hypermedia communication protocol. Explaining exactly what happens to your file would take several pages of text, and information about it is easy to find on the Internet (and hard to understand). Let's just say that you can do it absolutely for free with the Pinata site using these clear instructions.
4) Choose the marketplace where you will create and place your NFT. The most popular marketplace for NFTs is OpenSea, but for those who are just embarking on their first adventure in the murky waters of non-interchangeable tokens, we recommend the Rarible marketplace. It is as simple as possible, and NFTs created there are freely tradable on OpenSea thanks to the affiliate program.
On a wave of hype online venues for the sale of NFT appear almost every day, but at the moment the most popular are:
- Rarible is the most popular site for aspiring digital artists with the easiest moderation. Releasing your NFT on Rarible is as easy as uploading a video on YouTube.
- Nifty Gateway is the most elite and representative marketplace, in many respects we owe it to the haip around NFT today, and it was on Nifty Gateway that singer Grimes sold her NFT collection. Unlike other marketplaces, Nifty Gateway allows you to link not only an ethereum wallet to your account, but also a regular bank account - however, right now this is only relevant for U.S. bank clients.
- Zora is a relatively new marketplace, where musicians such as Toro y Moi and Mura Masa have been selling their stuff.
- SuperRare is probably the snobbiest site. SuperRare does not trade in NFTs associated with memes, but rather is a veritable gallery of digital art. All lots are carefully selected by NFT art critics.
- OpenSea is the most popular marketplace for selling NFT tokens. Now, due to the increased attention to the service, lot moderation times may take several days.
- MakersPlace is another elite NFT gallery. To sell your art here, you must first get an invitation to the community via messenger discord.
5) Put up a single item or an entire collection. One digital object (for example, your release cover) can be sold either as one unique NFT, or as ten or even thousands of NFTs. You decide how many copies your item will be released and how your lots will differ, what the price will be, set any end date of the auction - all variables you set yourself.
6) Let your fans know about the creation of NFT, or try to attract the attention of digital art collectors. Russian crypto-artists and those interested in NFT auctions have already created a thematic Telegram channel.
Still: Is the NFT an ingenious hoax?
It is not possible to give an unambiguous answer to this question, because the value of NFT is determined by the buyer, and all the processes described in our material are not a constant: the NFT market is just beginning to develop.
But already now the NFT is solving important problems:
Monetization of digital art. 3D art, video art, CGI graphics and other types of digital art that we are used to are extremely difficult to sell. Digital artists only get money from a specific customer or from the sale of physical copies of their works. But now cryptonomics opens unexplored financial prospects for monetization of digital art.
The COVID-19 pandemic has taught us to consume content in a whole new way - and it is likely that this skill will only evolve even after the end of the epidemic. We are already used to online concerts - but what if an entire exhibition of digital art could become a private online experience?
The transformation of music into digital art. Musicians have relatively quickly become accustomed to the rules of the streaming economy, which say that their earnings are directly related to the number of listens to their tracks by users of various services. Selling unique copies of releases in the form of NFT opens up earning opportunities for artists who have not yet fit into the streaming economy and who have a small but motivated audience to support the author.
Talk about the fact that most artists are unfairly underpaid on streaming services has not subsided. And the "NFT revolution" happened precisely when the concept of royalties, in which the user of a streaming service receives money only from the musicians the user listened to that month, began to be discussed more and more frequently. The Soundcloud service will begin using this method of royalty calculation on April 1. The royalty distribution is supposed to become the responsibility of the end listener. And fans of an artist may be more comfortable supporting the artist with an NFT purchase than listening only to their music every day.
Blockchain Streaming Development. Independent startups building streaming platforms based on blockchain technology have remained in the underground of the IT business for too long, and the hype around NFT is boosting the stock prices of their products. Rocki, Audius, Emanate, and others-the names of these streaming services are still unfamiliar to musicians, labels, and listeners, but the buzz around the use of blockchain in the music industry should benefit these projects.
Popularization of charity. Popular artists, successfully selling NFTs of their creations, send the proceeds to charities. This is, of course, a great trend, the development of which can only be welcomed. Even if all the prophecies about blockchain are not destined to come true, targeted assistance to people in difficult life situations pays off a hundredfold for any infomercial.
At the same time, we cannot keep silent about the harm NFT does to the environment: like all blockchain technology, NFT is associated with mining of cryptocurrencies, which is an extremely energy-consuming enterprise.
If the NFT-market does not burst in the near future, but continues to develop, then soon it will have its own highbuilders and resellers, and possibly counterfeiters (or rather, counterfeit tokenists). Also, it has already become known about the cases when purchased tokens disappeared from the buyer.
Crypto investors who are now buying up NFTs may eventually become serious lobbyists, and if NFTs move from the art industry to the music industry, after a while major labels will open their NFT supermarkets.
Definitely, for musicians (especially songwriters) it would be most interesting to sell shares of rights to their tracks directly to fans, but there is still very little reliable information about the issue of such tokens and mechanisms of royalties distribution through NFT. An interesting startup Vezt was selling such rights, but judging by its abandoned pages in social networks, this application stalled its development long before the current NFT-boom.