While macroeconomic factors play a major role here, there had long been a feeling that the market was overheated and needed correction. The bull cycle ended spectacularly with the collapse of Terra-Luna with an estimated $42 billion evaporating. Enter ‘bear market’.

Three stages of a bear market

People who entered crypto (and its recent moniker ‘web3’) in the last 1-2 years are likely to have a conception of bear markets as moments when hype simply dies down, but it cuts much deeper than that and is incomparable to hype as we know it in cultural domains. A Twitter thread by crypto veteran Jason Yanowitz offers a confrontational explanation (hat tip Dan Fowler for putting it on my radar):

Stage 1: The Unwind The excitement (and greed) from the bull market still exists. Mini-narratives pop up for weeks at a time. Assets still have floors. Valuations are cut but companies don't make the tough decisions (kill products, layoffs). Things seem alright.

Stage 1 doesn't *feel* like a bear market. It feels like prices have pulled back to "realistic" valuations. Investors continue allocating, builders keep building... In general, life is good. Only the weak hands sell.

Since the Terra-Luna collapse, we’ve entered stage 2:

Stage 2: Forced Capitulation This is where it gets ugly. Narratives die. Prices fall 90%... then another 90%. Layoffs across the board. Mainstream media and cynics rise up in Stage 2. They laugh and shout "I told you!"

Eventually this takes us to stage 3: winter.

If you are building in web3, that prospect is scary. Really scary. Not because you don’t believe in what you’re building, but because you don’t know how it’s going to pay rent. If you’re lucky to have a solid revenue model or have raised funds, it may still be hard to attract talent or general interest since people might have moved on to the next shiny thing (e.g. ‘metaverse’).

What it means for music

The sad reality is: music goes where money goes. Artists need to make hard choices about how they’ll pay the bills so they can focus on their art full-time. With gigs gone at the start of the pandemic, some turned to livestreaming and creator economy models like Patreon or OnlyFans, these trends eventually made way for ‘web3’ with artists learning how to market their art as NFTs. They identified a new market for their art that sits above ‘feels like free’ streaming pricing, above paid downloads from e.g. Bandcamp, and closer to what one might get paid for a gig, but in this case all the value’s transferred by 1 person or small number of people rather than a whole audience.

But the NFT market is stalling. Data from NFT market tracker NFTGo shows that trading volumes among so-called ‘blue chip NFTs’ have dropped. Blue chips are some of the more popular and well-known NFT collections in the market and thus provide a great overview for general market sentiment. In USD terms, the volume has halved.

A project like Songcamp Chaos, with full support from the space and an amazing creative concept, would have sold out easily just months ago, but has currently only sold about half of its 5,000 pack collection. Venice Music has sold only 188 of its genesis membership pass to date, with sales concentrating around its launch date. This would have looked differently too, not long ago. And there’s of course the project I’m personally involved in: COLORS’ Community DAO. It took us a good week to sell 25% of our total Founding Pass supply, after which the DAO passed a proposal to switch up our strategies a bit.

In short: it’s hard to sell NFTs at the moment and the amount of money NFT sales may generate in dollar terms has decreased. The result: we may see musicians and other artists spend less time building, since they’ll need to find other ways to put food on the table.

What it doesn’t mean for music

Web3 isn’t ‘dead’. Everything that was there is still there. Web3 is the infrastructure, the technology, the mechanisms - not the hype. Projects with weak theses will disappear and their proponents too (think: cash grabs). Their DAOs will fizzle out.

In the case of the COLORSxCOMMUNITY: we started with the idea of how COLORS can weave its community into itself (and vice versa) long-term. That community existed before we started integrating web3 tooling into it. The reason for integrating web3-tooling is equity: not necessarily in financial terms, but as a core value. We wanted the community to be equitable for its participants and although web3 has a steep learning curve, it is still the easiest way to achieve truly equitable outcomes as communities.

Organisations and individuals that operate along these lines will constantly find reasons to experiment, to build, et cetera. To compare: take all revenue away from a musician. Are they going to stop making music? No. Are they going to take a month off to tour and perform a whole lot of free gigs that they previously got paid for? Unlikely.

What will come first is a vibe shift. True doom. Revenue, in crypto, that musicians were becoming dependent on will go towards 0. There will be new attempts at price discovery: suddenly 0.08 ETH (~$95 at time of writing) feels different compared to months ago when it was worth double in USD. Less disposable ETH means less “artists supporting artists”, one of the most awesome things about the budding web3. Things will start to feel rough. It will feel like nobody cares about your music or art all of a sudden. This will make people turn away from communities they thought had their backs.

But the support is not gone. Communities will have to support each other in other ways. DAOs will need to find revenue flows that don’t completely depend on web3 market sentiments; things beyond NFTs and tokens. Web3 revenue being down doesn’t invalidate the idea of a DAO and its tooling - as a matter of fact it will prove it.

Build market

Some people refer to the ‘bear market’ as the build market. As the market heated up and the music business got onboarded to web3, we started seeing all kinds of problems emerge. These range from the technical difficulties of onboarding people to web3, to environmental concerns, to the emergence of communities with huge economic moats (pay-to-play), to speculators pump-and-dumping on legit projects. All of these problem areas and many more now provide domains for builders to come in and create solutions in a focused way.

There are a lot of DAOs and web3 orgs and platforms who have wasted a lot of time and money over the past year or two. If you have a liquid token for your community, it means people can cash out their membership when they want. This drives organisations, especially their elected leadership, to prioritize projects that keep token prices high. Unfortunately, these token prices are more affected by hype, speculation and vibes than by truly substantial contributions (e.g. ‘public goods’). But in a bear market, speculation dies down. There is less reason to build hype and since budgets are a lot tighter: way more reason to deliver with focus.

Ideas are no longer enough. It’s time to execute with focus, without relent, and with a commitment to tackle hard decisions fast.

Economics 101: externalities are hidden or indirect costs (or benefits) associated with goods or services. Pollution is often used as an example, as plastic-producing companies don’t have to pay to clean plastic out of the ocean or microplastics out of our water supplies, for example. The manufacturers reap the benefits, while the general population gets taxed and the environment itself burdened.

In the case of permissionless blockchains to which everyone can write, this means we’re going to have to deal with the type of problems and externalities that occur in permissionless spaces. Besides the high energy cost associated with creating NFTs on Ethereum, to which a solution is being implemented, there is another issue that is perhaps harder to solve since it strikes at the core of the decentralized principles underpinning the technology.

There are artists that make from NFTs on a monthly basis what they used to make in a year from streaming. As a matter of fact, many artists make more money in a single NFT drop than they have ever made from streaming. This is exciting; music can finally be valued in similar ways to art in galleries.

The problem facing the industry now is that anyone can create an NFT of any media. I can create an address on a blockchain, create an NFT of a random song on Spotify, and put it up for sale on a marketplace like OpenSea. Nobody would even know it was me.

This is not a huge thing for music yet, although issues are looming (see HitPiece), but visual art communities feel strongly impacted by it. DeviantArt has already sent over 90.000 notices of fraud to OpenSea, now scanning for false copies across 4 million newly minted NFTs each week. While it’s nice that things can be taken down from one particular marketplace, this does not mean the NFT is taken down from the blockchain. It’s still there, for all to see. OpenSea just decides not to display it anymore.

Flashback to the early days of peer-to-peer filesharing

Peer-to-peer filesharing had the benefit that people could access all the music in the world, suddenly. It was a fantastic moment in human history. At the same time, the externalities of it were disastrous; evaporating enormous parts of revenue for the industry. It took over a decade before all-you-can-eat music streaming subscriptions became normalized and standard. What happened in between?

Whether artists liked it or not, their music was now freely and conveniently available to anyone in the world. That was the reality that emerged. So to build a business, a common strategy artists & labels like Definitive Jux and Epitaph deployed was offering free music on their own websites, so that their audience would come to them. From there, they’d be able to sell tour tickets, collect email addresses, sell merch, etc.

It was perhaps not how they would have chosen things, but it was the best way to leverage the reality of this genie that could not be put back into the bottle.

The NFT genie

What can artists do against their art being minted as NFTs on the blockchain? Well, basically nothing, besides not publishing their art. The space will continue to evolve, so that platforms can better deal with these issues and cover their liabilities and as the space evolves, artists hands are forced into creating new strategies to deal with new forms of fraud, forgeries, counterfeits.

First, the good news. Unlike the previous decentralization shock to the industry, in the form of p2p filesharing, this technology won’t drive the value of art to 0. While it’s frustrating that someone else can mint an NFT of your art and try to sell it, them selling it doesn’t take money away from you unless they specifically target fans that are already familiar with you. The typical scenario is that they’ve fooled a random person into buying a counterfeit. Does that hurt the original artist? Unclear, but not likely. In fashion, researchers have found that “counterfeits have no negative effect on consumers’ perception of the luxury brand.”

While someone may make a quick buck off of forgery NFTs, they’re worth nothing in the long term, or as a nameless author in ArtReview quipped, commenting on art forgeries:

“What is the value of a marriage after one learns of a spouse’s adultery?”

Some estimates dating back to before NFTs estimate that 50% of art may be fake, or forged. Original works are consistently valued much higher. One experiment divided 180 people into two groups and made them look at two similar-looking paintings by Jim Rilko. The first group was told the works were by two different artists. The second group was told one of the paintings was made as a copy by someone inspired by the other painting. The first group valued the paintings roughly equally, the second group attached a much lower value to the perceived copy (source, study).

While it’s outrageous, unjust and immoral (and criminal) that people are selling copies of other folks’ work, it’s unclear whether this negatively affects the value of the artist’s work. Yes, it sucks, but the good news is it won’t put you out of business nor really affect your bottom line.

Three-pronged approach

Mitigation strategies should focus on:

1. Educating consumers;

2. Artists selling originals;

3. Protocols for artwork verification.

1. Educating consumers

It’s embarrassing to be caught with a counterfeit in your wallet. Don’t let it happen to you.

That’s the type of message I’d expect from campaigns aiming to educate consumers. The bare minimum one should do before buying an NFT is checking the official social media channels of artists. If it’s a resale, then you can check from which address the artwork originates and see if the artist has that address listed in their Twitter bio or on their official website. Any platform facilitating these purchases should direct effort and money towards consumer education. Beyond the moral incentive, there’s a market incentive to establish more trust with artists, consumers and institutions, too.

2. Artists selling originals

If your art is good, people are going to try to copy it, they might try to sell those copies, especially if it’s unlikely they’ll be caught. The innovation of MP3s and peer-to-peer filesharing forced artists’ hands to get their work available online, start building community and new business models. Will the innovation of NFTs force artists’ hands to start creating online galleries of their work, available to collectors as NFTs? Not unlikely.

3. Protocols for artwork verification

In 2016 I wrote a piece called The Music Industry Isn’t Ready for the Blockchain, which mostly approached the blockchain from the context of industry discussions around the time that focused on royalties, metadata and dispute resolution. My conclusion was that the problems to be solved were problems of human coordination, not technology. If the industry couldn’t come together to figure out the coordination issues, then it wouldn’t be able to leverage the benefits of this new technology.

I speculated about two scenarios. Either the industry comes together and figures it out, or:

“A new generation of companies come up and show creators, entrepreneurs and fans that another value chain is possible, that is more rewarding for both artists & [fans].”

And that’s what’s happened. The music industry is the canary in the coal mine for new technologies, because it’s been historically hesitant to move until its hand is forced.

So, NFTs have happened. On-chain music has happened. Now industries need to collaborate to ensure consumers aren’t scammed by forgers and artists’ originals stand out amongst the clones. A protocol could be developed that indexes artwork on the blockchain and verifies originals. Previous attempts at this have all but stranded or dissolved. There’s more at stake now, so perhaps solving this issue of human coordination finally has the right set of incentives.

Marketplaces, wallet apps, virtual galleries, social media platforms, etc. could all reference this protocol to check if the artwork they’re displaying is a verified original, a verified forgery or unknown. They could show a checkmark for verified originals, a 💩 emoji for forgeries or not display them at all, and approach unknowns neutrally. This would also help mitigate risk for platforms, as they would have to deal with less DMCA takedowns and reduce liability for facilitating sales of forged or pirated works.

Such a solution runs counter to principles of decentralization though and there’s a huge risk of gatekeeping and power concentration in such a protocol, if not designed carefully. I do expect centralized aspects to emerge for problems that decentralization won’t solve or fails to prioritize. After all, when the ‘free market’ doesn’t deal with its externalities like pollution, then it’s centralized forces like governments that have to clean up the mess and regulate. Decentralized filesharing led to centralized solutions like music streaming services. When decentralization doesn’t find ways to address the externalities it causes, centralized solutions are applied.

Thanks Sean Adams & Darren Hemmings for provoking some of the above thoughts, as well as this thread by Cory Doctorow about crypto & externalities (I don’t agree with the take, but it raises great points).

• To do away with music copyright or to improve how CMOs etc. work

• NFTs as collectibles or NFTs as investment opportunities

• Crypto for the masses or crypto for the lucky few

• VC investments or bootstrapping through token

• Fully decentralized DAO or the benevolent dictator DAO

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.

Do we need mainstream crypto-music adoption?

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.

https://twitter.com/RAC/status/1490330491379060736?s=20&t=5dq1bWmQonPv9939QwEp-Q

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.

Culture as public goods

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.

The radical break ushered in by decentralization

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.

Revolution versus Evolution

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.

The idea of fans investing in artists, music or songs directly isn’t new. Conversations about music royalty NFTs have brought renewed attention to David Bowie’s ‘Bowie Bonds’. At the peak of music startup launches in the web2, about 10 years ago, there was a whole range of startups that wanted to figure this out, only for most to be laid to rest in the ever-expanding music startup graveyard and forgotten. Now, too, there are many platforms that offer co-investment in songs in exchange for getting a cut of revenue though NFTs.

I don’t believe that this is a great value proposition for fans. Here’s why.

1. First of all, these type of NFTs risk being seen as securities. Various platforms are doing their best to stay compliant, but good luck staying compliant in all jurisdictions in this rapidly changing legal landscape. This puts risk on the collectors. Unfortunately, due to the way these NFTs are marketed, these collectors are often fans who do not know much about investing and (international) tax laws related to that. Yes - it’s cool to galvanize a fanbase around the success of an artist, but do they need to incur this much risk or responsibility? I don’t think they do; keep reading.

2. Royalties, schmoyalties. I think the wrong expectations are being set about what fans might be able to earn by participating in a fraction of a single song’s royalties.

3. NFTs already let fans participate in the success of their favourite artists, even without tying it to music royalties. Tying music royalties in makes fans care about ‘number go up’ for a song’s streams. What does ‘number go up’ mean? It means an artist is getting more visibility and / or engagement. Why tie that so directly to the current streaming landscape?

   If an artist and their work become more famous, more esteemed, then the valuation of their past work usually goes up. This means an early collector of their work could sell & capture that value. What we need is more models around how people can capture value without having to sell. This could be solved by regular token distributions to NFT holders, but there may be many other models to explore too. I expect the NFTs you own will allow you to get access to relevant DAOs, communities and experiences. For example, if you hold a rapper’s NFT, a hiphop DAO might let you claim membership tokens which may hold value on their own.

4. Lastly, I think these types of NFTs are too dependent on a high degree of centralization. Does that matter? I’ll admit, I’m not certain, but it causes a lot of friction with a core principle I believe in about value in web3.

   ‘Ownership’ in the web3 is an illusion. The NFTs you ‘own’ do not sit on your computer. They sit on the blockchain in the network. They are connected to your wallet address on there and if things are properly decentralized and secured, then nobody can change that reality other than you. This gives the experience of actual ownership of digital goods to the point we can speak of ‘owning’ something. When things are not properly decentralized, a few players can band together to change the state of a blockchain. Even if they choose to take something from someone else, e.g. a criminal or bad actor, it becomes immediately clear that how everything is distributed on the network is dependent on these people and they can intervene whenever they so choose. That’s more akin to feudalism than actual ownership.

My concern with web3 projects that depend on high degrees of centralization (e.g. having a single point of failure to distribute music royalties to NFT holders) is that it runs contrary to important core principles of why the web3 works.

I added the word ‘yet’ to the title to acknowledge that I may be missing something. I do think this is a direction to explore, but I’m not excited by the models I see yet. Perhaps something will emerge, for example DAOs aggressively collecting loads of music royalty NFTs (Hipgnosis DAO wen?). For now, if I can choose between buying a normal NFT of art or music created by an artist I love, or buying a music royalties NFT, I would go for the former rather than the latter. It’s simpler, more convenient, still grows with an artist’s success, and it’s more akin to the way in which I care about art.

For art’s sake.

Bas Grasmayer

Comment here.

First published on Jan 4 in the MUSIC x newsletter.

From CD to streaming landscape

Peer-to-peer filesharing felt like a revolution, but was only temporarily disruptive. The legacy of filesharing is a new ruleset for recorded music; a playbook for how recorded music thrives in the age of networks. The recorded music industry, and its major labels, still operate based on paradigms of the age of mass consumerism & recorded music: build catalogues & leverage them to get maximum exposure and ‘sales’ (aka streams).

Filesharing added new rules to that game, such as that consumers shouldn’t be forced to buy entire albums just because they’re into one song. It also made it easier for everyone to get their music out there, which has led to the reality of over 60k songs per day being added to the likes of Spotify today. Abundance x convenience has led to the need for algorithms and curators to carefully surface relevant music to end users. The need to sell subscriptions while competing with free has led streaming services to position music not just as something aesthetic, but as something with utility: workout playlists, coffee playlists, music for cleaning the house, etc. Music for every moment. The soundtrack to your life.

Meanwhile, portable music players took hold, which has culminated in the mobile device as the primary music player. Again, all the above trends converge perfectly.

Terms are still set by labels however - for artists, but also for streaming services. It’s about maximizing catalogue value and a lot of the economics involved can be traced back to before anyone had ever heard about Napster. These economics are designed for the role of consumers as listeners and the role of artists as creators of catalogue entries. Profit comes from maximizing those roles. That’s the incentive for major labels, that’s the incentive for the streaming services that license from them (whether they like it or not). Optimizing for listener-catalogue is a different game than fan-artist, which is where the higher margins are for artists.

(For a longer read on how modern music service interfaces can be traced back to the earlier days of digital music piracy, I recommend my 2016 article “How Piracy Changed Music Discovery & Licensed Services Pushed It Forward”. To go deeper into how music got free - read the book by that name.)

The game you can’t win

While streaming services follow a one-size-fits-all model, with most apps offering similar catalogues, similar features and similar interfaces, the economic model of streaming is far from one-size-fits-all. Streaming benefits specific types of creators who can deploy strategies that exploit the attention economy of release cycles and recommendation engines well. For everyone else, what streaming has accomplished is that music is easily available to fans in a legal way. When they listen, there’s payment, there’s data - both things that went missing when music consumption went underground in pirate networks.

The economics of streaming services are harsh. I say this as someone who has led product at two different music streaming services. There’s very little margin for anyone. There’s close to 0 margin for the streaming service if it chooses to price according to market standards ($10 / month) and utilizes Apple or Google’s in-app subscriptions for which the tech giants take sizeable cuts (30% per subscription per month, if you’re grossing over $1 million per year).

The streaming services do all it takes to get people to subscribe and stay subscribed. That means getting people into strongly discounted trials. That means pushing music through algorithms, so people experience themselves using the app all throughout the day. Music for every moment keeps people subscribed. These are dynamics of catalogue exploitation, but they don’t serve to deepen the connection between artists and fans. High margin transactions between artists and fans carry low engagement: how many times per month do you use artists’ Shopify pages?

Furthermore, services that are highly successful in user engagement will have lower per-stream royalty rates than less successful services. This is due to the fact that when people listen more, their revenue gets spread out more thinly. This is why some of the highest grossing services, who contribute the largest total amount of money to the music industry, seem to have lower per-stream rates than other services. (with the exception of YouTube, which has lower rates for other reasons I won’t go into in this week’s piece. #valuegap)

To me, it’s frustrating to see all the blame for low royalties pinned on Spotify. It’s even more frustrating to see people pulling their catalogue from Spotify, but not from the tech giants’ services.

https://twitter.com/sk33mask/status/1477753102421872645

The tech giants can afford music as a loss leader, while keeping price points artificially low, forcing the entire market to adopt the same price point. Meanwhile they put pressure on the market by taking a 30% cut every month, for facilitating a transaction. Do we want a music landscape dominated by Apple, Google and Amazon?

https://twitter.com/ScubaOfficial/status/1478057599325114368

The model is clearly not functioning right for most artists. When it started, it was designed to compete with piracy. To create payments and data around music consumption. To compete with free. The internet has changed a lot since then. For one, it’s mobile-first. Secondly, we’ve gotten way more used to making payments online, including for digital goods. I cannot emphasize that last point enough. This was absolutely abnormal for the majority of people 15 years ago. Now that it’s normal and it feels easier to unlock higher margin revenue online, the pennies from streaming services feel like… well, pennies.

I personally don’t think most artists should be pulling their catalogues from streaming services, but I do see a scenario unfolding where it just starts to feel irrelevant to bother with uploading music to the incumbent landscape.

The most likely way in which the web3 will disrupt music streaming

Over the next 5 years, I think there is one disruption music streaming services should be worried about from the web3. It won’t happen through direct competition with web3 services. Rather, it’s about competition for artists’ priority. Where will they place emphasis? Which profiles will they promote? What will be their ‘link in bio’?

Web3 is a game of its own. It’s highly community-driven. Its revenue models to date are, often, high margin. Even though it’s very early, you can witness on a daily basis musicians getting offers on their new music NFTs that far exceed the revenue they’d see from streaming services for that song or even across their catalogue. That’s not an assumption: that’s what they’ll literally tweet or be talking about in Discord Stages and Twitter Spaces.

What happens when these communities grow? When sizeable audiences can be reached through these dynamics? When artists realize how much more they can do on their own terms through this? My feeling is that the landscape that came before will slowly become an afterthought. I recently tuned into the Twitter space of Songcamp founder Matthew Chaim’s Sound.xyz NFT drop, which sold out instantly. He was in the car and blown away by it, mentioning how when he’d do a release in the past he’d have to do all this work, message folks, set posts live on all channels, keep pushing for days, etc. In this case, he made more revenue immediately upon release (which can grow via sales in secondary market) than he’d likely see in months of streaming revenue.

Who’s going to bother with all the work it takes to make a track successful on streaming services, if you can net more revenue faster through much more pleasant dynamics on your own terms?

This is the big threat the web3 currently poses to streaming services. When Facebook and SoundCloud came around, MySpace didn’t disappear. It faded into obscurity, as people found less and less reason to go back and update their profile. If streaming services don’t find a way to create significant revenue for more artists, they’ll start to feel irrelevant as artists find new ways to connect with their audiences at higher margins.

The writing was on the wall. Now that moment has come.

1. What exactly is value in all of these stories?

2. What is missing from these conversations?

To answer the first question: value is usually expressed in the economic definition – how much are people willing to pay – or give up – to get something. However, there’s often also an indication that it should be about values, in the sociological definition: what is good, or what is desirable? It’s that second idea of values that I will focus on here. Moreover, I’ll show how people – human beings – are what’s missing from discussions around value in music and often even in the production of music.

Producing people, not music

I draw heavily from the work of David Graeber here, especially the way he redefined how we think about value and money. One of the cornerstones of Graeber’s work, for me, is that he focused strongly on the way value is the starting point for all social relations. From there, he can argue that within a social system you produce people. Taking that one step further means that when you do labor, when you work, you always produce human beings. Within music, this hardly ever gets mentioned, or even noticed. This is partly due to the inherent necessity, or drive, with which people make music. This means that there’s always someone who will be making music. You know those funny stories about musicians being asked to play for free in a restaurant and retorting that they will be happy to host the chef for free in their house in return for exposure to their friends.

When we flip the script on this, we see that in all music productions we create people. Once we take that at face value (pun intended), we immediately realize that offering someone exposure without reward completely contradicts the social relation-building that should underpin all productive interactions.

Now, this isn’t a Web3 issue, but the tools that drive Web3 are all tailor-made to optimize for the production of people. Again, the problem here isn’t something that’s only inherent to Web3 or crypto. Compare this recent thread by serial entrepreneur Gregarious Narain on Web3, where he ends with the statement that investing in the future always requires a good team and support.

https://twitter.com/gregarious/status/1473629047636643841?s=20

Compare this advice with the first chapter of Donald Passman’s music industry bible – which is to place a good team around yourself as an artist – and you see how universal these issues are. It’s just that Web3 tools and solutions seem optimized to deal properly with it:

• Incentivizing feelings of ownership and control

• Allowing direct interactions within teams and between artists and fans

• Storing records of ownership, of activity, of interaction

Values over Value

Ever since the first Industrial Revolution so much of our rhetoric has been driven by talk of maximizing value. Quite often, such talk would even forego questions aimed at figuring out who value was being maximized for, and, in the same breath, at the expense of who this happened. If we look at the music industry, we see the resurgence of value extraction for recorded music.

As the value pie expands, so does the supposed middle-class of music creators grow. But when push comes to shove, and as recent catalog deals show, there’s a small percentage of artists who benefit from the recent upturn in overall recorded music revenues. Moreover, there’s often a devil in the details that brings in private investment firms and the like. If it’s about value, it’s rarely about values.

Of course, there’s a lot of VC money and private investors and investment firms who are diving headfirst into Web3 right now. Royal, Sound, and others have all recently looked to bring in outside funding. It doesn’t necessarily equate to finding devils in details and the funding helps the two examples set the scene for things like legal standards and a reimagination of how to consume music. Both Royal and Sound could conceivably be understood as organizations who push values over value. Another example is Endless, who last week announced a change to their manifesto that will see them firmly push values over value. Darren Hemmings summarized the move as follows:

“The company has announced that it is shifting from a paid product to a free one, in which the business will then make money from music made by creators on its platform. In addition, the current owners and investors in Endlesss with become minority stakeholders in a wider foundation with its own tokens. So put simply, as the whole thing grows and gains value, so those invested into it will benefit, with the twist being that anyone can own a piece of the business.”

This seems to be the crux of what Web3 offers. It’s not about the technology, or even the specific tools, but about the way people are – through the tech, with those tools – urged and guided to work together. The cherry on top is that everyone involved automatically benefits when shared values create work with economic value.

Human economies at scale

Human Economies show us how we can scale values-driven work. What Graeber has shown throughout his career is how money operates differently across different economies. On the one hand, there’s economies where money seems to be used simply to buy goods or services. On the other hand, there’s economies where it’s more about rearranging social relations. In his book on the history of debt, Graeber showed that in the latter case “money” is a very different concept than in the former case. As such, the “money” involved in the latter economies is different from that in the former.

“I’ve decided therefore to refer to them as ‘social currencies,’ and the economies that employ them as ‘human economies.’ By this I mean not that these societies are not necessarily in any way more humane, but only that they are economic systems primarily concerned not with the accumulation of wealth, but with the creation, destruction, and rearranging of human beings.”

If you’re in any way aware of the way DAOs organize themselves, and how social tokens work, you’ll agree that this resonates strongly. What’s important to note is how Graeber emphasizes how human economies aren’t necessarily more humane than economies based around economic value extraction. Similarly, a DAO isn’t necessarily a more humane organization than a large corporate like a major label. It’s a reflection of the values and norms of the actors within the network. So much in crypto is about flipping assets for quick value extraction. A human economy negates this.

And yet, money makes the world go round. If Dan Fowler is right, and Crypto Music will become a thing “that exists in parallel to the traditional digital and analogue music industries,” there will be a conventional economic value attached to the Crypto Music economy. Seeing this economy as separate, at least partially, from the other music industries is what will allow it to scale. Human economies, historically, don’t scale easily. But that may be the whole point. Instead of thinking about a single Web3 music economy that can scale to success, we should think about many different human economies. Scale, then, doesn’t come from one, or even a few, winners, but through the work of many smaller groups. Each of those groups has the tools to create their own social currency based on their own values to create a sustainable human economy.

Seasonal value cycles

The question we should ask ourselves then, is not ‘how much is this worth?’ Rather, we should ask ‘what social system is being created here?’ In much of Web3, so much value is being generated, not in terms of Ether or another currency, but in terms of the rearrangement of social relations. And to make the point here, this isn’t about some utopian way of cooperation or state of well-being. Instead, it’s about how we, as humans, work together and have worked together for thousands of years. Similarly to how I see current shifts changing the musical profession to a state it was in several hundred years ago, in the time of Bach, Web3 developments help us focus on social relations and the creation of inter-human values. This is why most DAOs work in seasons. It allows them to create cycles of creativity and productivity where each participant can work through a set of tasks with a clear end-goal. Cut through the noise of big-money headlines and endless streaming economy reflections to find that we don’t produce as many goods – music – as we want, but that we always create meaning, or value, when we come together to produce music.

The emerging web3 is a cultural moment. It builds on top of what has come before. While not everything will move towards web3 tech stacks, there will be a consumer expectation of services to behave more like the principles common in the web3.

Here are some of the most important ones for the digital music landscape.

Data autonomy

Your data should be in your hands, under your own control. Ethereum-based dApps integrating ENS means that you can own your username as an NFT that sits in your wallet. Token-based communities mean that you own your membership in the form of tokens that sit inside your wallet. These tokens cannot be taken away. Don’t like the direction a community is going? You can ‘fork’ it. You can set up an alternative version of the community that uses the same tokens, so anyone can join. You can clone the smart contracts that power the community.

There is a lot of power in the hands of the users, because of the fact that there is an unprecedented level of personal autonomy over your data. Since that’s not just true on an individual level, but also on an ecosystem-wide level, dApps try to cater to this principle. It’s practically a dealbreaker if they don’t. People will come to expect more autonomy over their data.

Interoperability

Anyone can build stuff on top of anything, for example, I could create a DAO for people who hold NFTs minted by a certain artist. It’s part of the fabric of web3 and why NFTs can be thought of as ‘magic beans’, because you never know what might sprout from one. People will expect to be able to carry their username (an NFT in their wallet) and their inventory, including their cryptocurrency, with them across various services.

This makes the web2 game of platform lock-in a lot harder. Web2 services thrived by having users build up inventories of playlists, photos, social connections, etc. inside their walled gardens. This helps reduce user ‘churn’, because the switching cost from e.g. Spotify to Tidal is high when you lose all your playlists, albums, your friends, your followed artists, etc.

This trend also gels well with metaverse concepts, for which blockchains could be used to host decentralized and interoperable user inventories: a decentralized property layer for the metaverse.

I’m very curious how this plays out long-term. There’s an immutability aspect of web3 where if the genie’s out of the bottle, you can’t put it back in. However, the promise of early web2 was also a highly interoperable landscape and instead we got walled gardens and platform economies. Luckily, web3 offers more revenue models than the advertising, subscription models, and app sales that web2 offered, so platform-lockins becomes less necessary.

Progress

When you do meaningful stuff in the web3, you have something to show for it. It’s like trophies to display your progress, in a similar way to items that you may unlock in video games, such as a character skin or that awesome gun when you reach a certain stage.

Some personal examples. For participating in Songcamp Elektra, I have my access ticket to show and three different puzzle pieces that were part of the audiovisual world and game that was constructed. I also have fungible ‘$Elektra’ tokens for my participation in the project, which help incentivize future participation in the Elektra DAO.

For crowdfunding Water & Music I have an NFT. For crowdfunding BPM Bot I have an NFT and tokens for Club BPM. And as a fan of Packy McCormick’s writing, I collected the first article NFT he dropped - as a memorabilia. I even hold tokens that represent my fractional ownership of a CryptoPunk NFT, which also give me access to an informal DAO. For attending certain calls and milestone moments, I have ‘Proof Of Attendance Protocol’ NFTs called POAPs.

I’ve been subscribed to Spotify for over 10 years. Paid them more than I have ever paid for any 1 NFT. But there’s nothing to show for it. There are artists I’ve supported when they were doing gigs for 20 people who are now huge and there’s nothing to show for being there for the whole journey. These are underexploited dynamics to create loyalty and tie-in; to get people to keep showing up, and they follow some of the same psychological principles as things like stamp cards to get a free coffee. The tech may be a little bit hard, but the principles are easy. You already know them.

Knowing that you own something that acknowledges you were there, that you participated, is a great way to keep people invested. Remember the NFTs as magic beans comparison from above? Knowing that you have a verified ‘early fan’ NFT in your wallet means that at some point down the line, something may be created for you… either by the author of that NFT (ie. the artist you’re a fan of), by the fan community, or by web3 music services that may group folks together based on shared ownership of music-related NFTs.

(the above section also underscores why we normally post on our self-hosted Wordpress, rather than Medium (which I left in 2017), because we own the data. Why make an exception for Mirror when it comes to web3-themed articles? Because it’s acting to include its users in the progress the platform makes.)

How to get ready

You don’t have to start using all of this tech just yet. Right now, we’re operating very close to the actual infrastructure of web3, which means things are hard, confusing, and sometimes expensive. What is important is that you start aligning yourself with some of the principles, such as the 3 above, but please don’t treat this as an exhaustive list.

Think about the web3 as decentralized social media that has payments embedded into it, rather than tacked on. These payments may be optional, but when payments occur they’re natively built into the network through cryptocurrencies.

Long-term thinking is a huge benefit in the current web2 to web3 landscape. What is also key is understanding the psychology and social psychology of community and governance. While the 2010s were the era of personalized social media feeds, follow buttons, and algorithms to make sense of all the data, the 2020s are going to be about carefully picking the communities you want to play a role in and the dynamics that come with that.

That doesn’t mean everything has to be community-run, it doesn’t mean everything should be a DAO, or that community should always be the starting point, but increasingly we’ll be either servicing communities or helping those that do so. Data autonomy, interoperability and measures of progress are powerful drivers. Pay attention to those leveraging these principles and start experimenting with them yourself.

You can start experimenting anonymously under a pseudonym if you’re not yet ready to tie your professional identity to these dynamics and would like to learn more first. Pseudonymous identities are widely accepted in the space.

Shifts

We’re going through a shift. Many of the novel concepts of ownership, autonomy and more equitable ways of distributing value across ecosystems of creators will stick. Some of the tools we are already using for this will stick to. These shifts have happened before.

1. Shift from CDs to MP3 & P2P piracy.

2. Shift from early web2 (MySpace, Flickr) to modern (SoundCloud, Facebook, Spotify, etc).

The latter also coincided with the shift from desktop to mobile.

I vividly remember the second shift. New ideas around interfaces, open APIs that could be leveraged by app developers, and liberal approaches to the amount of data you could upload for free. All of these drew early adopter artists and fans away from MySpace and the piracy sites and apps of the day and onto Spotify and SoundCloud. Most fans didn’t join them.

In the modern social media landscape it’s common to have strong overlap across different platforms, but this wasn’t really the case. Moving fanbases around wasn’t a skillset many people had mastered or even really thought about. The unmetered internet was still a relatively new thing and for many people only available if they were at a desktop PC (laptops were not as common for young people yet either).

Building new fanbases

People moved to new places and started connecting with audiences there. They were separate from their fanbases elsewhere. Your SoundCloud following may have had a distinct set of characteristics compared to your MySpace following, for example.

Artists would then keep updating their old profiles, but there’s an advantage to being on a growing platform… all you need to do to keep growing is just to hold on. As long as the platform grows, your exposure grows along with it. You don’t have to compete for visibility yet. This is what’s happening in the web3, but perhaps closer to home for some readers: it also explains the success of so many creators on TikTok.

Eventually, updating the old platforms starts to feel tedious and perhaps pointless. So artists would stop and they’d have migrated, found a new online fanbase of majority new fans and not really look back.

Reunion

Years down the line, these artists would be reunited by their old fanbases. As these platforms reached critical mass and became incumbents, the late majority of adopters would move over and find things they’re familiar with as they’re onboarding. For example, pages to like on Facebook, so updates appear on your newsfeed.

They may have never stopped listening to the artist, they may have remained fans, but for a while they weren’t active participants in the fanbase anymore. Once the shift reaches a stage where the late adopters can move in, there’s a reunion and fans once again can experience the full spectrum of an artist - at least until the next shift.

Predictions

• Artists will find & build new audiences in web3 that are separated from their existing fanbase. (this is already happening)

• Some existing fans will be onboarded to web3 through artists' activity. (these will be early adopters)

• Large proportions of fanbases will stay behind and will be reunited in 2-5 years. (probably by FAANG integrations with web3)

Strategy

• Should artists worry about onboarding all their fans to web3?
  It’s a waste of time. Be inclusive in your communication. Never throw your fans under the bus. However, as an artist your role is to create art, to create narrative, to build worlds. Tech platforms have a much stronger economic incentive to improve the user experience, so that it’s easier for people to use their tools. They have far more control over it too. You should worry about finding & building audience.

Small anecdote: I led product at a classical music streaming service called IDAGIO. We solved issues with how classical music is organized in the music streaming era, allowing users to browse catalogues by individual performers, composers, and actually having access to data obscured in most streaming services. Many classical music fans still listen to CDs. Our job wasn’t to onboard them to streaming. There are companies worth billions of dollars who are trying to do that. Once they get activated on those streaming services, they’ll realize that classical music doesn’t work well in them. That’s the point where IDAGIO has clear value to them; not before that. The goal was not to convert folks to streaming, but to convert from a poor streaming experience to a great one. In short: let others with deeper pockets worry about onboarding people to the technology - you just make sure you stand out in what you add or improve in that space.

• What about the web2 legacy fanbase? Keep them in the loop. Show them what you’re working on. Introduce them to communities you’re a part of, e.g. on Twitter Spaces or Discord. Those that are ready will come along. If not now, then later. Channel your energy into your own future. You can’t bring your entire past with you.

• Collect email addresses & phone numbers. The social media landscape is going to get rocky in the next few years. You'll need a reliable way to stay in touch with people.

I hope this gives artists a sense of freedom. Also if you’re struggling with the above, you are not alone. Practically every artist I’ve spoken to has struggled with this. Latashá regularly makes jokes about the division between her fanbases on Instagram and Twitter, which are more web2-leaning and web3-leaning respectively. I wonder if most of Matthew Chaim’s fans are even aware of what he’s building with Songcamp.

There’s another bonus to shifts like this. If you’re an artist looking to relaunch your career, for example you’ve gone inactive in the past or you’re trying to release different music, now is the perfect moment. You have your legacy, which gives you rep, but you can be free from it by focusing completely on new audiences in the web3, who are eager for more artists to make it over and hear greater varieties of expression.

Focus on the future. People will follow at their own pace. Meanwhile, connect with those on similar journeys.

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Photo by Noah Buscher on Unsplash

I’m personally also of the opinion that utility is an important factor in both the adoption of NFTs and in getting people to stop talking about NFTs and start talking about what the tech can do as a tool. That said, utility in music isn’t a new concept. So if we want to think about what the utility of music is, let’s talk about the framework those ideas sit in.

Gebrauchsmusik

I tend to think that the primary utility of music is that it brings people together. But there is, of course, much more that music does. Music offers rhythm and groove, euphoria and celebration. Music can change a mood and reduce pain and anxiety. In other words, music has a physical, physiological, and mental impact on us. This is also immediately why it brings people together: it’s ingrained in us.

When we can share such experiences it creates a bond. I’m sure that all the people in that room with Bobby McFerrin still remember that moment. How we provide ways for those bonds to establish has changed over time due to the introduction of new technologies as well as through new ways to think about music.

Back in the 1920s in Germany an ideological divide shaped itself specifically around the utility of music. This happened both within academic thinking about music and within music practice itself. In the latter divide there was, on the one hand, the art for art’s sake music of Arnold Schoenberg and others. On the other hand, there was the Gebrauchsmusik - music for use - of Paul Hindemith and more popular composers like Kurt Weill. The academic divide, meanwhile, had its own protagonists: Heinrich Besseler, who pushed for an understanding of music as a practical form and including an actively listening, even participating, audience. Theodor Adorno was the man who confronted Besseler’s idea of Gebrauchsmusik, instead arguing that music held secrets that could only be penetrated by autonomous listening.

Dance, religion, community

One of the key factors of Gebrauchsmusik lies in its creators having a concrete need in mind when they compose their music. And while Besseler himself and his ideas of Gebrauchsmusik were sadly appropriated by the Nazis, the underlying philosophy of music-making and music-listening both requiring active participants still holds value. This is about musicians learning their craft and then monetizing that craft. It’s also about listeners - fans - who want to get actively involved with the music they’re listening to. Examples of Gebrauchsmusik in Besseler’s philosophy are the dance or music written for a religious ceremony. In dance music the listener participates by moving, while in religious ceremonies music has the function of bringing the listener into a different state of mind.

Now that we once again have a heavy focus on utility when it comes to music and Web3, we must ask ourselves what the concrete need is that music caters to. If that is indeed community, then we accept Besseler’s idea of Gebrauchsmusik. At the same time we reject Adorno’s idea that

“we will need to abandon the persistent illusion that through music the relationships between people can be changed in any fundamental sense.” (Adorno, 1967: 179)

What we’re seeing in current iterations of NFTs and broader token-based communities is that music is fundamentally about relationships. Specifically also beyond the concert hall; beyond where we allow music to bring us together as human bodies sharing a space. Moreover, in many instances the community is made up exactly of musicians.

There’s more than one pyramid

As the number of people who have access to digital music-making tools grows so do the number of ways these people can play music together. One example is Bandlab, where people can make music through the app, play music together through the app, and share what they’ve made with others - looking for listeners - through the app. Very few of the millions of songs created through Bandlab each month will find larger audiences. And that’s totally okay. We need a large base of amateur musicians to sustain an ever-growing middle class of musicians. Again, this idea isn’t new. The composer Ralph Vaughan Williams, writing in the same period as Besseler and Adorno, talked about a pyramid showcasing this exact need.

“At the apex are the great and famous; below, in rank after rank, stand the general practitioners of our art, competent and enthusiastic … the musical salt of the earth, a great army of humble music makers … these are the foundations of the pyramid, sustaining those above them and at the same time depending upon them for strength and inspiration.” (Vaughan Williams, 1987: 239)

Compare that to Li Jin’s fan pyramid and you can see a similar support system appear. Without that broad base of casual fans there’s no system to support the super fans.

So new business models unlock new ways for people to create and share music. They also unlock new ways to access and monetize different strata of fans. All of these people, professional and amateur musician / superfan and casual listener, feel part of a community which connects through music.

What is community as utility?

Is that the same form of community that Besseler and other adherents of Gebrauchsmusik idealized? Probably not specifically, because a lot of it happens online nowadays, which is simply a form of being together that didn’t exist in the 1920s. Because of its often asynchronous and definitely displaced nature, digital-first communities require a reconceptualization of the ‘playing together in the same time and space’ ideal underpinning Gebrauchsmusik. But therein lies the exact utility of music that comes to the fore in Web3-first communities.

Take Wobblebug [disclaimer: I own a Wobblebug], an NFT project but mainly a digital artist where the holders of the NFTs get a say in the music, remixes, performances, etc. All the music created for Wobblebug exists solely to push the project forward. There is no specific Adorno-esque need to contemplate autonomously about the music. This isn’t music for music’s sake, this is music for the community’s sake. It is, specifically, about the relationships that will come through the music: artist collabs, community members throwing a party in the hyperverse, etc. It’s no coincidence that Wobblebug makes bass-driven music. Dance has long been a great utility of music, and the lineage from ‘wob’ to techno to ragtime and further back is strong in its power to get people to move together in unity.

Music is utility

Besseler struggled to come up with a positive definition of Gebrauchsmusik. Instead he often relied on what it wasn’t: as a type of music that specifically lacked the concert-type characteristics of enjoying something sat down and by yourself, preferably in your own head. Now, around a 100 years after Besseler put forward his theory, we have a positive definition of Gebrauchsmusik, of music as utility: the point of music is to create participation, to foster cooperation, to establish relationships, and to allow the individual to submerge itself into a collective.

So, if we live in this attention economy and ever more attention is consumed where does it stop? Can we put more into a minute than what we see on this wheel? What does that mean for the music you want to put out? How will you stand out from the raucous noise surrounding everyone’s ears? How do you get people to listen? Or should we be asking very different questions to define success and growth?

1-of-1 NFTs

How often do you give your full attention to something? How often do you give your full attention to someone? I listened to Don Diablo talk about NFTs on Dutch national television yesterday. Here’s a guy who’s knee deep into crypto trying to keep it simple for a mass TV audience. The interviewer asked him about his NFT concert - the one he sold for 600 Eth - and in his reply Don Diablo explained how special it is to have this one-on-one relationship with someone. And it helps, of course, if that someone is an Ethereum whale. The premise stands, however. Selling someone something of which there is only one will get them to pay attention. Especially if the buyer and seller relate to each other and establish a human relation.

Does that mean that you need relationships with whales to turn Web3 into revenue streams? And why would you need Web3 tools to benefit from a one-on-one relationship? This last question actually captures one of the most common arguments against Web3. But, as Nathan Baschez recently argued, Web3 building blocks are modular, open, and set to compose on top of each other. So there is no single player who vertically builds the infrastructure of a new technology. Instead, this happens like a big symphony that’s being composed by all the various instruments in the orchestra. There might not be an overarching genius keeping everything together, but if the communication is strong the whole orchestra can pull off the symphony too.

This leaves us in this messy phase where one person stands to benefit a lot as they already have the power to invest. But for every Don Diablo NFT concert, there’s a little success story on the likes of Catalog where an independent artist sells a song as an NFT. That one sale can then support the recording of a new album, or simply represents a month’s rent. What’s important, though, is that each new iteration helps create the symphony.

Poverty of attention, richness of community

But a 1-of-1 NFT isn’t truly going to lift us out of the clogged up minutes of the attention economy. What it does do is provide another tool in a broader move towards direct-to-fan models. Such models aim to flip the value relationship between artist and fan by letting the former make money directly from the latter. We have had crowdfunding, subscriptions, tipping, and now we have communities, sometimes decentralized. Within Web3, these communities share ownership, governance, and stand to profit together from the work they do.

Writing back in 1971, Herbert A. Simon, economist and cognitive psychologist, put forward that “information … consumes the attention of its recipients.” And for sure, a common question in DAOs is how much time you can put into a project. And the same goes for any other task you want to involve yourself with. But note that Simon wrote this in 1971, long before our current crazy internet minutes. Note also that Simon already spoke of information consuming our attention. But what if we switch this around? What if our attention consumes the information? That would give us much more control over what’s going on. And that’s where community can help.

Looking at Perez’ theory of great surges, what always strikes me is how it looks like this relentless capitalist advance of growth over growth. And yet, that’s not how she sees it. The growth can manifest itself differently and I reckon it’s the community that leads the way here. If you take that turning point between the installation and deployment periods, one reason we get through that bubble is because of investment of capital. Another reason is through investment of other resources, such as human capital.

Communities and the future of music

So what happens if you stop looking at Perez’ great surges of technological advancement through a prism of financial growth? What other kinds of growth can you focus on? One framework that’s being put together for this comes from the Protein community.

Whether you’re a musician, a label, a venue, a manager, etc. this framework forces you to ask what good growth is and how to then set out to achieve it. Personally, I feel this framework will help everyone in the music industry better define their own role in a world where direct-to-fan, or direct-to-audience, is your best bet at sustainability. And that’s sustainability in art, life, and relationships.

• Time and space to make your music

• Time and space to, basically, have fun

• Time and space to organize the relationships between artists and their various audiences

Beyond time and space, it also provides a way to cut through the clutter of information available to us. It’s a kind of community-led and curiosity-driven gatekeeping function. Within the community this curiosity can then be rewarded, which is also immediately a great way to escape the money-breeds-money driven nature of much of Web3. Similar to leisure, which was always a luxury for the rich, it can seem like onboarding in Web3 has the same problem. With leisure, the issue has long been that it’s been defined against what’s it not: work. With Web3, we also need to move to a framework that allows us to start from its positive and talk about what it is versus what it’s not.

Vine swinging

Let me end by rephrasing Jim Griffin’s quote on Tarzan Economics - made famous again by Will Page recently. In my recent discussion of Page’s book I said that the next vine to swing to for music is that of direct-to-fan community building. Let’s have Griffin’s quote from 2008.

“We’re still clinging to the vine of music as a product. But we’re swinging toward the vine of music as a service. We need to get ready to let go and grab the next vine, which is a pool of money and a fair way to split it up, rather than controlling the quantity and destiny of sound recordings.”

And let’s put that into the now:

We’re still clinging to the vine of music as a service. But we’re swinging to the vine of music as a community. We need to get ready to let go and grab the next vine, which is an audience-driven community generating a small pool of money split up as they, together with the artist, see fit, rather than pumping music into an already information-overloaded digital distribution system.

However, due to the decentralized nature of the technology, this is turning into quite a different story than if a web2 platform had gone down without warning. The community is regrouping, rebuilding, and improving on mistakes from the past. Nothing important was lost.

How though?

Rather than on Hic et Nunc’s own servers, all the important information was stored on Tezos, a proof-of-stake blockchain. That data includes:

• Metadata like the name, description, images and sounds. This content is actually stored on IPFS, a decentralized way to store files. IPFS links are in the NFT metadata, so any platform can read them.

• The history of all sales and transactions.

• Social graph: which wallets transacted with each other?

• The smart contracts.

Using that data, the community has managed to rebuild Hic et Nunc, essentially creating a clone at hicetnunc.art which intends to become a DAO. This last part is important: Hic et Nunc, from what I gather, was a one-man-show. They decided to take it down and they could. By organizing as a DAO, the governance and ownership spreads out to the community. This decentralisation makes an organisation much more resilient.

If DAOs haven’t clicked for you yet: decentralized data allowed the community to reboot when the platform went down. Decentralized ownership and governance of the actual platform means it’s way harder to bring the platform and the organisation down.

The NFTs I bought on Hic et Nunc (by the wonderful artists Tea Stražičić and Tabitha Swanson) are still in my wallet and they render perfectly on its successor.

HEN Radio still works too, by the way, since it always read data directly from the blockchain rather than from a server owned by Hic et Nunc.

Far too much data, like art and music has been lost. Over a decade ago, when I was writing my thesis about online music, imeem was a significant player. It got acquired, by MySpace if I recall correctly, and promptly taken down (on the same day!). Poof. Uploads gone, connections gone, everything you worked for on the platform gone.

These things happen. Regularly. Either through situations like the above or through startups dying or pivoting. As the Hic et Nunc story shows, though, this dynamic is now a choice rather than a tragic default feature of the web. As one of IPFS’s claims goes:

The average lifespan of a web page is 100 days before it's gone forever. The medium of our era shouldn't be this fragile.

Twitter threads

I saw a number of excellent takes on Twitter and wanted to make sure to include them here. They’re threads / discussions: click through and have a read.

https://twitter.com/matdryhurst/status/1458966893503594500

https://twitter.com/jstn/status/1459555967117533191

https://twitter.com/quasimondo/status/1459074191312011317

sone’s tone Discord music bot

tone is a music bot for Discord that’s designed to pay artists. It’s being developed by the sone DAO, which was kicked off by members of the Topshelf Records team and is exploring what a record label can be in the new web3 context.

Edit, Nov 12: at time of writing, tone is a work-in-progress. An MVP exists on the sone DAO Discord.

The bot takes a metered approach to streaming and collects monthly fees based on usage. It plays music from SoundCloud and Bandcamp and creates a registry of all music that’s been played, so artists can sign in and claim their payments in CELO (a proof of stake blockchain & cryptocurrency).

It utilizes a so-called ‘user-centric’ payment model, as opposed to the big pool model common with most major streaming services, where in this case the Discord server is the user.

Besides payments, artists also get $SONE tokens, which gives them access to the sone DAO.

Aspects I like:

• Being popular on the bot means you get to hold more tokens in the DAO that develops it. Imagine if artists that drive traffic to the platforms they use (Instagram, Bandcamp, Spotify, etc) automatically became shareholders in those platforms.

• It solves the issue of Discord streams not being monetized. Communities can decide “we want artists to get paid”, then kick out the existing music bot and go for this bot instead. They could use it to play the music of artists they know and alert those artists so they can claim their CELO payments.

One thing I worry about:

• Collecting money for artists without having licences in place will eventually invite the attention of lawyers. I trust the crew behind this. They work in music and have a track record of getting musicians paid. I think what they’re setting up solves a problem, gets artists paid in a place where no payments exist yet, and they do so in a transparent way, so that anyone can see exactly what’s happening with the money… But if a company feels that this money is not theirs to collect & distribute, I think this DAO might run into some friction with the legacy industry’s lawyers sooner or later.

For more info, check out the tone website.

WarpSound’s WVRPS

WarpSound is a music collective created by Nayomi, DJ Dragoon, and Gnar Heart which appear to be avatars created by Authentic Artists. Their upcoming project, called WVRPS, blends generative profile pictures (PFPs) with music by feeding a generative visual and metadata layer into a music AI, which generates an audio loop. This last music layer is then merged together with the other two layers to form a unique audiovisual NFT called a WVRP.

What I like about this project specifically is its world-building exercise through Twitch, its Discord which has loads of activities including social games, and its characters. By launching a generative PFP series, it gets the community to invest and will bring more folks into the community that may currently be just on the periphery.

Longer term, they want holders of the NFTs to be able to collaborate to do new things with the audio fingerprints, like create full songs or new compositions.

geniuscorp

The website is a little mysterious, but I think geniuscorp is kind of like a record label by music web3 pioneer Mighty33. You may know the latter from this blockchain music map on Miro, if not from their music. geniuscorp lists its address as 104 Ceres Tower A, Ceres, Cryptovoxels, which is a virtual world (or metaverse, if you will) built on top of the Ethereum blockchain.

A lot of their music is also released on NFT platform Rarible, for relatively affordable sums like 0.05 ETH (~$250 at time of writing).

hic et nunc radio

hic et nunc has been the NFT platform of choice for some artists, due to the low transaction fees and energy cost of the Tezos blockchain that it’s built on.

What I didn’t know, is that there’s a music ecosystem there, which has now been clearly exposed by a little tool called hen radio which provides an easy way to explore the music on the platform.

I’m highlighting this project, since it was built by the community during a hackathon. It’s a great example of how people in web3 ecosystems can come together to create value for each other and the wider space around themselves (similar to Club BPM’s bot which plays Catalog NFTs on Discord).

If you’re new here and would like more MUSIC x web3 updates, consider subscribing to the biweekly MUSIC x newsletter, which has been covering innovation in the music space since 2016. You can also follow me on Twitter.

At this point in time, it takes quite a lot of onboarding to make the web3 click for most people. Until it clicks, a lot of what's happening understandably looks like a grift. Or, to be more accurate, it's hard to distinguish the grifts from the genuine attempts to reorganise the internet towards something less extractive. For some people, the moment it clicks is when they start using crypto wallets to login to services and take their decentralized username along for the ride, which is why I've recorded a primer to get folks set up to do exactly that.

What may also help make things click is hearing about relevant examples of this reorganisation of the internet. Currently, there are probably a dozen or two experiments every month that may contribute to the reorganising of music's digital value chain in a way that benefits creators, fans and their surrounding communities more directly. Here are some of the ones I've come across recently.

MusicFund

The MusicFund is a community for discovering, funding and curating music. People can join by minting one of a total of 10,000 generative NFTs. The funds raised are used to create grants for artists and to support the community. Currently, these grants are distributed by allocating 1 ETH to a batch of three curated artists, which is then split based on how the community votes, with the top contender taking 0.6, and the runner-ups 0.25 and 0.15 ETH (at time of writing, 1 ETH is about $4300 USD). In order to vote, one must log in with their wallet which must hold a MusicFund NFT. Its latest line-up is curated by Before The Data, successor to music blog Hillydilly, which is also running a DAO of its own.

Disclosure: I was airdropped a MusicFund NFT.

Dreams Never Die Records DAO

Dreams Never Die is a label by the same crew as Before The Data & Hillydilly. It aims to help artists at their earlier stages. Now, by organising itself as a DAO, it intends to "become an incubator for brand-new artists and aspiring music business talent alike, built around an incentivized and aligned community that participates in discovering, developing, distributing, and promoting the roster."

It's in its earliest stage, having only just done its first town hall discussion on Discord and hasn't raised funding yet. If you're new, this is a great stage to get involved or just go along for the ride and see how the organisation evolves by idling in their Discord.

Water & Music

If you're not familiar with the phenomenal publication and community Cherie Hu has set up, and my co-editor Maarten & I occasionally contribute to, you should check out Water & Music and consider subscribing. They're now being accelerated by Seed Club, which specializes in tokenized communities, in order to develop a 'new collaborative research model' which I assume will see token distribution based on community contributions. Its first collaborative research report covers spatial audio and just before Halloween the community kicked off a large collaboration to document music & web3.

Again, early stage, so it's a good time to get involved.

FWB & Web3 Ticketing

Blockchain-based ticketing isn't new (GUTS Tickets comes to mind), but this initiative is notable because it originates from a DAO. The Friends With Benefits DAO is a social community of creatives and builders. When, post-pandemic, it was possible to start meeting IRL again, the DAO started throwing token-gated events.

Token-gating is a common practice in DAOs, it's used in the above example from MusicFund to restrict voting to members only and is also commonly used to open up certain Discord channels exclusively to the community. FWB wanted to be able to token-gate live events and developed its own tool for it called Gatekeeper.

They're making the app available to organisers and other DAOs to experiment with it.

I think examples like this are exciting, because anyone can build something on top of anyone's token. If I want to organise a music conference in Berlin and I want to give free attendance to people who have earned a lot of tokens by contributing to FWB or Water & Music, I can set that up (of course, I recommend being diplomatic about it). No central body owns the community or the relations between community members: the token is held by the participants of the network. It's an empowering type of decentralization.

Disclosure: I hold FWB tokens.

Polly

One of the most creative technologists & musicians I see experimenting in the web3 right now is Troels Abrahamsen, who I know from Songcamp. He runs a number of projects, which you can read about in this thread, but I want to highlight a specific one called Polly, a tool (or smart contract) that is just entering development. It's "a proof of concept label backend for releasing simple semi-on-chain singles as collectibles.

https://twitter.com/troels_a/status/1452706854233157644

XYZ

Another musician I know from Songcamp is Colt, who has just announced a new DAO called XYZ which aims to "continuously and sustainably release original, high-quality music onto web3 and web2 channels, building expertise in music distribution in the crypto era."

The project just raised 4.5 ETH ($20k at time of writing) in funds by selling NFTs & dropping its own $WAV token to the community, which will be used for governance.

"In the future, participants will earn $WAV for participating in the production and sale of music NFT releases. Each release is an event that brings more token holders into the DAO."

Club BPM's BPM Bot

To round things up, I wanted to highlight BPM Bot. When YouTube started shutting down music bots, the Songcamp community wanted a way to keep playing music on Discord, so they raised funds for the development of a bot that plays music from Catalog NFTs. To me that's exciting, because it brings more visibility to these songs, thus increasing the value of being the owner of their NFT. It's web3 communities linking and utilizing open data and interoperability to build tools to create value and utility together. It’s currently used on 47 Discord servers.

Disclosure: I participated in the BPM crowdfund and hold some tokens.

This list is not meant to be exhaustive. I think it's currently possible to set up a daily newsletter to document everything that's happening in music x web3 (I'll consider serious sponsorship / bankroll offers, DM me). A great daily read about DAOs in general is ForeFront's #ff-daily channel on Discord.

I hope this communicates the energy, excitement and creativity in the space. I also hope it shows that people who are working on projects that, traditionally, would be competing are now figuring out ways to make their projects interoperable, because everyone stands to win from that.

Regardless of tokens, NFTs and cryptocurrency, these are amazing, vibrant and supportive communities of people who want to create new things together in order to support musicians. You can bring your skills to the table without knowing how any of this web3 stuff works. That's how you start learning and that's how you eventually start seeing the value of communities owning the value they generate.

https://twitter.com/basgras/status/1454144303585009668

Direct-to-fan business

Musicians have started to treat their fans as people they interact with on deeper, more personal, and more creative levels. This started with crowdfunding platforms, where fans could sign up for perks, special mentions, and unique merch if they paid the artist before they created their music. This trend grew with subscription models. Through these the artist extended the way they opened up to their fans. In the same breath, fans agreed to provide recurring revenues for their favorite artists. In between, we’ve seen the rise of micropayments and tipping features as musicians became part of a broader creator economy. The relationship between artist and fan deepened and the holy grail became 1000, or 100, superfans for each artist.

Artist-fan communities

Superfan groups in the 1980s would get together and create a fanzine that they distributed themselves to other fans. With the rise of the direct-to-fan tech stack those superfans could not only support their favorite artists directly, but also reach them more directly. Whether it’s through a Twitch channel or a Patreon page, artists have increasing had to reveal themselves to their fans to gain that valuable recurring revenue. In most cases, these communities center around the personality and the creative process of an artist. Say you subscribe to Jamie Lidell’s Hanging Out With Audiophiles Patreon, you care about the podcast and, if you take a Soul Science Crew subscription, you care enough to want to work with the audio from the podcast episodes. It’s all about the process though, it’s about creating together, however asynchronously, together with an artist you love.

Taking control of the container

And then there were NFTs. What made major news headlines with big sales from crypto-connected artists has grown into a valuable way to do direct-to-fan business. Moreover, tokens more broadly are a great way to empower fan communities and create reciprocal business models around music. Since artists themselves are fueling the innovation around NFTs, it means that for the first time they are in control of the technology. Not only is the revenue earned through NFTs, and tokens more generally, a very direct form of artist-fan relationship, the artist also doesn’t lose ownership. On top of that, and because artists can control the direction the technology develops in, NFTs have given way to new forms of artistic expression, mainly in the form of generative art. Take a platform like Async where artists can sell separate stems and differently layered pieces of a single work. In a sense, then, there isn’t a single finished piece of music anymore. Instead there’s hundreds of different pieces of music.

Where does this leave music?

I keep going back to John Cage’s piece 4’33” when I think about the developments I described above. In that piece Cage challenges the notion of what constitutes music. A pianist remains silent, but the composer, together with the performing artist, codified that silence into a music framework. Within that framework, the silence is no longer silence but a piece of music filled with serendipitous sounds. This is very similar to what’s happening to music in the latest iteration of our digital age. We don’t need songs that adhere the limitations of a physical format. Instead, we have music that adheres to the needs of artist-fan communities, who not always need final products to create value. Similarly, we have music that adheres to the possibilities of NFTs and related blockchain technologies. Why create a piece of music that lasts exactly 4’33” when you can also have a piece of music that evolves and changes in relation to certain triggers.

Economics and community

I’ve previously referenced Carlota Perez and her lifecycle of technological revolutions. Earlier this week, Ben Thompson wrote about this same topic in relation to the adoption of crypto. His point centres on defining which period of the crypto-tech-revolution we are in.

Where Perez has claimed that we’re nearing the golden age, Thompson argues that - for crypto - we are in the installation period. It’s pertinent that Perez, as far as I can see, doesn’t see crypto, or Web3, as its own technological revolution. If anything, it’s part of phase 3 in her analysis of the lifecycle of the digital revolution we’re currently working through. I would argue, though, that it’s possible to have various revolutions, or iterations of revolutions, that are all happening at the same time. Web 3 is one, NFTs are their own little one, but the broader internet is also one of which the former two are smaller parts.

looking at what’s happening right now in Web3 I see two main areas: 1) investment heavy; 2) community loaded. The former is important, but I won’t go into it too much here. The latter is where I see most potential and it’s also where I see most overlap with other shifts, such as the way artists interact with their fans and flip the value proposition between them. This is where Li Jin comes in, especially with her fan pyramid.

Along this pyramid, both fans and artists alike exist on a gradient. Not all artists will want to capture their super fans and nor will all fans have the capability to become more than a casual fan. What’s striking, however, is how Jin argues that new business models are what unlocks new tiers on this pyramid. The cult fan, for example, comes from an NFT allowing a sense of ownership and access that didn’t exist before. Each new business model is, of course, part of a developing technological revolution.

Now that I’ve set this stage of a technological-economy-community triad, let’s turn to Web3 specifically and see how we’re working through that using music as a case study.

Promise

We’ve gone through several promised lands already with blockchain, and it’s only been thirteen years since that Satoshi Nakamoto paper on a peer-to-peer electronic cash system. Let’s quickly go through some more music-focused instances.

Attribution in rights management

The first promise of the blockchain for music came through ideas around managing copyright. What if we could put everything on-chain and make sure there’s no more black boxes and rights owners - performing artists, songwriters, composers - would always get their fair dues? During the Bitcoin-crypto hype of 2017 a lot of innovation happened in this space. There were plenty of new companies setting up around this time. Examples like JAAK, Blokur, and Dot Blockchain all worked to fix the perceived broken royalty system. The reason that royalty system broke, however, is that copyright always lags behind technological developments. One solution is to get radical and consider a post-royalty world. Another solution is to work with the current major players and see how blockchain can be utilized as a tool to fix issues - like that black box, like attribution, like splits, etc.

NFT hype

Starting in 2020 and moving fast in 2021 we witnessed a quick boom-bust-plateau cycle with NFTs. Driven by the hype of those major sales of 3LAU, Grimes, and others, the uptake was immense. But it also quickly dried up in May. Since then, the NFT hype has given way to something more of an NFT marketplace hype. There’s a split between platforms that are sort of pure-play NFTs, like Foundation or Catalog, and those whose focus isn’t on the token but on the framing of a digital collectible, like Serenade or RCRDSHP. Both have their place and both work towards new revenue streams for artists. There’s also marketplaces that focus more on the artistic potential of working with NFTs in music, like Async, and whose focus isn’t so much on the revenue side, but more on how Web3 models help develop music artistically.

DAOs & social tokens

The latest promise of Web3 is all about community. Decentralized Autonomous Organizations promise transparent and community-driven frameworks, planning, and assemblies. We’ve written before about how to start a DAO, but also on how DAOs have a long history of cooperation that they can learn from and build on. Part of DAO frameworks, and part of what makes them transparent is that decision-making often centres around tokens. These tokens can be earned by performing tasks and, depending on the structures, provide say-so in the way the DAO will develop. Peter Yang succinctly explained how this might work for a person starting to work in a DAO.

Looking at a roadmap, or just a spreadsheet of tasks that need to be performed, from a DAO can be overwhelming. It’s a great exercise in figuring what your specific skills are and how you can add value to a group. Of course, this is all in very early stages, but they key to success seems to be that DAOs should be community-oriented, i.e. focus on doing things that benefit the community instead of an individual. It’s a radical rethinking of the way most companies work nowadays.

Pitfalls

The dangers of new technologies lie in the fact that they encapsulate fast change.

Scams

The number one pitfall for everything blockchain-related is the scam. We recently wrote how and why so many crypto start-ups look like a scam. It’s inherent to the explosive growth that we see in Perez’ analysis of technological revolutions. During those boom years a lot of people enter the revolution, but not all of them are fully aware of all the particulars. Hence, it’s easy to take advantage of them. I didn’t have to do a lot of research to learn of four recent scams in the Solana NFT space. Of course, there’s precedent for this, as 80% of ICOs (Initial Coin Offerings) turned out to be scams.

Transparency, or a lack thereof

Another pitfall is a lack of transparency, which seems to be going against the grain of what Web3 and blockchain stand for. The fact that transparency is so easy, because everything is traceable, that means that even if you work in the Web2.5 space and you tend to talk about collectibles instead of NFTs it’s still easy to show a token’s history on chain. There’s a difficult balance between opening up the Web3 space to more and more people, which requires leaving out most of the tech talk, and staying transparent and verifiable, which requires some tech knowledge on the side of the end-user.

Smart contracts vs old school contracts

And then there’s the smart contract. One of the great strengths of Web3 is that it mainly operates on these smart contracts, which allow both the transparency, but also a lot of flexibility. However, Innovating in a space like music, which is bound by complicated and overlapping copyrights, puts up a road block. As discussed in terms of rights management, the ecosystem of music copyright has too many different layers and players to easily accept smart contracts. One recent example is an NFT by Afrobeat star Eugy that both provides access to the artist - ownership of the NFT lets you join Eugy on a remix of his My Touch song - and then splits the royalties of that remix 75/25. That last part, though, cannot be handled on-chain. It’s a space where smart contracts simply aren’t accepted yet and old-school contracts are needed.

Possibilities

The opportunities provided in and through Web3 solutions and tools are virtually endless. A lot is dependent on adoption of course, but the best possibilities centre around exactly those initiatives who see Web3 as a set of tools and solutions to help solve problems.

NFTs & Utility

The most successful NFT projects are about more than a jpeg or an mp4. Of course, we are all status monkeys and we want to be able to show we are part of a group and express our identities. Still, since we’ve moved past the first NFT hype earlier this year we’ve seen more and more examples of the potential of utility. This utility is closely related to story-telling as it helps validate the story of this expression of identity. Owning an NFT, for example, can give people status, access to their favourite artist, and provide an artefact to be showcased.

Community-driven models

With the current drive of DAOs, we see the strength that lies in community. Throughout history, cooperation has allowed people to band together and work against, around, or with more powerful single players. However, the promise of DAOs and community-driven models also lies in the fact that they can create new art. A great example is Holly+, where Holly Herndon uses her own voice and a deep neural network to transform any music others put in into Herndon’s digital twin. Another example is Songcamp, which puts people together in heavily story-driven environment to co-create new music. The experience has shown how people, when put together in a group, “all created sprouting songs that each held such beautiful power and potential. The cover artworks also encapsulated that improvised energy and beauty.”

Shared ownership models

Closely related to the previous point is that of shared ownership. One of the reasons the community-driven models work so well, is because of the possibilities Web3 tools provide to let those communities share in their ownership. Independent artists have an advantage here, because they often have less entangled copyright issues. If an artist signed to a major label wants to do something like this, they have everything to worry about from who owns their music to who owns their image rights. It’s another benefit of being independent from traditional music revenue models and moving towards community and shared ownership. The Holly+ and Songcamp examples focus heavily on creating communities of and for artists. But there’s a lot of opportunities for artist-fan communities too. The increasing focus on social tokens shows this. A great example is Colin Benders, who is working to turn his Modular Mayhem community into one driven by social tokens. He works with Rally.io for his token and in a recent interview with them explained what makes him go down this route.

“I'd seen the whole social currency movement happening around me, so I felt like, This could actually be an interesting way to bring balance to how I do things, where the community can support me in my work, and I can still give everyone access to my music.”

A final word

Music runs the gamut of Web3. Whether you want to learn about the pitfalls or instead are eager to dive head-first into all the possibilities. The most important thing that the case study of music for Web3 shows us is that long-term, and artistic, success will comes from those initiatives that use the Web3 tools and solutions as just that: tools and solutions. It’s important to drive forward, but it’s also necessary to do so to fix problems. This can be as specific as how to tackle deepfake technology entering our world, to as broad as how do you set up a community-centred and creative fan-artist relationship that will allow artists to do what they’re good at: making music.

• “It’s just a jpeg everyone can see, so anyone paying for it is [delusional / getting scammed / etc].”

• “The internet’s supposed to be about abundance - why are we creating unnecessary artificial scarcity and financializing everything?”

Given music’s history with ubiquity, including the economic effects of the sudden shift from paid to free post-piracy, I think these are two excellent critiques to explore the value of NFTs in general and for music specifically.

Participation

One of my own, biggest critiques of what happened to music in the 20th century is that music’s default shifted from communal to individual, from participative to consumerist, from folk to personalized. This happened through the proliferation of the recording and record players to every house, then every room of the house and eventually everyone’s pocket until even the music played from streaming services would be atomized to personalized playlists that fit an individual’s taste exactly.

This had great economic consequences for the recording industry, which eventually dwarfed other parts of the music industry like publishers. It also created a framework through which corporations own and govern the majority of contemporary culture. If you think about folk songs as songs that an entire population knows, or just subsets thereof, then pop music has essentially replaced folk. Folk music was communally owned and iterative. Pop music is, typically, corporate-owned and there will be 1 official version: everything else is ‘derivative’, less authentic, less ‘real’, than the ‘original’. In that sense, Seven Nation Army could be considered a folk song, especially in countries where it’s a common chant in football (‘soccer’ 🇺🇸) stadiums.

Don’t get me wrong: I think many of these aspects brought great attributes to music too, but it’s important to consider which other attributes, like the ones mentioned above, got deemphasised and moved into the background of our default music experience.

Back to artificial scarcity and abundance.

The time we live in is amazing. We have so much of humanity’s knowledge and cultural expression at our fingertips. We have simple, digital tools at our disposal that allow us to express ourselves through any modern type of media: image, sound, video, augmented reality (think TikTok, Snapchat, and Instagram when it’s not down). After being locked out of participative culture because of decades of a creator / consumer divide, we may soon see a billion music creators. So why be so excited about something that introduces scarcity?

Open scarcity

The exciting thing about NFTs is that you can let everyone access the media, yet assign the ownership of the NFT that represents the media to one person. This is not that dissimilar from video games: your friend may have unlocked a certain skin that is purely cosmetic and does not affect gameplay. You can enjoy this skin while you play with your friend: even if they’re the ones who paid for it.

NFTs can be used in similar dynamics. Sometimes they’re used as vehicles for crowdfunding. They can bring media (or culture) into existence that wouldn’t exist otherwise. One patron, one NFT. And a jpeg or mp3 for millions to enjoy.

MP3s, for a long time, held a real price of $0. Most people would download them and wouldn’t pay for it. Streaming, unfortunately for many artists, hasn’t helped them to attain a significant income. This may be due to a number of factors, but the fact is that for a long time music has been a game with just one mode to play it. If you don’t fit that mode well, it’s going to be hard and the factors are often outside of musicians’ control. The major exception I can think of is the period before recorded music revenues bounced back to pre-piracy days, which kind of forced people to get creative. Besides contemporary streaming giants, two of the more popular crowdfunding platforms were born in this period: Kickstarter (2009) and Patreon (2013).

If we use the phrase ‘NFT’ to mean works of art (music, visual, both) then NFTs create an amazing situation where content no longer needs to be locked behind a paywall on a platform like Patreon. Instead, the proliferation of the media associated with the NFT, for example a song, will increase the value of the NFT. This also impacts the perceived value of future NFT drops.

Ownership is exclusive, but the media is abundant. It’s open scarcity.

But why pay if it’s free anyway?

There are many motivations why people pay for NFTs. Some people are purely speculating, but I don’t think that’s the important part of the story. Some are collectors. A web2 example I can think of is Bandcamp: for some releases you can get the free download, but if you pay $0.50 it also shows up in your collection. I love building my collection on Bandcamp, so I’ll pay for the free jpeg and mp3 to be there.

Most importantly, NFTs are decentralized social media. They are objects that exist in a social context. This social context is powered by the blockchain on which the NFTs sit, plus any social media an NFT holder might use. In this context, possessing an NFT holds meaning to the owner, because it can signify social value, taste, distinction, membership, or identity, just like people’s clothing or virtual skins in video games. All of that is portable to any social context they move to.

It’s that social aspect that gives these objects value and in many cases the social value would be greatly diminished it the object was not freely accessible for all to see.

Financializing all the things…

Finally, a conclusion I’ve drawn for myself. I sympathise a lot with the critique that the web3 is financializing everything. Should all these things have a price tag or should the price tag be secondary? Certainly, in this wave of the web3, the price tag has often been the story, but I don’t think it’s the whole story (although to some writers it is).

The real story is that value can be tracked and it can be made transparent. People who create value can participate in it. All these interactions we have with each other online, all this culture we’re accessing: it’s already financialized. The companies that host our conversations, our art, our expression, they have shareholders, they sell ads. The difference with the web3 is that 1) we don’t know what interactions are worth, and 2) we don’t participate in the value they create.

That’s different now.

From here we have options. We can choose to express things in tokens or cryptocurrency. We can choose not to. We can choose to distribute equally to all participants or reward those who contribute more. We can choose governance models where it’s one person, one vote, or where people can vote based on their stake (e.g. number of tokens held). We can choose the game we play - this has not happened since that 2009 to 2013 period that spawned so many of the current status quo.

These systems are in our hands now. There’s no one-size fits all platform. Instead we’re stringing the tools together to create brand new configurations to design communities the way we see fit. Different subcultures will emerge in the space. They already have. For example, Zora is a radically different NFT marketplace (and more) from Crypto.com. Just compare their positioning: “THEY THOUGHT THEY COULD OWN US” versus “The World's Fastest Growing Crypto App”.

Auctioned digital cultural objects, as NFTs, have an important role to play in online culture in the next ten years. Music piracy paved the way for streaming. Streaming paved the way for microgenres on SoundCloud to playlist edits on Spotify to the meme-like behaviour of music on TikTok.

Now a web3 layer is going to start providing a new context. Let’s add social context to those mp3s and jpegs.

Loot

At the end of August an NFT project called Loot dropped. People could claim Loot NFTs for free by minting - only paying for the gas cost. Like NFT avatar projects, people did not know what they would get exactly after minting. Unlike other NFT projects, Loot was stripped from everything except text.

https://twitter.com/dhof/status/1431316631934967815?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed%7Ctwterm%5E1431316631934967815%7Ctwgr%5E%7Ctwcon%5Es1_&ref_url=https%3A%2F%2Fnftnow.com%2Fguides%2Floot-nft-guide%2F

After minting, you’d get a list of gear. Text in an image. That’s all.

People loved it, because it felt like an invitation to imagine what you could build from this starting point. Quickly, an ecosystem emerged around the project.

Adventure Gold created a token to set a standard for projects building on Loot in the future. Role creates characters which can equip the Loot. Realms attempts to map out a world for Loot to exist in. And there are many other projects.

Mirror, the writing platform this article is published on, ran a similar project called Heroes which would create randomized pen names and identities: text-only.

It’s different from many other NFTs, because instead of selling you something that is finished, you get the building blocks. Since everything’s on a blockchain with smart contracts, everyone can plug in and start building and expanding the project.

https://twitter.com/tandavas/status/1432803033650368512

What if this idea was applied to music?

Tunes

Tunes started with a similar premise. 5,000 possible songs to mint for free, but without audio, cover art, or an artist. Building blocks.

A bot called Artunist was set up on the project’s Discord to generate artwork. People can submit the ID of the NFT they minted and then get artwork generated for it. The results are impressive.

The project has since expanded to include ‘Songs for Tunes’ which combines the generative artwork with artists and the music they made, with some being sold as NFTs for 1ETH ($3000~ at time of writing) like this beat by oshi or this song generated by the AI band (Twitter).

New games, new economies

The reason why I’m highlighting these projects is to show that there are new games to play, completely new avenues to explore. From the outside, the crypto space mostly gets attention for financial aspects while the cultural aspects don’t get picked up properly. When they do, it’s almost always in a financialized context… If an artist drops a new release on Spotify, we don’t say “Artist X is releases album on streaming service that raised over $2.1B in 18 rounds” yet that’s exactly what’s happening in the web3.

The actual exciting part is not really the money. It’s that anyone who perseveres can spin up a new project that can tap into any other project connected to the same blockchain. In that sense blockchains with smart contracts like Ethereum are global computers for us all to utilize. The web3 is iterative and music culture in the space is starting to embody that principle.

https://twitter.com/Suhail/status/1440702405612478479

The first music artists who will never bother with the contemporary streaming landscape are likely already here, experimenting in the web3 and trying out other modes of collaboration, community-building, and are starting to make a living by doing so.

And to put it in Thanakron Tandavas’ words: that’s fucking cool.

Here’s how, and why.

PFPs & NFT Avatars

NFT avatar projects are casually referred to as PFPs: ProFile Pictures, since that’s a common use case for them. They most often have up to 10,000 template characters that are ‘minted’ by people wanting to own one. Minting costs money (cryptocurrency) and in the process of minting randomized traits are applied, ranging from extremely rare to common. These may be variables like skin colour, headwear, haircuts, shirts, background colours and anything else you may think of that’s appropriate to the project. Many projects will have 10 traits with 10 variables per trait.

Once minted, the character is created and will remain unchanged, so before you mint, you usually only know what the style of the project is, but not what your NFT character will end up looking like. Once all NFTs from a series have been minted, the value of some of the PFPs may increase, since people may try to purchase ones that specifically appeal to them (like Jay-Z’s CryptoPunk).

Being early

The creative web3 space is still relatively small. Many of the more successful projects specifically cater to the crypto community and its aesthetics. As interest has peaked, so have the number of PFP projects that now flood the space. Many struggle to get all their NFTs minted, often resulting in minted NFTs being sold for a price lower than the minting cost, which further slows down the minting process.

Yet we’re early. Many types of aesthetics that are popular in subcultures, for example as album artwork, in music videos, or as tattoos, don’t necessarily resonate well with those already onboarded to the web3. While some of the aesthetics emerging from the web3 space will go on to become cornerstones of emerging subcultures, a more diverse variety of aesthetics will become popular in the web3 as more people get onboarded.

A PFP project making slow progress on minting seems bad, but if it finds ways to onboard the subculture in which its aesthetics are rooted, it can succeed over time and enjoy a potentially more meaningful success than it could by shilling to speculating crypto bros (f/m/non-binary).

Onboarding subcultures

The social dynamics of what’s happening right now are not unique. The clearest memory I have of subcultures shifting to a new type of internet is from around 2009 when artists started switching out the MySpace Music players on their profiles for SoundCloud embeds. SoundCloud’s player was clearly superior. While MySpace limited you to a maximum number of tracks per profile, SoundCloud allowed you to upload 4 tracks of any length per month for free in those days. The benefits were obvious and thus once a few musicians in a genre embedded the SoundCloud player on their MySpace profile, you’d see it spread like wildfire through their subgenre.

The type of people who were the first to switch out their player, the innovators, are now onboarding to the web3. Many of them are already experimenting with NFTs and DAOs. PFPs allow them to signal the web3 to others in their cultural space, just like how the SoundCloud player signalled a shift from the age of downloads to the age of streaming. PFPs are not enough though, since their utility is not as obvious compared to an embeddable player that was easily twice as good as what preceded it.

For subcultures to onboard to the web3, there are two main hurdles to overcome:

• Proof of stake (PoS). The energy use associated with Proof of Work blockchains like Bitcoin and Ethereum has made many people unwilling to touch any type of crypto. So, I expect a few factors in the next year will drive more people to the web3: 1) Ethereum switching to PoS; 2) maturing ecosystems around PoS blockchains such as Tezos and Solana; 3) more accessible layer 2 rollups for more diverse use cases.

• Usability. It currently takes about 30-60 minutes to onboard someone to the web3 and buy their first NFT, like an ENS domain (see my primer below). They have to open a wallet, verify their identity on an exchange, buy crypto, wait for transactions to clear, etc. It’s hard to figure things out. It’s easy to make expensive mistakes. Many people who are already onboarded forget how hard it is: try onboarding a friend who’s completely new to it. Sit next to them. Walk them through all the steps.

Subcultures and PFPs

A year from now, things will likely be a lot easier for newcomers. Besides work being done on the previous two bullet points, tech giants like PayPal, Square / Cash App, and likely Facebook / Instagram entering the space will help decrease the number of hurdles (at the cost of decentralization).

It will increase the viability of sounds and images that are specific only to certain subcultures and decrease the necessity to make plays that cater to the wider web3 community. So if you’ve been hesitating to start a PFP project or a DAO, because you don’t think the people are onboard for it yet: start small and do it anyway. Consider a lower number than 10,000, and don’t rush, don’t shill too hard. Your audience will get here eventually and you’ll be the CryptoPunk equivalent of your domain. The OG PFP NFTs of your subculture.

I don’t know about you, but I’m so ready for crypto goth, crypto gabber, and actual crypto punk. See you soon.

If we think back to Bach and how musicians worked, created, and subsequently got remunerated in his age then that is actually our future. They worked for a patron and learn their craft through apprenticeship. From Mozart and Paganini onwards, we started to create an image of artists as mavericks and people who’s art would force itself out no matter what and no matter the consequences. But Bach and his contemporaries and predecessors were essentially craftspeople. Churches and royals would hire them to do a specific job: create music befitting certain events, holidays, or ceremonies.

Why the musicians of the future will be more like craftspeople

There’s a lot of enthusiasm surrounding the potential of Web3 for musicians:

• it allows them to create more close-knit communities;

• it gives artists the power to control their IP by, for example, releasing their music through NFTs;

• it allows them to fund their music in a novel way, outside of the old musical infrastructures of labels and managers.

But the Web3 solutions for music are mostly built within the framework of the creator economy. This means that there is pressure to continuously engage a group of followers. There’s also a need to distinguish between what you offer your more regular fans versus your superfans. The latter desire, and should receive, insights into the creative process and gain access to the artist.

What that means is that it’s not possible to just disappear for a couple of years and work on your magnum opus and just release it into the world. That kind of release required the kind of marketing strategy and force that a major label like Universal could offer around 20 years ago. There are plenty of critiques of the current marketplace for music, and art in general. One of my personal favourites is from William Deresiewicz. In his book The Death of the Artist, he argues that we’re coming into a time where Art with a capital A and the Artist with a capital A disappear. What started in the mid-18th Century is now running its course. Spurred on by the capitalism of Big Tech we are in the death throes of these romantic concepts. Instead artists need to act like entrepreneurs.

Nowadays, it’s all about churning out high quality content consistently and regularly. NFTs, DAOs, and other Web3 solutions don’t necessarily change this, they almost reinforce it. The power of an NFT is about ownership, but also about buying access. 3LAU offered a custom-created song for the highest bidder in one of his drops. Li Jin ended up writing an article with the person who bought her first NFT. Experimentation with this is ongoing with current examples being gated communities like Friends With Benefits or Holly Herndon’s Holly+. There’s also the potential for more dynamic NFTs that allow for change and growth over time. Something I’m personally very curious about is how NFTs can be put together so that they will only open at some point in the future when certain criteria are met. With all of this potential, it still means that artists need to look at their craft differently than before. Art becomes something else again.

All of these developments, however, still require a kind of always-on mentality and a focus on briefness and easy-to-grasp concepts. The hope is that by engaging with fans through tools like NFTs artists can create the financial space to focus on what they want to create. But those same fans also crave attention and require content to keep their ears piqued. Of course, there are some who have created success. If we look at Cristina Spinei, for example, who recently stated that:

“NFTs have allowed me to gain complete independence from classical music institutions. This is the first year in ages that I won’t be applying for any awards or grants. It’s liberating to connect directly with an audience and collectors.”

Notwithstanding her success, she has learned her craft and is now finding ways to earn money off of her craft through new technologies.

Communities & technologies also require craft

Freedom from institutions is one of the great promises of the blockchain. Making that work is why a lot of people start experimenting on it in the first place. But operating on the Web3 requires its own form of craft. This is why Bas wrote his Web3 Primer and this is also why Spinei put together an NFT Guide specifically for classical musicians. To flourish in this new landscape requires knowledge of its concepts and tools. And that knowledge comes through craft. There’s no wonder that most Discord channels I’m in have a community manager, it takes skill and dedication to keep a group of people together. Setting up a community isn’t as easy as minting five NFTs and sending out a group email.

As some of the earlier examples showcase, technology itself can be a creative medium. Learning how to utilize them as such is something that should be allowed time for. Not necessarily through institutions such as schools and universities, but it definitely requires something thorough. What Deresiewicz ascertained is that there have been three models of artist in the past couple of hundred years.

“Artisan, genius, professional: underlying all these models is the market. In blunter terms, they’re all about the way that you get paid. If the artisanal paradigm predates the emergence of modern capitalism—the age of the artisan was the age of the patron, with the artist as, essentially, a sort of feudal dependent—the paradigms of genius and professional were stages in the effort to adjust to it.”

And now we have an environment where this adjustment continues while it shirks towards a form of rebellion. The latter is the opportunity to become independent from longstanding infrastructures. The former shines through in the way that it’s still about getting paid. The question is, at what stage do you get paid? If, indeed, we go back to the musician as a craftsperson then the system supporting that should allow them to learn their craft, every aspect of it.

An artisanal freedom

Of course, there are endless opportunities to create and market your music. Web3 offers enticing solutions that promise freedom. But that freedom is not the kind of freedom we traditionally associate with the genius artist. It’s not about creating your work in solitude, outside of the public eye. On the contrary, the freedom promised through Web3 tools and solutions - of which NFTs are just one - focus on craft. It’s a world that still requires artists to stand out from a large crowd. This requires platforms, gatekeepers, and attention-grabbing headlines just as much as it did in previous environments that artists operated in. The hope, then, is that we come to a new kind of artist, one who finds their perfection in the way that Bach did. Through endless craft comes a moment where the entertainment becomes art. This can be in the ear of the beholder or in the form of the art. Perhaps we don’t need to make music that people will consume in a concert hall with an 80-person orchestra. Instead, it could be music for pixels with a total duration of 50 seconds. To do that right, to not let that be generic but something truly creative requires craft. It’s up to all of us to see to it that artists are allowed to learn those crafts.

From 1844 to 2021

Blockchain and Web3 tools, solutions, and services are akin to the changes seen in the 19th Century driven by the Industrial Revolution. If you look at Manchester, in the UK, in 1801 you found 85,000 people. By 1851, this number had grown to over 400,000. The areas surrounding Manchester had industrialised at an equal pace. Towards the end of this 50 year period a couple of major changes had taken place that still shape our economic society today. All three actually have their root in the year 1844.

1. Friedrich Engels published ‘Conditions of the Working Class in England’, which Karl Marx subsequently read and lead to the two of them spending time together in Manchester, in Chetham’s Library to be specific, to read - quite boring - economic history. This lead to the publication in 1848 of ‘The Communist Manifesto.’ As Will Page recently pointed out in his ‘Tarzan Economics,’ this link between cooperation and Communism is one that often means people shy away from the former, but we would do well not to be deterred.

2. The British government laid the foundations of modern capitalism in 1844 by passing the Joint Stock Act and the Bank Charter Act through parliament. The former is the basis for the stock-based businesses and corporations we still know today. The latter functioned as the macro-basis for currency protected by a central bank as we still know it today.

3. Finally, and if you’re at all familiar with DAOs there’s a strong chance you will have heard of them before, a group of workers founded the Rochdale Equitable Pioneers Society. They did not come out of nowhere. Their principles and codifications can be seen as the fruits of decades, if not centuries, of co-operative work. A main protagonist in this earlier work was Robert Owen, who also had a history in Manchester where he worked as a draper in the late 18th Century. From there he went on to buy the New Lanark Mills in Scotland where he put his, and those of others, ideas on social reform into practice. As a reference, one of the radical ideas he instituted at New Lanark was to introduce a minimum age for apprentices: 10 years old

Let’s briefly compare this history to more recent developments:

1. Writers and thinkers such as Yuval Noah Harari, and specifically his book ‘Sapiens,’ who argue that human development is predicated on the ability to work together in ever larger groups and across ever larger geographies.

2. Global hypes that drive adoption of Web3 tools, solutions, and protocols. The latest example being the NFT hype, but also the crypto-boom of 2017. As blockchain-based technologies become more mainstream, global financial institutions and governments are forced to join the new space and create policy.

3. Early iterations of DAOs mostly involved investments. Examples are The DAO and Bitshares. More recently, DAOs have started veering more towards cooperation and away from drivers such as pure profits. Overall, the last year has seen the number of DAOs explode. According to DeepDAO – which tracks DAO activity – one year ago, there were 4,600 DAOs while today there are 716,000.

So humans get their best work done when they operate together as teams, or squads if you prefer agile terminology. We’ve been doing this for a very long time and major social-economic changes often impact how we organize ourselves. In the Middle Ages we had guilds, in the 19th Century we turned to cooperatives and now, in the 21st Century, we operate in DAOs. If indeed the idea of a DAO is closely related to that of the cooperative, then what can we learn from the latter’s growth from 28 skilled workers from Rochdale to around 720 million cooperative members worldwide in 2021? Let’s have a look at the key moments of growth for cooperatives in the past 180 years and how that compares to DAO-led developments.

Diverging cooperatives: from Rochdale to Weyerbusch

Of course, our 28 Rochdale pioneers were not the first to organize themselves into a cooperative. However, they stuck in history as a defining group because they set out rules, principles and codifications that allowed others to build on what they did. For them it was mainly about helping out fellow workers and establishing a community that was capable of creating pecuniary benefit and led to improve the social and domestic conditions of its workers. Of course, others who took up this initiative had other incentives and goals. From 1844, our next step leads to Germany, where the first cooperatives – some say Engels kickstarted these – centred around helping indebted poor in rural Weyerbusch. The need for excessive loans and the conditions to those loans found their roots in early capitalist ideas arising from industrialisation. Friedrich Wilhelm Raiffeisen started a project in 1847 that allowed farmers to receive small loans on favorable conditions for repayment. The other main figure at the beginning of the cooperative movement in Germany was Franz Hermann Schulze-Delitzsch. Where he differed from Raiffeisen was that he wanted the cooperatives to remain free of state help. Raiffeisen, conversely, increasingly engaged with Prussian government structures for aid. By 1895 this had resulted in a state-owned cooperative bank. Schulze-Delitzsch, who had died in 1883, and his followers did not approve of any state help and instead focused on self-help. In other words, by the end of the 19th Century, and after unification, Germany was home to two main divergent strands of cooperativism.

1. A kind of middle-ground cooperative which still held up ideals of togetherness, but which increasingly had involved state help. Besides, it had increasingly come to be built upon structures that did not favor the cooperative, but which focused on centralized ownership.

2. A more pure-bred cooperative which focused on units of self-help and which saw cooperation as a moral virtue. Moreover, cooperation meant first and foremost that single workers lacked the resources to compete in expanding markets. By banding together they could both retain ownership and compete with industrialization.

DAOs can learn

As I jokingly said in the opening paragraph, almost anything that happens collectively on the blockchain is called a DAO recently. But it’s worthwhile thinking about various forms of DAOs and how they compete together. For example, back in 2014 Vitalik Buterin wrote a short terminology guide on the differentiations between DAOs, DACs, DAs, and DCs. He focuses heavily on the ‘automation’ implied through ‘autonomous’, or in what way humans move from the center to the edge of decision-making. Related to the above German example of cooperatives going in two different directions it’s useful to look at the differentiation between a DAC (Decentralized Autonomous Corporation) and DAO.

“[A] DAC pays dividends. That is, there is a concept of shares in a DAC which are purchaseable and tradeable in some fashion, and those shares potentially entitle their holders to continual receipts based on the DAC’s success. A DAO is non-profit; though you can make money in a DAO, the way to do that is by participating in its ecosystem and not by providing investment into the DAO itself.”

Buterin himself already acknowledges that this distinction is murky because even the internal capital of the DAO, expressed in its own coin, will go up when the DAO becomes more popular and thus increase in value almost like a dividend. Leaving that murkiness aside, it’s clear that any attempt to decentralize organisations today faces the same dichotomy faced by cooperatives in the late-19th Century.

State-help in blockchain terms should be seen as any help that isn’t transparent. The pure-bred DAO is totally transparent and reveals itself through their blockchain of choice. And while we need web2.5 solutions to increase adoption rates for Web3 solutions, just like Raiffeisen felt it was fine to use state funds if it helped him achieve his own goals towards cooperation, this will ultimately lead to competing elements.

Expanding principles

Post-World War II, the cooperative movement, which had already for decades been institutionalized into the International Cooperative Alliance (ICA), found itself struggling with the original principles set out by the Rochdale Pioneers. Even though these principles had already been amended in 1937, they needed another set of changes to reflect an ever-growing number of non-consumer cooperatives. For the current purpose of this article let me highlight one renewed principle:

The economic results arising out of the operations of a society belong to the members of that society and should be distributed in such a manner as would avoid one member gaining at the expense of others. This may be done by decision of the members as follows: a) by provision for development of the business of the corporation; b) by provision of the common services; or c) by the distribution among the members in proportion to their transactions with the society.

DAOs can learn

The reason I highlight that part is because currently most DAOs would require expanding this principle again. On the one hand, voting in a cooperative was, and is, based on one member equals one vote. Most DAOs work on a vote distribution based on token ownership. More significantly, however, is the mention of the common services. Of course, there are DAOs which keep this in mind, but a key element to any DAO is that they automate certain governing processes.

https://twitter.com/evabeylin/status/1396184123761303554?s=20

There’s an element of cooperation in this image of a DAO as a truly autonomous organization. However, the idea and especially the ideal behind many DAOs go much further and potentially bring the human closer to the decision-making process again. One example of an expression of this is Project DisCO, where DisCO stands for distributed cooperative organization.

The project started in response to DAOs as they formed a couple of years ago: focused on investment. Project DisCO’s main focus is on the commons and in doing so they link heavily back to the ideal of cooperation. This comes back in their manifesto, where they dedicate a full chapter to historical precedents for decentralized models.

One important way Project DisCO updates the principles set out by the Rochdale Pioneers, and modernized throughout the years by the ICA, is by priming DisCOs for federation.

“This dynamic resembles how TCP/IP allows a network of networks, the Internet, to function. Each node can be based on small group trust, intimacy and mutual support while still achieving a larger impact through federation.”

This harks back to an issue that Raiffeisen tried to solve in the mid-19th Century by talking about villages as a synonym for the cooperatives. He did that, because he felt that any cooperative would need to resemble a village. Any group bigger than that would start to cause problems. Over the next couple of decades he was proved right as his own organization expanded and failed at keeping that commons connection alive.

Where does this leave music DAOs?

Bringing musicians, fans, or your organization together as a DAO isn’t that difficult, but what the above asks is to think about why you do that. Furthermore, it asks that when you have an answer to the why, you realize what the history is you’re building on. The why then becomes a how do I interpret a DAO and what it stands for? Am I looking to bring people together to create something new that will benefit them as a whole group? Or am I bringing people together to share ownership of something we would not be able to achieve as individuals?

Whatever your reasons, if it builds on the long history of the DAO then it might lead you to reassess the principles that have been codified for almost 180 years now. While DAOs’ first iterations took humans towards the edges of decision-making, cooperatives took economics and brought it to a human scale. DAOs can do the same for any community coming together in a decentralized, or better yet distributed, manner. Music is often already a collaborative effort, but to take all those elements of collaboration and decentralize and distribute them will work better if the historical struggles of cooperatives are learned from.