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How can NFT help independent musicians recover their "missing" royalties?

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In 2021, some pioneering musicians have begun tocking audio files and selling them to fans in the form of NFT.

NFTs Have the Potential to Crackroyalties and Give More Value to Artists

Originally written by James Beck

Compile: 0x13, beat BlockBeats

Every month I set aside part of my money budget for music. Before COVID-19, I would go to Live shows, buy some records and subscribe to streaming platforms. During the epidemic, I spent that budget on Bandcamp Fridays, NFT and donating every month to the places and communities that shape the soul of New York City. In these hard times, music is a source of comfort, and yet, ironically, artists rarely receive as much as they should.

No matter how the epidemic evolves, people will always make music. It's innate, because we made music before we made language. Today, however, we see a lot of musicians who are pessimistic about the future of music streaming technology. While streaming platforms have greatly helped musicians by changing the way music is discovered and shared, more importantly, they have changed the way musicians themselves are paid. As Mat Dryhurst put it, Bandcamp feels more like putting a Band-Aid on a wound.

Internet Ownership & NBSP;

So where do we start? Let's start with how you own things on the Internet. Technology has made it possible to miraculously convert sound waves into bytes. These words explain the reproducible, borderless flow of everyday information. Developments in encryption are challenging the notion that they can be owned, and that ownership is valuable.

Take the example of Jacques Greene, an electronic musician. His 2011 song "Another Girl" has been played 7 million times on Spotify, netting him an estimated $27,904 in royalties from the platform. Last week, he sold a mesmerizing audio loop and GIF for 13ETH ($16,037.32) of a speckled character called "Promise." The six-second video earned almost half of the royalties in the 24-hour cycle.

It's very important that you know a little bit of terminology. Explain the four the etheric fang developers wrote ERC in 2018-721 tokens, standards, launched a Non - fungible Token, also called NFT. NFT is often used to refer to digital assets that have proved to be scarce, such as digital collectibles, event tickets, in-game assets, and the $6.6 million Beeple digital art sale.

So why not apply it to music? After all, it's the ownership data on Ethereum that matters most. Can a song's metadata -- whether it's audio files, Copyrights, or even MIDI stems -- be encrypted and transformed into its components, with royalties paid to the metadata's owner? In 2016, artists like Imogen Heap tried this on pioneering platforms like UJO Music, despite the limited capabilities and high barriers to use of Ethereum smart contracts at the time. In addition, there is a lack of an efficient way to pay royalties on sales on the secondary market.

Smart contract standards remain at the center of innovation on Ethereum, and are attracting a growing number of individuals trying to program contracts in new ways over the Internet. The ERC-721 standard, which has driven the NFT market to flourish, is now being revised to allow a more dynamic standard to pay royalties no matter what platform NFT is on.

What does Euler's Phi have to do with music?

Two weeks ago, ConsenSys Mesh portfolio company Treum created a project called EulerBeats, which are 27 algorithmically generated art and music NFTs. The name is a nod to the function phi proposed by the 18th-century mathematician Euler, and if you don't like theoretical mathematics, think of it as the function that sets the price of every printed matter in the future. As the number of copies in circulation of a particular original increases, the price of its next print increases exponentially. These NFTs use a modified version of the ERC-721, known as ERC-1155. This means that the original LP holder will get an 8 per cent royalty on every future sale, with the other 2 per cent going to Treum. Within two weeks, the smart contract that manages the unique LP automatically paid 912ETH ($1,429,012) in royalties.

Unlike other NFTs, its metadata is hosted on a centralized web server, while the music and image metadata is contained within the token itself. This is important: if the EulerBeats site is down, you can still run art and beat generator scripts, as they are permanently stored on the Ethereum chain.

The Ethereum community eventually made a guess at the value of the project and bought the first record for 300ETH. Mark Cuban has called it "the most brilliant idea ever." There are many aspects to this project that are worth writing about, but for this article, storing a verifiable, unique audio on Ethereum, where future sales will automatically pay royalties to the original owner, is the most important aspect of the new music sales model.

Do other NFT not pay royalties?

Not necessarily. Currently, most NFTs are issued in the form of ERC-721 tokens, which means that the first time an artist sells a work to a buyer, it's the first and only time they receive money. If the buyer resold five times the price on a secondary market such as OpenSea, the original artist would not receive the royalties.

Zora, an emerging NFT platform for creators of all kinds, is trying to change that. Each artist casting NFT on the platform can set a "creator share," which is their percentage of all future sales. For example, their creator share is 10%. If the original work is sold for 0.5ETH and someone later sells it for 10ETH, then the creator will receive an additional 1ETH from the secondary sale.

Plus, because these creators' shares are automatically paid for using smart contracts and are auditable on Ethereum, creators never have to worry about not receiving their share. It's a powerful concept, similar to royalties in the traditional music world, but automatic and censorable.

Improvements to the NFT standard

There is, however, a problem. Zora's current method of paying creator shares cannot be replicated in the secondary market. Only secondary sales that occur on Zora will pay the creator share ratio.

Zach Burks and James Morgan wrote an "Ethereum Improvement Proposal" or EIP-2981 to create an ERC-721 royalty standard. The main motivation was to create a modified NFT standard so that NFTs created, bought or sold in one market could be resold for royalties regardless of the trading platform.

With this standard, artists can set a royalty rate that can be paid to creators when resold on any exchange. Going back to our previous example, if an artist casts an NFT on Zora, if the purchaser sells it in another market, they are still entitled to their creator share.

I expect more trading platforms to start adopting this standard, which is already compatible with the mainstream ERC-721 NFT standard. We can also see more decentralized autonomous organizations (DAOs) of record labels, managing minting and publishing audio NFTs via existing streaming services such as DAORecords. Just this week, RAC announced the creation of a new creative agency dedicated to NFT.

The collision with the traditional field

In 2021, some pioneering musicians have begun tocking audio files and selling them to fans in the form of NFT. We are also getting closer to these NFT's more general royalty standards. But how does this interact with the traditional, opaque world of performing rights organizations (PRO) and centralized royalty databases?

In short, what happened on Ethereum still exists in its own ecosystem. Slowly, however, this seems to be changing, both as PRO's rights management database is modernized and (I am optimistic) as more labels begin to understand the power of NFT to create value for artists.

Last year, ConsenSys was selected by MLC to partner with the Harry Fox Agency to modernize music royalty data and payments over the next few years. The MLC portal, primarily founded by ConsenSys, was launched in January and is still evolving. There are already about 48 million songs, 9,400 music publishers on it, and they just inherited $424 million in unpaid royalties (the "so-called black box"). We believe we will start to see these worlds converging next year as more music publishers and PRs begin to adapt to the benefits of Etherium-based NFT.

Until then, if you're an artist and you think the current royalty system is broken, there's nothing wrong with downloading MetaMask and starting to explore what other musicians are doing in the NFT space.