What Waves’ custom blockchain tokens platform offers the music industry
technology has already disrupted the music industry, since the launch
of the first file-sharing networks over 15 years ago. But peer-to-peer
platforms based on cryptocurrency technology arguably offer even greater
advantages for indie artists.
a lot of buzz about the blockchain — the decentralised peer-to-peer
ledger of transactions pioneered by bitcoin — and its potential benefits
for all kinds of industries. Cut out the middleman, goes the theory,
and you can eliminate inefficiencies and sidestep the gatekeepers who
would otherwise hold the keys to profitability and success. That’s as
true for the entertainment industry as it is for finance, but though
we’re hearing more and more about FinTech, there’s been very little
Filesharing and blockchain
music industry, which has already been turned upside-down by
peer-to-peer technology such as Napster and, more recently, BitTorrent,
is the perfect candidate for such disruption. A recent report highlighted at least four of the ways
in which blockchain technology might benefit musicians. It could act as
a networked database of music files; it could offer fast and
frictionless royalty payments; it could bring transparency to the
payments process; and it could provide artists with new sources of
date, little of such a vision has been realised. That’s partly due to
the emerging nature of blockchain technology; like any new technology,
it doesn’t appear fully-formed and enterprise-ready. Bitcoin is just
eight years old, and does only one thing well: transfer money. Newer
platforms perform more of the tasks that would be required to realise
the benefits, but none has yet gained traction in this area. But that
might be about to change.
The Waves platform
As a product itself of the decentralised and crowdfunding world, the Waves platform
is well-placed to address the inefficiencies of the music sector. Waves
is a custom blockchain tokens platform: users can create their own
tokens, representing whatever they want, and send them to each other
peer-to-peer. Moreover, they can trade any token directly with any other
token — something that might sound trivial, but that is highly
significant for such mainstream applications. It was a vision that
caught the interest of almost 6,000 investors, who deposited around
30,000 bitcoins to make it a reality. Given prices at the time, that
made it the 6th largest crowdfunded project ever.
So how would it work in practice?
a scenario for a band who have had some local success but have not
attracted the interest of a major music label and lack funds to record
their album. We’ll call them the BlockHeads.
Crowdfunding and distribution
BlockHeads crowdfund the money they need to book a studio using the
Waves platform. They use their social media presence to reach out to
investors. The user experience for investing is a lot like it is for
Kickstarter and other popular variants. Fans buy tokens representing
pounds sterling or any other currency they want — dollars, Euros,
bitcoins — via an approved gateway, using a credit card or bank
transfer. (There is no need to restrict investors to one country if the
demand is there; blockchain platforms are borderless by nature.) These
can then be used to purchase tokens for the BlockHeads’ forthcoming
album, BlockMaster. Because Waves is decentralised, there is very little
overhead and no fees to pay an administrator, so fans’ money goes
further. And since one currency can be converted to another in the
background via token-to-token trading, it doesn’t matter whether they
spend pounds, bitcoin or Yuan.
BlockHeads use the money collected — cashed out for Sterling via the
same gateways — to record their album at a local studio. They can now
distribute it to every holder of BlockMaster on the Waves network by
sending a download link to each address that owns one or more token.
Note that these may or may not be the original buyers; unlike
traditional crowdfunding, stakes are transferrable and can be sold or
given to other investors, allowing early buyers to exit their investment
if they wish. Again, they can sell them for whatever currency they
want — or even for a stake in another crowdfunded project.
Equity stake and revenues
there is scope to reward investors further in the future. As new albums
are sold, the BlockHeads can distribute a slice of revenues to token
holders, in proportion to the number of tokens they hold — just like
dividends from holding shares. This kind of action is trivially
straightforward using a cryptocurrency asset exchange like Waves. If the
BlockMaster album does really well, this will raise the value of those
original crowdfunded tokens, which would then change hands on the Waves
platform at higher prices — much as regular shares typically trade at a
multiple of their price/earnings ratio. If they wanted to, the
BlockHeads could buy back their own BlockMaster tokens, at prices
subject to supply and demand, thereby allowing them to keep a larger
proportion of their future royalties.
a far cry from the traditional model of being picked up by a big
label — or even going down the regular grassroots/indie route. But
there’s no doubt it’s coming. The technology is ready and the music
industry is crying out for change. It’s just a matter of time.
For more information about the Waves platform, see www.wavesplatform.com.
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