What Waves’ custom blockchain tokens platform offers the music industry




  • Peer-to-peer
    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.

    There’s
    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
    about EntTech.

    Filesharing and blockchain

    The
    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
    capital.

    To
    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?

    Consider
    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

    The
    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.

    The
    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

    Moreover,
    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.

    It’s
    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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