What are NFTs? Why blockchain might save the music industry
Musicians like Post Malone and Kings of Leon are selling music and merch using NFTs, which are essentially digital receipts for art stored on the blockchain.
On Wednesday, Kings of Leon announced that their eighth album, When You See Yourself, will be available as a non-fungible token (or NFT for short). For $50 you can buy a unique digital copy of the album, complete with audiovisual art and videos from the band’s live shows. At an online auction this weekend, fans can also bid on six golden ticket NFTs guaranteeing front row seats to every Kings of Leon concert from now until the end of time (or whenever the band breaks up). As of publication, the highest bid was $11,622.
Celebrity artists making money selling cheap products and VIP access to fans is nothing new. People pay for autographs, so why not a blockchain receipt that points back to the celebrity’s crypto wallet? Even better, it (usually) costs a lot less to mint 200 non-fungible tokens (NFTs) than to ship 200 t-shirts.
But are NFTs just the latest crypto trend, or the future of the music industry? Here’s why this technology might be the most important development since the invention of blockchain, and what it means for the future.
Crypto-Savvy is an occasional series from Inverse that explains the world of cryptocurrency and where it’s going next.
What is an NFT?
NFTs are Ethereum-shaped receipts for digital art. It’s basically the blockchain equivalent of putting a metal coin in a pressed penny machine to produce a unique souvenir.
The 411 on NFTs:
- NFTs are crypto tokens that represent a certificate of authenticity.
- They can be videos, memes, music, fonts, and almost any type of media file.
- Apps like Enjin, Rainbow wallet, OpenSea, and Rarible help NFT fans organize and trade these collectibles.
- You can also use these apps to organize and display your NFT collection, almost like a Pinterest board.
- No one can accurately promise an NFT will go up in value.
Why are musicians issuing NFTs?
We’ve seen this trend before. In 2018, the Securities and Exchange Commission fined DJ Khaled because he promoted an unregistered security in the form of cryptocurrency — essentially, retail consumers viewed the asset like stocks. These days, musicians like Soulja Boy and DJ Alesso have pivoted to issuing NFTs instead.
The hype is so blown up that celebrities like Paris Hilton tweet about NFTs and talk about them on Clubhouse. (Hilton was also reprimanded by the SEC for selling tokens in 2017.) In contrast, NFTs aren’t inherently seen as regulated securities because NFTs are art.
For musicians who have a tech-savvy audience or want to attract crypto-savvy fans, NFTs offer a new revenue stream. They are not dependent on streaming platforms, record sales, concert tickets, or third-party merch sellers — so the artist keeps the cash. They can also help artists connect with fans during the pandemic’s touring hiatus. For example, rapper Post Malone and his manager Dre London used NFTs like coupons, which fans redeemed to play virtual games with Post Malone.
Flash forward to February 2021, when DJ and music producer 3LAU made $11.6 million selling music NFTs in just 24 hours. He didn't hold the record long. On February 27, Elon Musk's partner Grimes made $5.8 million in 20 minutes selling NFTs.
The problem with NFTs
How this technology can help indie artists and less famous musicians is unclear, but early signs are promising. Some crypto-savvy visual artists and musicians like Tatiana Moroz are reaching more people thanks to NFTs. The technology could boost entire music industries, too — like the Elite Vibes Awards in Nigeria, which raised thousands of dollars with music video NFTs.
Many musicians already earn most of their income selling swag and concert tickets. NFTs offer a cheap way for artists to sell these goods and more, including NFT concert tickets for streaming private shows.
But don’t rush to chant “crypto revolution” just yet. People who claim an NFT proves you own the art aren't telling the full story. If you can’t find a cryptocurrency transaction using a blockchain explorer, because let's face it, those long strings of numbers and letters are confusing, then you can’t prove you own the NFT.
Likewise, you can only prove ownership to other people who can read blockchain data. Even if we (generously) assume all 43 million people who've used Coinbase know how to read the blockchain receipt for an NFT, the NFT still doesn't offer copyright or identification guarantees.
An NFT owner doesn’t own the copyright to the song or image used in the NFT. The owner simply holds the blockchain receipt, proving payment for an original media file. Just like an autographed copy of a book that's also available at the library for free, a signature (or NFT) can make your copy more valuable.
Blockchains can’t replace lawyers. Some people impersonate artists and sell NFTs without the artist’s consent. If a record label owns all of a musician's songs and swag, they could probably claim the label deserves that NFT revenue. Likewise, musicians may need to defend authentic NFT sales or identities in court. Most NFT platforms don’t offer moderation, so musicians still need legal support.
At this early stage, NFTs are mostly about bragging rights between crypto nerds. But if artists can find a way to earn money selling crypto souvenirs (without ever promising NFTs will accrue passive value like an investment) then good for them! During the Wild West of a pandemic bull run, all is fair in the realm of crypto love and Twitter wars.
If you enjoyed this hot take on NFTs, be sure to subscribe to my Substack newsletter. And stay tuned to Inverse for next week, when I’ll continue this column about cryptocurrency with a healthy dose of reality. So many blockchain myths to debunk, so little time.