blockchain and nfts

A revolution as big as the internet?

For years, Blockchain was labelled a solution in search of a problem. Like many new technologies, the use cases and value were not always clear.

Now, after years of experimentation, we are starting to see clear value for blockchain and related technologies such as smart contracts.

In areas such as traceability, security and monetisation there are hints of the transformational changes that blockchain promises – what some have called ‘a revolution as big as the internet’.

We see several emerging areas where blockchain is creating real value in the music business:

• Traceability and ownership – Blockchain technologies allow the assignment of rights at time of recording (at stem level), publishing or performance, creating a permanent traceable record and a ‘single source of truth’. This has the potential to solve a number of current problems, such as identifying rights ownership, apportioning royalties and efficiently facilitating payments.
• Security – Using blockchain technologies to combine ID verification and transaction tracing can provide robust security for sale and ownership of music assets, including tickets, rare goods such as VIP packages, and IP.
• Payments – Smart contracts can be used to automate simple or complex contractual structures, including automating and speeding up payments. A historical transaction record stored on the blockchain enhances security.
• Monetisation – NFTs have grabbed the headlines but the use of smart contracts potentially provides a simple and secure way for fans and others to invest directly in bands, with or without resulting rights ownership. We believe we are at the beginning of the monetisation journey and NFTs (in effect a form of packaged smart contract) are just the start.
• Investment – By increasing traceability of rights usage, rights-holders and investors have more visibility of historical revenues, and more predictability of future earnings. This potentially increases the attractiveness of rights to investors. The use of smart contracts and the inherent permanence of blockchain records open up rights ownership to fans, retail investors and others.

The sustainability issue

Blockchain and, in particular, NFTs have been very popular with a number of labels, artists and fans. However, there is pushback from a significant portion of the public and from many artists on the grounds of sustainability.

The Ethereum blockchain, used as a platform for most NFT and many smart contract transactions, consumes more energy than Greece. Ethereum is expected to change its underlying methodology to dramatically reduce energy usage, but this is not here yet.

For many stakeholders, the sustainability issue is a real turn-off. Asset holders and investors should consider options carefully before rushing in.