What is NFT and what is in it for the music industry?
Lately it is rather unlikely not to stumble across the initials NFT, probably in the context of famous artists like Kings of Leon, Taylor Swift, Beeple, UMEK or deaudmau5 who made a fortune by selling NFTs.
NFT - short for non-fungible token - is a kind of cryptographic certificate that identifies a digital file, such as paintings, music, videos, GIFs, etc., as irreplaceable and unique and is stored forgery-proof and unalterable in a blockchain. (In contrast, bitcoins are fungible tokens, as they can be exchanged for each other due to their equivalence). The file to which the NFT refers can theoretically be copied or shared endlessly, but only one person holds the proof of ownership.
So what do we get out of it? Well, with the help of NFTs, digital files become tradable assets or even speculation objects with limited availability, think of it like a limited edition vinyl signed by the artist. Meaning, the creator of a digital work can now directly monetize his/her art by selling unique copies - without a middleman who also wants a piece of the pie. This might especially be beneficial for independent artists without a label. In addition, the artist can get his/her share of resales, the conditions for this are defined in the NFT.
Likewise, the copyright remains with the artist. This new source of income could be tempting for corona-torn musicians. Platforms like Rarible, Mintable, OpenSea or Zora are being used by musicians and artists to sell or auction NFTs. And there is XLR8r, an upcoming marketplace supporting exclusively electronic music genres.
So are there any downsides? The process of creating an NFT, or “minting”, is still a legal grey area. This system allows anyone to make and sell tokens of anything, so along with resolving questions of copyright ownership and providing proof of creation unfortunately comes a real piracy and abuse potential that many have already discovered for themselves. Legal regulations are much needed.
NFTs could be promising for the future or just a marketing hype that quickly disappears again - time will tell.