Are there reasons to be wary of music NFTs ?

If you work in or adjacent to the music industry, it has become impossible to go a day without someone singing breathless paeans to the glorious future that awaits us thanks to non-fungible tokens (NFTs) and the coming crypto revolution. If it’s not Russian protest punks Pussy Riot minting NFTs while under house arrest, it’s that dude who was in a mildly cool punk band a decade ago and now spends all his time tweeting weird crypto-memes. Or it’s T-Series releasing NFTs of digital art from its latest eminently forgettable blockbusters.

I get it. The covid-19 pandemic has been a scary reminder of the financial precarity faced by the vast majority of working musicians. Even as major label revenues grow at unprecedented rates—almost 29%, according to MIDiA Research—artists are still fighting to get paid more than fractions of a cent per stream, with the top 1% hoovering over 90% of streaming revenue.

Repeated lockdowns have left the live music industry—where most musicians earn their bread and butter—reeling, unable to play beyond an event horizon of the next few weeks. So it’s not surprising that many musicians have eagerly bought into the utopian vision of Web 3.0—a new, decentralised version of the internet that, if you believe its ape-avatar prophets, will make the digital economy more transparent, egalitarian and creator-focused.

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As with any promised land, the actual details of what Web 3.0 will look like are still up in the air. But at its core is the idea that edge computing (a framework where data is computed and stored close to its source), Artificial Intelligence and blockchain technology will help us build an internet free of the centralised control of Silicon Valley corporations. This will allow users to own, control and profit from their data directly and fix the imbalances of the current creator economy which cedes a large chunk of control and value to corporate-owned platforms like Google or Facebook.

Swarathma released audio rarities, merchandise, live experiences and exclusive animated artwork as part of an NFT collection

That last promise—as well as breathless headlines about quick pay-days and overnight millionaires—has driven a significant number of musicians to dip their toes into this space of NFTs. Last February, Canadian musician Grimes sold a suite of digital art NFTs for $5.8 million (around ₹43 crore ) in under 20 minutes. The same month, DJ and producer 3LAU sold 33 NFTs for $11.6 million in the highest grossing NFT auction at the time. Earlier this month, Bengaluru folk-rock band Swarathma released audio rarities, merchandise, live experiences and exclusive animated artwork as part of an NFT collection. It has become the buzzword to kill all buzzwords.

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To put it simply, an NFT is a digital certificate of authenticity—a smart contract implemented using a blockchain ledger that allows you to own and trade a digital representation of an asset. That asset could be anything from a piece of digital art or a song to concert tickets or even the deeds of your car.

In the context of art and music, the immediate appeal of NFTs is that they will create artificial scarcity in a world of digital abundance. By its very nature, digital artwork—whether it’s an image, a song or a movie—is infinitely reproducible. “Owning” a piece of digital art is as simple as right-clicking and saving. But if you buy an NFT of an artwork, you buy a token that acts as proof of ownership, one which can be easily checked publicly and is practically impossible to forge. So the NFT is more like a traditional art object, one that you can own and trade between collectors.

The promise of Web 3.0 goes beyond a headline-grabbing collectibles market. Proponents argue that these technologies will revolutionise the music industry, make labels and streaming platforms obsolete, and put power back in the hands of the artist. Cryptocurrency could solve the problems of delayed royalty payments and fraud. Contracts on the blockchain could ensure complete transparency for artists when it comes to various revenue streams, with information that cannot be manipulated. Decentralised Autonomous Organisations, or DAOs, could allow artists to build their own communities with fans and other stakeholders that could provide them capital through NFTs, replacing the label.

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“NFTs offer us a new way of connecting with our audience,” explains Swarathma bassist and manager Jishnu Dasgupta. “A chance to connect with an inner circle of truly engaged members of our community.”

But there are plenty of reasons to be sceptical about this techno-utopian future. Despite all the attention, music NFTs currently attract only a small, already tech-focused subset of artists (and the big winners so far are already big names). There’s a significant—but solvable—technological barrier to entry.

A bigger problem is the complexity of the current rights and royalty regimes, keeping an entire army of entertainment lawyers in business. In an industry where even three people making music in the same room can’t always agree on sharing rights and royalties, getting more than a small avant-garde of tech-savvy artists to adopt these technologies and platforms is going to require a lot more than pseudo-revolutionary pamphleteering.

It’s also more than a little likely that the massive prices for NFTs (whose sales totalled $25 billion in 2021) are not a reflection of real value but a speculative bubble, one which might burst at any moment. Crucially, an NFT usually doesn’t actually include the artwork you are buying, because storing artwork on the blockchain is prohibitively expensive. Instead, it points to an online location hosting the file, which means you could potentially own a token for a dead URL if the host goes down. Will people continue to pay thousands of dollars when these—and other risks—become more apparent?

Plenty of other issues are beginning to crop up—high-profile scams, fraudsters minting NFTs of artwork they don’t own. Just this week, fraudsters targeted the launch of an Ozzy Osbourne NFT collection, and rapper 6ix9ine came under fire in December for promoting a charity NFT auction that buyers now decry as a scam.

Also read: Is NFT the disruptor that digital art needs?

But the real elephant in the room is environmental impact. The marketplaces that NFTs are traded on run on cryptocurrencies like Etherium, which are incredibly energy-hungry. The numbers over carbon emissions are hotly debated and there are some maybe-viable solutions in the pipeline, but at the moment NFTs and the blockchain ecosystem they are based on eat up a lot of energy. With climate change looming over our heads, sustainability will be a pain point in the mainstreaming of NFTs and crypto.

Depending on your viewpoint, these may be minor roadblocks or insurmountable obstacles for Web 3.0. For me, the radically open and democratic Valhalla that it promises has the whiff of overblown hype—part wide-eyed optimism, part financial opportunism. But NFTs do offer an opportunity for artists interested in alternative models of creation and collaboration—contemporary analogues of 1960s’ communes or 1970s’ punk collectives—to put those ideas to the test and innovate at a much larger scale.

So non-label artists like Sweden’s Danny Saucedo can fund the production of new music using NFTs, with buyers getting a cut of the royalties. Producers can monetise beat sample packs using NFTs, as Illmind has done. And you can even have prankster collectives like PleasrDAO make grand gestures, like purchasing the most expensive work of music ever sold—Wu-Tang Clan’s Once Upon A Time In Shaolin, limited to a single copy once owned by Martin Shkreli—with the aim of making it freely available. Whether that translates into a broader paradigm shift depends on factors too many to list, though, so for now enter the NFT space with an eye on the exit and a hand on your wallet.

Bhanuj Kappal is a Mumbai-based writer.