Almost five years ago, I wrote a column about how Bitcoin and Blockchain might change the music business. At the time, the question seemed more about how than if: An online merchandise store had just started accepting cryptocurrency, several entrepreneurs had founded startups to use blockchain technology to pay rights holders, and entrepreneur and then-Dot Blockchain CEO Benji Rogers predicted that “Blockchain technology is coming like a tsunami.”
I was skeptical. I called Blockchain “a solution looking for a problem” and pointed out that the only person I knew who had bought anything with Bitcoin was a former neighbor in Berlin who had purchased LSD online. At that time, Bitcoin was worth $11,631 and the Dow Jones average was 25,803.
As Bitcoin shot up — to a November 2021 high of more than $56,000 — more artists and music executives became certain that cryptocurrency and Blockchain technology would change everything. Artists sold NFTs — as did Billboard — and in February Coachella sold $1.4 million of NFTs, including 10 lifetime passes to the annual festival.
Now the cryptocurrency exchange FTX is in bankruptcy, Bitcoin is down to $16,099, and the U.S. will almost certainly regulate cryptocurrency “banks” and exchanges. In economic terms, that means cryptocurrency companies might have to compete on an even playing field with traditional finance entities, which would reduce risk for consumers but eliminate some of the advantage that startups get from making their own rules. In non-economic terms, Mom and Dad are home, they’re pissed, and they’re not going to let you run your business unless you can wear your big-boy pants!
So, what about that tsunami? It has been a busy five years for the music industry: recorded music boomed, major financial players invested in publishing catalogs, two of the three major labels went public, Latin music gained a bigger global audience, and TikTok emerged as a transformative source of promotion. Blockchain and Bitcoin barely changed the industry at all, though. A few artists made an insane amount of money on NFTs and a bunch of companies announced plans to fundamentally disrupt disruption itself. But Bitcoin is still an inefficient means of exchange and a poor store of value — at best it’s a high-yield, high-risk investment — and Blockchain is still a solution in search of a problem.
A little more than a year after my column, Benji Rogers, he of the tsunami prediction, left Dot Blockchain, which in September 2019 rebranded as Verifi Media. The company still helps rights holders track ownership and use data, but it doesn’t emphasize Blockchain technology on its website. (Emails to the Verifi publicity contact came back as undeliverable.) That makes sense: The big problem with rights data has always been that it’s incorrect or incomplete. Blockchain is a distributed database that allows users to track changes, but it can’t fix incorrect or missing information.
Five years ago, the startup Choon had a plan to track music use with Blockchain and pay rights holders immediately with a digital currency called Notes. It went out of business in 2019, as Notes fell in value along with Bitcoin. The following year, Choon co-founder Bjorn Niclas launched Rocki amid the pandemic and exchanged outstanding Notes for Rocki tokens at a 50:1 ratio. (The company also lets independent musicians sell NFTs.) Since then, “Rocks” tokens have gone from being worth about 5 cents each, up to an April 2021 high of $5.45 — it peaked when Bitcoin did — and down to about a penny. That sounds exciting, and potentially profitable, but I suspect most artists prefer to get paid in currency that holds its value.
Bitcoin and NFTs aren’t going anywhere — some investors see the “crypto winter” as a buying opportunity, while others just want to HODL. (Art NFTs are performing better than most.) But the collapse of FTX will inspire investors, and hopefully government agencies, to ask more questions about whether celebrities who buy and sell NFTs are being transparent enough about their transactions — especially since the fans they influence may buy into investments in a way that help those who already own them.
Like many online technologies, Blockchain and Bitcoin offered a utopian dream of decentralization, free from government regulation and control. When it comes to finance, however, government regulation isn’t a bug, to use the technology phrase — it’s a feature. Just ask anyone who had money with FTX, which wasn’t insured by the Federal Deposit Insurance Corporation (FDIC) the way U.S. banks are. Among the assets stuck in the exchange are the Coachella Keys that offer holders access to the festival.
Coachella told Billboard that it’s confident it will handle this issue. But it’s hard not to wonder if there wasn’t an easier way to do this — say, passes with QR codes, or maybe even just spots in a database that could be sold with the cooperation of the event promoter. Blockchain is essentially a distributed database that can operate at internet scale, and it’s easy to see how exciting that is. It’s just still hard to see what use the music business might have for it.