Controversy

Published on April 25th, 2015 | by Alan Cross

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Bitcoin and the Music Industry Part-1 
 What is Bitcoin and Why Should Musicians Care?

Peer-to-Peer and the Music Industry

Music has a long history with peer-to-peer technology. Napster was the first to allow us to download mp3s directly from our peers. Music fans were so frustrated with the pricing strategy and delivery mechanisms dictated by the Music Industry that they felt justified not paying for tracks. So what killed Napster? The fact that it only benefited the consumer and not the artists or the Record Labels. By bypassing the artists, record companies/labels, consumers – even if unintentionally – eliminated intellectual property royalties from the business equation. And if artists are not being fairly compensated, the music suffers – and we all lose!

When Napster died, other peer-to-peer companies jumped in to fill the void (e.g. Kazaa, Ares, and Morpheus etc.). They, too, didn’t last long – and the reason has to do with the fundamental flaw in their model: the inability to reconcile file sharing and fair compensation to the artist.
The blame here is not all with the consumer and tech companies. The record companies refused to invest in solutions to remedy the problems. The music industry stood by flailing their arms while their business model imploded. From the shadow of Napster emerged new protocols like Gnutella (e.g. Ares, Morpheus) and Bittorrent, which has remained top of the heap for the longest of any of the peer-to-peer (p2p) technologies.

The next step in the p2p music evolution is to adopt and integrate Bitcoin and cryptocurrency technology into the fabric of the music business.

Why Bitcoin and Cryptocurrency?

Getting paid has always been a problem for musicians. And it’s never been this challenging. While it is true that the internet helped some musicians to profit more directly from their work, most did not.

Why not? There are two main reasons:

1) Before Bitcoin there was no such thing as a non-duplicable piece of data
2) Before Bitcoin, small and micro payments were not financially viable

What has changed?

Bitcoin and cryptocurrency (Bitcoin is on version of a cryptocurrency. There are hundreds of other cryptocurrency coins or “alt-coins” based on the same technology) have arrived. For the first time, we have a trusted mechanism for data and low-to-no-fee micropayments.
But let’s back up just a bit. You probably know about Bitcoin through the following topics:

1) Theft (MtGoX)
2) Buying Drugs (Silk Road)
3) Funding Terrorism

I would like to point out that illegal transactions such as these are done every day, using various currencies, all around the world – including the U.S. dollar. Still, no one seems to question the legitimacy of the American dollar.

Bitcoin has gotten a lot of bad press in its infancy. But if you recall, the exact same things were said about the Internet when it first arrived. So what’s the big deal about Bitcoin? Better people than I have explained this. Here is what Bitcoin.Org says about it:

“Bitcoin uses peer-to-peer technology to operate with no central authority or banks; managing transactions and the issuing of bitcoins is carried out collectively by the network. Bitcoin is open-source; its design is public, nobody owns or controls Bitcoin and everyone can take part. Through many of its unique properties, Bitcoin allows exciting uses that could not be covered by any previous payment system.” Bitcoin.Org

One of the most important features is that a Bitcoin can be divided down to 8 decimal places, enabling any content to be exchanged in the form of micropayments. The other major benefit is that transaction fees are almost zero. That makes it easier for artists to sell tracks without losing most of their revenue to transaction fees to the likes of PayPal, MasterCard, Visa, etc.

Who’s using Bitcoin?

There’s an increasing number of companies out there currently using Bitcoin in different ways to help musicians.
Here are a few examples:

The easiest and most popular way for musicians to use Bitcoin is through “tipping” Bitcoin. Huzza lets you tip any song or musician in the world: “Tip any song or artist in the world using Bitcoin or credit card.” Tips go directly to musicians and fans get exclusive content from the artists they care about.

Haulix is a service that allows independent artists, record labels, and publicity firms to package up digital promos, manage their media contacts, and serve the promos in various ways to their consumers.

Grooveshark is a web-based music streaming service owned and operated by Escape Media Group in the United States. Users upload digital audio files, which can then be streamed and organized in playlists. The Grooveshark website has a search engine, music streaming features, and a music recommendation system. (source)

Radical.FM is a digital music streaming service available on iOS and Android devices. The service allows users to create their own custom online radio stations based on musical genres. (source)

YumCoin is a new Bitcoin-dedicated site which offers content creators the chance to sell their wares in exchange for the digital currency.

Fandistro’s mission is to help artists develop their fan base and monetize their music. The company provides artists with a platform for creating and managing rewards programs and provides tools for monetizing their music.

Coindl is simply selling Digital Downloads for Bitcoin

As promising as Bitcoin and cryptocurrency technologies are for solving some of the problems facing the music industry, the most exciting aspect of the technology is what is known as the “Blockchain.” The Blockchain is the technology on which Bitcoin and all cryptocurrencies are based. In our next article, we will dig in to how Bitcoin, cryptocurrency and the Blockchain can help the music industry in ways that creates more revenue, has more accurate reporting, and has smaller fees associated with running a music business – thereby benefiting the artist, the fans, and the music.

Stay tuned for part two.

This article was written in conjunction with Andrew Dick. You can “talk-tech” with Andrew and Alan Cross at their monthly Music Tech MeetUp.

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About the Author

is an internationally known broadcaster, interviewer, writer, consultant, blogger and speaker. In his 30+ years in the music business, Alan has interviewed the biggest names in rock, from David Bowie and U2 to Pearl Jam and the Foo Fighters. He’s also known as a musicologist and documentarian through programs like The Ongoing History of New Music.


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 What is Bitcoin and Why Should Musicians Care?

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