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What is NFT

What is NFT

WRITTEN BY : Paul Keane

Musicians around the world are using NFT to breathe new life into the industry. Artists can now publish their work, from unreleased tracks to exclusive releases, on NFT platforms and earn revenue directly from the audience without any middleman.


Leaving record companies, distributors and publishers aside, musicians can earn as much as users are willing to pay. NFT is already used by Deadmau5, Richie Hawtin, Daft Punk, Steve Aoki, Grimes, Mike Shinoda, The Weeknd, Charli XCX, 3LAU, and many others artists. Music platforms are also using the technology - Beatport, for example, has recently entered this area.


In this article we have analyzed how NFT changes the picture of copyright in music, how artists are integrated into the meta-universe, is possible to make money on NFT, and what the disadvantages of this phenomenon are.




What is NFT?



The most important thing to understand is that NFTs are based on blockchain technology. And the abbreviation NFT (non-fungible token) itself translates as a non-interchangeable token.


Virtually any music can become an NFT item: a track, a compilation, or an entire album. In addition, NFT can become artwork or music covers, objects from games, collectibles, images, clips and digital art, tickets to exhibitions or festivals, domains on the Internet, as well as assets of the physical world.

To make the briefest analogy, the NFT is a museum where you can buy a painting. And it will be written underneath it! But you won't be able to take that painting home

Producers, artists, and musicians create NFTs to sell various forms of digital media themselves. Copyright owners can also receive royalties thanks to smart contracts, an algorithm spelled out in a blockchain that is executed automatically under certain conditions.



NFT Tokens and Crypto Music: Which Famous Artists Use NFT? Is it real for a musician to make money on it?



Let's be clear again: music NFT can include anything (album, song, merchandise, or cover art). It is both a genre, a medium, and a media format.


Is it possible for a musician to earn on NFT?


Theoretically. But it is worth looking at the reality and looking at cryptocurrencies - they are still not widely circulated. In many countries, they are not recognized at all. So, don't expect the NFT to suddenly break this rule, and you can buy a house in Miami by selling an album.


NFT is a very specific market, like LDs or albums on floppy disks. The NFT market does not have a very large number of buyers, and most of them are not real art collectors. They are just fans who are willing to support the artist. Soon the market will fill up with supply, will become oversaturated and on average NFT prices will fall. The trends will pass and many will rush toward the new trend.


In the world of NFT now there are no standards and no understanding of what will work and what will not. Often it's just luck and the influence of the infomercials on the market that helps you make money. If you are confident that your work can be in demand, it is worth trying to put it out as NFT (or to experiment with other ways of making money).



Here are famous examples of using NFT in the music industry:



- DJ and producer Deadmau5 has teamed up with rock band Portugal. The Man released the single as an NFT. The track This Is Fine is sold as a collection of 1 million NFTs exclusively on the Mintbase marketplace.


- Beatport and Pixelynx (a music and gaming meta-universe platform) have jointly released Synth Heads, a series of generative NFTs totaling 3030 units, which is dedicated to analog synthesizers. Buyers get bonus access to the community, festival passes, and other activities. Interestingly, the startup Pixelynx was founded by Richie Hawtin and the same Deadmau5.


- Daft Punk released several collectible NFTs before announcing their breakup. They sent out tokens to several celebrities registered on the Rarible platform. Of those so far, only Lindsay Lohan has decided to sell her token for $15,000.


- Grimes is exploring the future of musical NFT with one of her artistic alter egos War Nymph, a digital avatar that she created after the release of her Miss Anthropocene album.


- 3LAU sold 33 tokens for more than $11 million.


- Steve Aoki teamed up with 3D artist Antoni Tudisco to create unique digital works. The collection has raised several million dollars.





- Mike Shinoda sold his little animated video with music for $30,000.

- The Weeknd was releasing his new music in 2021 as NFT.

- Charli XCX with 1975 and No Rome also released the NFT single Spinning.



How are NFTs changing the music industry?


  1. First of all, we should mention the suppression of piracy or misappropriation of music. It will be harder for artists to plagiarize. Authors will be able to avoid expensive and lengthy court battles. In addition, it will be harder for listeners to "steal" music through traditional methods such as piracy.

  2. Thanks to NFT, artists can partially free themselves from streaming, and all the money can go directly to the creator. For example, many musicians, including Kings Of Leon, Steve Aoki, and Sean Mendes, have already successfully tried to exchange digital art and audio at NFT for cryptocurrency to increase their income. Similarly, Grimes earned a whopping $5.8 million in 20 minutes on the sale of its digital artwork.

    "Even if I downloaded the full version of the song contained in the NFT to streaming platforms (which I can still do), I could never even come close to $10,000 after royalties to the platform, the label, and everyone else," is how Mike Shinoda of Linkin Park commented on selling his NFT One Hundredth Stream for $30,000

  3. Control goes back to the performers and authors. As well as adding royalties through resale. Performers can earn extra income or royalties even after the initial sale. For example, everything can be set up so that every time an NFT changes hands on the marketplaces, it earns the artists a percentage.

  4. The use of NFT and smart contracts can make the services of resellers obsolete. This is especially true, for example, for the same event industry. Yellowheart is a ticketing platform founded in 2018 that ensures the authenticity of digital tickets. Through Yellowheart, the identities of the concert, party, or festival attendees are recorded. The artist or his management has complete control over how each ticket is bought and resold. This can make it very difficult for resellers to operate.



What does the future hold for us - NFT and the meta-universe? And how are the fashion world, music, and big brands involved?



- Own meta-universes. There is a possibility that it is NFT that will be the basis of the economy in the Metaverse. Meta (former Facebook), Google, Microsoft, Samsung, Sony, and other major companies are working on their meta worlds and technologies for them. Among the decentralized counterparts, virtual worlds on the blockchain are also worth mentioning: Decentraland, The Sandbox, and Alien Worlds. YouTube will have its own NFT merchandise and meta-universe.


- China will create its NFT industry based on state-supported blockchain infrastructure. The Blockchain Services network has begun testing its NFT mining and management system. The infrastructure is based on adapted blockchains that are not tied to cryptocurrencies.


- NFT appeared in test mode on Twitter. Something similar appears on Reddit as well.


- It's important to remember: that the NFT market does not have a very large number of buyers, and many of them are also not real art collectors. They are just fans who are willing to support the author. The other category is made up of desperate HYIP catchers. And do not forget about scammers of all stripes and scams.


- The fashion world is also integrating into meta universes. For example, Burberry launched the NFT B Series collection in Blankos Block Party.


- Companies register trademarks and patents for virtual goods - that is, goods that do not exist in reality. Nike has applied for registration of the trademark "virtual goods" and patents for them. It is worth noting that similar applications have already been filed by such brands as Balenciaga, Gucci, and Saint Laurent.


- Artists integrate into the meta-universe. Warner Music Group is coming to The Sandbox meta consent. The music concern will buy the virtual land plots for the branded space. Another sensational case - rapper Travis Scott held a concert in Fortnite, to which 12 million users "came".


- Decentralized streaming platforms based on cryptography are emerging. For example, Audius (which became a partner of TikTok, allowing the transfer of songs to its platform). Producers and musicians such as Deadmau5, Weezer, Mike Shinoda, 3LAU, and many others contribute to this platform.




Pros and cons: are NFTs bad for the environment and are they securities?



Pros NFT 



- A simple way to monetize. A popular blogger, author, or celebrity simply creates something and promotes it to the audience, and people bid to touch the idol or have a new experience.


- PR. Tokens attract fresh users to the crypto-economy. It is an expansion of economic opportunities in games and other systems.


- Fewer middlemen. NFT removes a lot of intermediaries in the sale and purchase thanks to decentralization. As a result, the whole system becomes more transparent, more honest, and cheaper.


- Licensing or Smart Contracts. NFTs are used in licensing contracts in connection with intellectual property. For example, the creators of EulerBeats (which are short soundtracks combined with an artwork whose originals are scarce NFTs) still receive an 8% royalty for each resale.


- Real Estate. In the world of real estate, NFT can be a digital symbol of ownership on a blockchain network. For example, instead of a paper deed stating that you own a single-family home, you could have an NFT showing your ownership of that home. This could provide some advantages in terms of security and ease of access.



Cons NFT 



- Ecology and Carbon Footprint. All NFT-related activities consume energy. One environmentally-minded artist found that the release of six of her tokens left the same footprint as the work of her entire studio for two years.


- Very frequent thefts. Many authors have had their works stolen and put up for sale as NFTs without their consent.


- Copyright and fake "exclusivity. It is difficult to determine the value and uniqueness of an object. It is difficult to understand how many copies have been produced.


- When selling NFTs, there are difficulties with copyright protection. For example, a drawing by the famous and now deceased artist Jean-Michel Basquiat was first put up for auction and then withdrawn two days later after discovering that the sellers were not its rightful owners.


- Transaction fees that are paid when creating tokens can be as much as $100. So the possibility that the proceeds from the sale of NFT will not cover the costs of its creation is quite real.


- Entry threshold. At least a basic understanding of blockchain technology is required to use the assets.


- Digital assets can be copied. If someone owns the NFT of a digital asset, that doesn't mean that copies don't exist. Art can be republished, GIFs sent thousands of times, and videos re-posted to various sites. Just because you own an NFT doesn't mean you control the asset - you just have a mark of authenticity.


- Fraud using NFTs. A huge number of fake copies of famous stores, fake NFTs, and gifts can be found on the net. In addition, NFTs may contain code of viruses, trojans, and miners.


Types of NFTs: how are they implemented on the Internet, in sports, in clothing, and generally in life?


As already mentioned, you can turn almost anything into tokens: tickets, virtual clothes and objects for games, collectibles, art objects, and even social networking technology. Let's break down each option in more detail.

  1. NFT tickets for events. This type of token was tested by the organizers of the world-famous Coachella festival, where lifetime NFT-tickets are sold. However, this type of token has its pitfalls. If you lose access to the wallet, there is no way to get help. The account balance and any NFTs or tickets are irrevocably lost along with the e-wallet.

  2. NFT collectibles are one of the most common types. Here are some types: art objects, real-world objects, game items, and sports items. For example, an NFT of a Nintendo Super Mario 64 cartridge was sold in July for $1.5 million. The NFT of Twitter CEO Jack Dorsey's first tweet sold for nearly $3 million, a pretty impressive sum for the chance to touch a little bit of social media history.

  3. Sports. For example, DeRace is an NFT sports marketplace where the platform offers and runs virtual races for people. They can own a horse and race. Another example is Socios, where users can buy fan tokens from their favorite teams to have a say in certain team activities.

  4. Games. For example, NFT games with the Play-to-Earn model allow you to earn income for the time spent in the game (with the earned tokens often used to create in-game items).

  5. Domain names. Blockchain domains have two key uses: converting hexadecimal wallet addresses into readable names and creating censor-proof websites. As a result, crypto-domain trading is big business for NFT speculators or traders, as natives of the meta-universe.

  6. Music. You can add the COVID-19 code turned into music or the Beatport NFT music compilation to the examples already mentioned in the article.

  7. NFT-projects. NFT-projects exist on the TON platform (developed by the Durov brothers). For example, TON Diamonds or TON Airplane.




Types of NFT-marketplace, their specialization, and commissions



NFT marketplaces are platforms where tokens can be sold, bought, exchanged, or released. Let's analyze 5 such platforms.


- OpenSea specializes in a variety of NFTs: from paintings by contemporary artists to game cards. There are several auction features, plus OpenSea is fully integrated into the crypto-infrastructure. Users have to pay a commission when putting their works for sale, most often it is $70-100.


- Raible specializes in artists. It uses its own RARI token. There are royalties. Registration on the site is free. You have to pay a commission of $30-100 per publication for each new token or collection creation.


- Nifty Gateway. Users can buy NFT using fiat currency (euros, dollars, and so on), and sellers can withdraw funds to cards. There are royalties. Posting is free, but Nifty Gateway takes a 15% commission on the transaction. The platform deducts 5% + 30 cents from each resale.


- Super rare specializes in artists. Placing work is free, but 15% is withheld on the first sale. The platform also takes 3% from each successful sale of  NFT.


- Foundation is an auction site. You can get in by invitations from other users. Placing your work is free. Foundation deducts 15% from token sales. If NFT is resold, the author receives a 10% royalty.




Types of earnings on NFT. What does the cost of NFT depend on? Does NFT enshrine copyright? What is the difference between NFT and cryptocurrency?



What features does the NFT have



1. Smart Contracts. This is a special program running on the Ethereum blockchain. Its code and data are located at a specific address in the Ethereum blockchain. NFTs are based on smart contracts that control transferability and verify ownership. These are some of the rules by which specific NFTs operate. For example, so that NFTs can be substituted, created, and applied to a game, smart contracts are created with rules for using such tokens. Another example is that royalty deductions are implemented based on smart contracts.


2. The difference between an NFT and a cryptocurrency. Each NFT is unique and cannot be exchanged for a similar token. But bitcoin or other cryptocurrencies can be exchanged for cryptocurrencies of the same value. NFTs are traded but not traded as securities on digital exchanges. NFTs are not exchangeable for purchases. Many types of cryptocurrencies, however, can be used to buy physical goods.


3. Options for earning at NFT:


- Create your NFT. You put your work on the Marketplace, it is assigned an NFT.


- Contributions. Relevant to artists, musicians, or content creators.


- Reselling an NFT. You buy someone else's NFT, then resell it.


- Playing on cryptocurrency rate changes. Sell NFT (redeemed or received at the giveaway), get cryptocurrency for it, and wait for the rate to rise, making money on it.


- Participation in NFT giveaways. Selling NFTs received for free. Over time, some NFTs may increase in value greatly.


- NFT services: NFT consulting, NFT project diagnostics, project strategy, "custom" NFT project.





4. Copyright. The token specifies: who is the author, and who became the current owner. Transaction history is openly stored on blockchain platforms. Copyright and ownership remain with the original creator of the work. Buyers may be disappointed when they later discover that the NFT contains only a link to the work, which can be digitally downloaded somewhere. Since they receive neither a file (in exclusive high resolution) nor a printout, much less a license to use it.


5. Cost. The cost of tokens is primarily influenced by the name and fame of the author himself. For example, Yuri Dud can sell short clips from his interviews for hundreds of thousands of rubles. However, a little-known novice blogger may not find a buyer even for an entire video clip lasting a couple of hours.


6. DAO (decentralized autonomous organization), NFT, and collective ownership. A DAO allows a group of people to collectively own an expensive NFT. The idea is that each participant does not have to shell out the entire amount. It is divided by the number of participants.




NFT problems: scams, complaints, and the authenticity algorithm



NFT's major problems:



  1. Anyone can link an NFT to any picture without verifying authenticity. The sites where authors (as well as scammers) post content for sale and do not check the works for authenticity or establish copyright in any way. This problem has yet to be solved.

  2. Sometimes attackers do not just copy other people's files (even the watermarks on pictures do not embarrass them), but also the composition of entire collections and their names. Sometimes fake celebrity accounts are even created. For example, a famous artist's work with DeviantArt Qinni was copied and put up for sale after her death. Another example is an attempt to sell an NFT collection of stolen avatars of Discord users. Sometimes, attackers steal and offer for sale "author's" screenshots from games like Minecraft.

  3. Marketplaces do not respond to complaints from authors who have had their content stolen. Dozens and hundreds of complaints are sent to the largest NFT-marketplace OpenSea every day. Stolen content is not removed immediately, so many people manage to buy tokens, which then simply disappear without a refund.

  4. Authors sometimes have to go to extremes and close their galleries and profiles. "Unfortunately, I am forced to shut down my gallery on DeviantArt completely," comics artist Liam Sharp posted in a statement. Artists affected by the attackers include Loish, Nesskain, Andre Rios, and R.J. Palmer.

  5. Bots create NFTs from tweets without the authors' consent. Artists were most affected by @tokenizedtweets because their posts became more valuable thanks to the pictures attached to them. For example, the bot attached a token and put up for sale a post with works by a Russian artist with the nickname Weird Undead.
  6. Websites specializing in false NFTs are appearing. For example, the site HitPiece sold music as NFT without the artists' knowledge. The Spotify API was used for this purpose. Hundreds of NFT songs by The Beatles, Bob Dylan, Taylor Swift, and other popular and obscure artists were sold at auctions. NFTs are sold after a bot collects track information from Spotify.


These are all real problems, they cannot be glossed over. But it shouldn't discourage the NFT world entirely, either. You just have to be careful and keep these points in mind.



Basic fraudulent schemes:



  1. Development of any project with no guarantees. The announcement attracted customers, and the developer of the NFT project Evil Ape was able to earn money to fully develop the game. Eventually, the game and its official Twitter page disappeared. Four projects on Solana suffered a similar fate: the authors offered investors grand plans for the future but disappeared along with hundreds of thousands of dollars.`

  2. Pump-and-dump schemes. This term refers to a situation where a group of people buy NFTs or currency and artificially inflate and increase demand. Having succeeded, the scammers cash out at the peak of prices and leave everyone with worthless assets.

    How to avoid pump-and-dump. Check the history and wallet records of any project you're interested in. In OpenSea or other marketplaces, view the number of transactions and buyers of the NFT collection. In EtherScan, you can see all incoming and outgoing transactions occurring in the Ethereum blockchain.

  3. NFT phishing scams. A typical example is a tempting token giveaway that forces you to share your passphrase (to log into your account). Neither NFT marketplaces nor wallet providers will ask for your private key. If someone asks you about it, it's a scam.

  4. Token images from the Internet. Use Google's reverse image search. If the NFT was not first uploaded by the artist himself, there's a good chance it's fraud and copyright infringement.

  5. The author of NFT is a fake account. The work of artist Derek Laufman was sold on Rarible by a copycat who managed to register a profile on the platform.

    How to determine the authenticity of the NFT. First, check the author's pages. It is very likely that the author has mentioned the token somewhere on social media or directly on his website. Second, just ask about the NFT - contact the author directly to find out if the NFT is legitimate.

  6. Fake NFT collectibles. Check if the price is suspiciously low - this is the first red flag. Check the contract address - each NFT has a smart contract with a unique address on the blockchain that never changes (and you can check it at the original site).




Summary, tips, and a little forecast for the future



If you are a buyer



- Remember: it is a misconception that by purchasing an NFT you will also own the copyright. Unfortunately, this is not the case. The buyer of a token is only granted ownership of the blockchain technology that makes up the NFT, not the underlying asset. This means that the owner of the NFT can neither modify the "content" nor use it for commercial purposes (such as selling or licensing the NFT content).


- It is also worth remembering that there are scams with free giveaways, phishing sites, with fake pages on social networks. Moreover, many NFT famous works of art are created and sold without the authors' knowledge.



If you are an author or represent a brand



- If you created the original underlying asset, you will own the underlying intellectual property rights to the work. It is up to you to decide what an NFT purchaser can or cannot do with your work.


- Usually (unless you are a crypto-enthusiast or technology expert) authors need the help of a software developer to create an NFT. Although likely, you will not do it yourself, it is important to be aware of the options available to you. Once you have created your work, you need to choose a way to create the NFT (i.e. which blockchain technology will support the token). There are many options available and suitable, but Ethereum and Binance Smart Chain tend to be the most popular because they are reliable and offer more options for authors.


- It is important to understand that the technology you choose will affect the market (i.e., the platform) on which you can bid your NFT. If you have a particular preference, you should let the software developer know before creating the NFT, it will affect your chances of a faster sale.


- You can check the terms and conditions of the platform on which you sell NFTs, as more often than not the platform will withhold a commission. Knowledge is power, and you should consider this when deciding which platform to use.



If you represent a brand that wants to launch its NFT collection



- Very often big brands want to provide their customers with a new digital experience through NFT. For example, soccer clubs collaborate with artists to create new digital products for this online environment.


- These types of collaborative relationships are governed by licensing agreements under which clubs allow artists to use their brand (club logos, uniforms, player image rights, merchandise) to create digital sculptures of their players, which are then transferred to the NFT, in exchange for a commission from the sale.


- In contracting, the brand must demand damages from the author if the underlying digital work infringes the intellectual property rights of any third party, as well as a guarantee that they will deliver the work for the release of the collection on time.


In general, we can say that NFTs have taken the market by storm and brought new meaning to collecting all kinds of works. Now this technology can be compared to the trends on sustainability, conscious consumption, or the popularity of the abolition culture, when these phenomena are talked about in all the media, scientific articles are written and even these are devoted to them.


It is necessary to understand and remember that any HYIP has its life cycle and sooner or later NFT will cease to resemble an "overheated" bubble. But there are great chances that later NFT can become quite a common tool. It is only important to overcome the problems and childhood diseases of the technology mentioned in this material. And then it may well change our lives for the better.