WTF are NFTs? A basic beginner's guide to NFTs and the music industry
NFT seems to be the acronym on everyone's lips right now, and there's an especially huge buzz amongst the music industry. There’s plenty of headlines about artists deciding to use NFTs, and other artists saying they never will.
But what even are NFTs? Why would musicians use them and why does it matter to fans if they are?
So...WTF are NFTs?
NFT stands for Non-Fungible Token. But, that’s not much help, so here’s a proper explanation.
Non-Fungible means that an item has unique properties so it cannot be replaced with something else. (BBC).
Think of it as a rare one-of-a-kind limited edition vinyl. Sure, you could switch it for another non-limited vinyl version of the same album, or you could sell it for its equivalent value, but neither of those exactly replace the original item. NFTs are like the limited vinyl, but digital.
The token essentially acts as a digital certification of ownership and authentication.
NFTs are mainly used for digital art right now, with Grimes selling some for $6 million, but musicians have started using them to sell limited versions of their music.
People can copy, replicate these items in any way they like, as people have done with art and music since, well, forever. However, only one person, or a limited about of people, will own the token that proves they have the original.
The value will then fluctuate as the wider crypto market fluctuates.
How are they used with music?
Right now, NFTs are at the very early stages in music but some big names have been using them.
However, in most of these cases, specific new tracks have been created for sole release via NFTs, so it’s not really acting as a replacement for selling existing music releases just yet. (Guardian).
Why would musicians use them?
With the world of streaming meaning musicians are struggling to make money, and digital copies of their music just not selling as much as they need, so NFTs are a great way for musicians to bring in the bucks for exclusive releases.
It’s the same premise as the example used before of the limited edition signed vinyl. People will pay a huge amount of money for them to own something exclusively, even if it can be found on streaming services for free.
There’s also no middle man - the transaction goes straight from the owner to the fan. (College of Contemporary Music)
“I thought: ‘Wow, this is a whole new tool for creativity that isn’t policed by radio or streaming, or someone from the label or any of this stuff. It’s a whole new avenue that you can really just put out whatever you want, and that’s kind of how music should be but it really isn’t.” - Calvin Harris (Billboard).
Why are they controversial?
There’s no standard for royalties yet. Songwriters, publishers, and copyright owners will need to be more vigilant than usual to ensure they get a fair price not only in the initial sale but for any future sales of the NFT that may take place.
Also, right now, nothing is stopping somebody else from creating an NFT of someone’s song. The rules and regs just aren’t in place yet.
Newer artists would also be less likely to be successful with NTFs as they may not necessarily have fans willing to pay such a premium price for the items.
Finally, and arguably the most important, they have a huge environmental impact. NFTs not as environmentally friendly as you might think with them being online. They use a huge amount of energy. One piece of art called 'Coronavirus' consumed an incredible 192 kWh in its creation. That's equivalent to one European Union resident's entire energy consumption for two weeks. (Techutzpah)
NFTs are definitely worth keeping an eye on. It’s worth watching out and noting which artists are using them, and more importantly, how they are using them.
If the energy consumption issues can be addressed, and NFTs can become more environmentally friendly, then they are set to be the next big thing in music consumption (depending on who you ask)
However, there’s a lot of room for error right now. NFTs being pretty much unregulated may seem like a positive in some ways, however, it could lead to a lot of problems. In particular, in the music world, there’s a huge need for transparency to ensure songwriters, publishers, producers and other creators get their fair share. Maybe we should focus on getting creators their fair share with existing streaming methods, before moving on to something completely new.