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A Field Guide to Music’s Potential Crypto Boom. 1. Cryptocurrency enthusiasts envision a future where artists are paid fairly, the secondary ticketing market is no longer ravaged by scalpers, and the value of digital memorabilia soars. In a huge labyrinthine ecosystem of labels, publishers, distributors, and royalty collectors, the idea of artists getting paid quickly may sound like a revolutionary concept. What if it wasn’t? What if the music industry’s hundreds of thousands of artists — who are especially cash-strapped when they can’t tour, like right now in the Covid-19 pandemic — didn’t have to wait a cripplingly long time to get their royalties, but rather could receive streaming money instantaneously? Broaden that thought experiment: What if there was a “merch royalty,” so that the artist got a cut every time a branded hoodie or piece of art was resold, or a system to ensure accurate paychecks for musicians? All these things are possible, according to music’s cryptocurrency enthusiasts — a growing group of tech-obsessed entrepreneurs who want to apply the technology of blockchain and bitcoin to the multibillion-dollar global business of selling albums. Crypto advocates want to engineer a new financial system for music that can support real-time revenue streams and ultimately hand much more power to the individual artist. The average music fan may be easily deterred by these conversations: Cryptocurrency is, well, cryptic, and articles on the subject tend to be filled with in-the-know jargon and lengthy digressions. So Rolling Stone has scoped out the landscape and, with the help of experts like Zach Katz, Shara Senderoff, Adam Alpert, and RAC, we’ll walk you through the genesis, potential applications, and latest developments in what crypto can mean for music. How cryptocurrency works, in a nutshell. It was 2008 when the developer Satoshi Nakamoto — likely a pseudonym for either a person or group — introduced the first cryptocurrency, Bitcoin. The first official Bitcoin transaction happened in 2010, when Florida resident Laszlo Hanyecz paid 10,000 BTC for two pizzas. Over a decade later, Bitcoin’s value hit a record high in January 2021 when one BTC became worth more than $40,000 in U.S. dollars, meaning those pizzas would cost $400 million by today’s standards. Cryptocurrency arose out of popular distaste for society’s bank-reliant money model. Essentially, it was created so that average citizens could have complete control over their funds without government interference. Most importantly, it operates on a blockchain, which eliminates double-spending. (Double-spending happens when someone copies a digital currency to use the same “token” on multiple purchases — the equivalent of scanning a real dollar bill and then printing a fake one, but far easier to get away with. Prior to bitcoin, many coders and technologists had tried their hand at an anti-government digital currency, but they failed due to issues around double-spending.) A blockchain is a publicly accessible, transparent ledger. When a person makes a transaction, it creates a data “block” that houses the sender and recipients’ addresses — strings of letters and numbers that log involved parties but don’t give away a person’s identity — and a timestamp. Those blocks, which form a digital chain as transactions continue, cannot be edited. And once someone participates, their computer begins keeping a copy of the blockchain. That means — say, in the case of Bitcoin — any hacking attempt would be immediately flagged thanks to the hundreds of thousands of computers that are now keeping track of and updating Bitcoin’s decentralized blockchain. These days, Bitcoin is just one of many forms of usable cryptocurrency. And there are also non-fungible tokens (NFTs), which can hold unique assets like art, tickets, or trademarks instead of money. Easier, faster, and more accurate payments for songs Ghazi Shami, the founder and head of music distribution company and record label Empire who has worked with everyone from Snoop Dogg to Migos, is one of the many music executives excited by crypto’s ability to circumvent banking headaches. Says Shami to Rolling Stone: “How is it that I can jump on an app like BitPay and I can send somebody Bitcoin any time of the day, anywhere in the world, but if I want to send somebody a wire or an ACH, I have to do it during business hours, it takes 24 hours, and I can’t do it on Saturday and Sunday or holidays? The banking system is very antiquated.” Shami also scoffs at banks’ refusal to let patrons take their account numbers with them if they switch banks — which even cell phone companies allow. It’s a “gigantic undertaking” for a label like Empire to switch banks, he says, because all the vendors have to be manually switched over. But “if I controlled my account number, I can go anywhere with it. Crypto is a peer-to-peer thing. It’s faster, it’s more fluid.” Upon realizing these advantages, Shami started to think about what would happen if the process was applied to receiving payments from digital streaming platforms (DSPs) like Apple, Spotify, Amazon, and YouTube. “You could create a much clearer and cleaner sequence of getting paid by them,” he says. Because stable coins — a type of crypto coin that is traded against a stable existing currency, such as the dollar or the euro — are globally traded, there’s no issue with conversion rates when the euro-using Amazon France pays an American rights-holder, for example. Currently, paying royalties out from labels to artists is also a laborious process involving various bill-pay systems, a horde of vendors and software platforms, and checking and rechecking all the paperwork. “I have to initiate the royalty from my system, they have to draft the money from my bank against that royalty, and then they pay it out,” Shami says. “That can take three to five business days. If I had a crypto address for somebody and we were dealing in direct payments on blockchain, I could send them their royalties in seconds.” For Shami, crypto’s appeal is also its reduction of systems that are at risk for fraud or misbehavior. “As a label, you have to do business with all the other labels; there are side artists, clearances, and you’re sharing royalties on things. We could pay each other easier, we could interact with one another in a much easier fashion, we could pay our artists easier, we could track the payments,” he says. (He recalls being flagged for fraud by both MoneyGram and Western Union while trying to pay a Ghana-based graphic designer.) Shami knows there are possible pitfalls with crypto payments, like a lost password resulting in lost millions, and he also knows it would take a lot of time and educational efforts to get everyone on the same page, but he believes the possible upsides are greater than the downsides. This future doesn’t require the industry to agree on one currency or even one blockchain, as long as there’s an interledger “where all the blockchains can be interconnected and can report and speak to one another,” explains entrepreneur Shara Senderoff, who’s held a number of executive roles across music, multimedia, and technology. Senderoff and Zach Katz — who co-founded Beluga Heights Records and previously headed BMG’s U.S. operations — run Raised in Space Enterprises (RISE), a Ripple-backed company that aims to discover, invest in, and guide transformational tech startups in music. “Ghazi is absolutely right,” Senderoff says — but cautions at putting the cart before the horse. “Now, it becomes about the timing of those forms of technologies and the progression of those interledgers that all the big blockchains are working to create and be involved in. That just needs to catch up.” Senderoff says that people will see major advancements in the conversation around this topic, as well as the execution of some of these puzzle pieces, within the next two to five years. “It’s not too ambitious or too forward thinking,” she says. “Currency is just one tiny little aspect of [crypto]… It’s about changing how we interact in a business setting.” — Grammy-winning artist RAC, who has his own crypto token $RAC.