Disclosure: The views and opinions expressed here belong solely to the author and do not represent the views and opinions of the crypto.news main article.
“Party like it’s 1999sang Prince Rogers Nelson, as on June 1, 1999, a new computer software service would forever change the way music was distributed, consumed and even written. Napster was a peer-to-peer file sharing service that quickly gained popularity among music fans (since its launch in May 1999, it had amassed over 20 million users by March 2000) looking for a way to get free music online. share and download . The cataloging software, created by Shawn Fanning and Sean Parker, searched your computer’s hard drive, listed all the MP3 music files on it, and allowed anyone using the service to share and play those files.
You might also like: Expanding mobile services with device licensing and crypto | Opinion
Napster’s popularity was short-lived, as its eventual demise resulted from the legal problems arising from cybercrime: file sharing and piracy. According to the Recording Industry Association of America (RIAA), the company’s computer software facilitated copyright infringement and brought a lawsuit against Napster. Napster eventually closed in 2001. Nevertheless, Napster’s technology had a profound impact on the music industry by paving the way for other P2P file sharing services, which helped popularize the idea of downloading music online, giving rise to the concept of the first virtual currency for peer-to-peer systems: Karma. Karma was introduced in 2003 as a way to pay for P2P file sharing services.
The co-founder of the first internet money – way before Bitcoin (BTC) – was a virtual currency called Karma, designed by Dr. Emin Gun Sirer, who is also the founder and CEO of Ava Labs. Dr. Sirer explained that the rise of the Internet and then the World Wide Web marked a crucial shift from isolated, local computing to global computing:
“Architecturally, we moved from standalone computers to a “client-server architecture,” which allowed us to connect to remote services managed by others to leverage their programs and capabilities. This new paradigm led to digital services that served the entire world, created millions of jobs and solidified the US’s position as a global economic leader..”
Dr. Sirer added: “I built a system called Karma to ensure that people participating in peer-to-peer file sharing networks don’t just leak. They not only take resources from the network, but also donate resources. So everyone was downloading files, no one was making files available for uploading. And so my solution to this was: what if there was magical internet money that no one had control over and that you had to use to download files? And if you run out of money, that would put an end to your devious ways and you would now be building some files to get your Karma back.”
Ava Labs is a software company founded in 2018 headquartered in Brooklyn, New York, with a mission to tokenize the world’s assets on the Avalanche public blockchain and other blockchain ecosystems. This includes tokenizing the music industry with music NFTs.
Dr. Sirer explains that blockchains represent the next phase in the evolution of networked computing systems by enabling many-to-many communications over a shared ledger. This allows multiple computers to work together, reach consensus, act jointly and build shared services in the network. This in turn enables the development of unique, secure tokenized assets, such as music NFTs, among many other innovative applications.
Harnessing the power of blockchain technology, which locks in copyright ownership of the music that cannot be changed, the Avaissance program’s music NFTs offer musicians a new universe of creative and financial options. They expand the range of music they can create by allowing them to sell music NFTs directly to fans through an NFT marketplace. Dr. Sirer points out that there are different types of tokens.
A real asset
A token can be the direct or indirect representation of a traditional asset. For example, numerous musicians are currently publishing entire songs and albums as music NFTs or selling their fans NFT concert tickets. While music NFTs offer exciting opportunities for artists, they raise copyright and intellectual property concerns. When artists tokenize their music, they need to make sure they have the right to do so. Smart contracts, a key component of music NFTs, automate the payment of royalties to creators every time their tokenized music is resold. This feature is a game-changer in an industry where musicians often miss out on resale profits. Smart contracts simplify the process of compensating musicians, but also raise questions about how different types of music rights should be fairly calculated and distributed.
A virtual article
A token can represent a digital work of art, including a musician’s album cover, poster, and show photos; a collectible in the form of a musician’s signature; a gaming skin; videos of virtual concerts or songs; virtual meet and greet experiences for artists; and more. These digital assets can be converted into music NFTs that can be traded for a profit. These can also vary in function and form. They can range from simple, non-programmable images of the musician, a common use of NFTs, to complex assets, some of which are used in virtual concerts, which can encode all kinds of functions and features of the asset directly into the asset itself.
Pay for use
Public blockchains represent shared computing resources that must be allocated efficiently. A token is the perfect mechanism to measure resource consumption and prioritize important activities. Such tokens are also called ‘gas tokens’. For example, BTC is the host token of the Bitcoin blockchain, ETH for Ethereum, AVAX for Avalanche, and so on. Without gas or transaction fees, a single user or a small group of users could potentially overwhelm the blockchain, similar to a denial-of-service attack, rendering the blockchain unusable.
Sebastien Borget, COO and co-founder of The Sandbox, a culture and entertainment platform based on the Ethereum network, explained that he has set up a new web3 musical entertainment arena in the metaverse called ShowCity which is home to The Voice and other TV shows. ShowCity is also home to music industry heavyweights such as Snoop Dog, Steve Aoki, Chainsmokers and Warner Music Group – the first major music company to enter the metaverse with top artists such as Bruno Mars, Twenty-One Pilots, Ed Sheeran, Madonna, Metallica to hold virtual concerts and other musical experiences.
ShowCity is offering musicians exclusive digital and physical perks – such as tickets to live tapings of The Voice – when they purchase a LAND in ShowCity in exchange for The Sandbox (SAND), which was deemed collateral by the U.S. Securities and Exchange Commission last year.
That’s a bargain. https://t.co/CtNRD7NQTn
— Snoop Dogg (@SnoopDogg) December 3, 2021
Snoop Dogg, tweets about Sandbox Land sale prices: “That’s a steal.”
Musicians are creating avatars, digital versions of themselves, to hold virtual concerts, selling millions of dollars worth of tickets and NFT merchandise. All items purchased from The Sandbox are 100% owned by the musicians themselves, creating income opportunities.
Sebastien Borget indicated that ShowCity takes the open metaverse a step forward toward sustainable fan-owned and community-driven musical entertainment initiatives, with its partnerships with nonprofits supporting social, environmental and climate goals.
As musicians turn to tokenization of their music, hold metaverse concerts, issue collectible NFTs, and collectors invest in music NFTs, they should keep in mind that the tokenization of the music industry poses potential legal challenges and financial problems. These include issues related to copyright, taxation, security classification of gas tokens, AML concerns for metaverse land sales, sanctions compliance, artist royalties, environmental footprint challenges of music NFT and metaverse platforms, and other matters affecting music -Can complicate the NFT landscape.
Jonathan Cutler, senior manager at Washington National Tax, Deloitte Tax LLP, said:
“The final digital asset reporting regulations, published in late June, keep NFTs within the scope of Form 1099-DA reporting. The rules include a $600 reporting threshold for sales of “specified” NFTs: NFTs that are indivisible, unique, and do not reference certain excluded properties. If sales exceed $600, a digital asset broker can report NFT sales on one Form 1099-DA for the year instead of separate forms for each sale. These regulations do not comment on the treatment of certain NFTs as collectibles for tax purposes. The April draft Form 1099-DA, which is awaiting a redesign for the final rules, also did not include any reference to collectibles.”
Read more: A digital asset tax year begins | Opinion
